Meta AI Boom Fuels Goldman Windfall

>> I'M ISABELLE LEE. BLOOMBERG OPEN INTEREST STARTS RIGHT NOW. COMING UP, ANTHROPIC'S MEGA IPO IS SAID TO HAVE A DEFINING MOMENT FOR WALL STREET AHEAD OF BIG TECH EARNINGS. META'S SHARE OFFERING AND A SURGE OF A IDEALS ARE CREATING A WINDFALL FOR GOLDMAN SACHS. FROM COCA-COLA TO UPS, INVESTORS WADED THROUGH A SLEW OF EARNINGS FROM CORPORATE AMERICA TO OUTSIDE OF TECH. THE TECH TRADE IS IN FOCUS AS INVESTORS DIGEST ANTHROPIC'S IPO FILING. NVIDIA AND META ARE EXPANDING OUR MUSE OFFERING SHIP -- PARTNERSHIP. META DOWN BY .6%. BROADCOM IS THE ONE THAT'S GETTING A LIFT BECAUSE OF THE 63 BILLION DOLLAR FINANCING DEAL TIED TO ANTHROPIC TIPS. LET'S GET MORE WITH ED LUDLOW. IT'S ALMOST 24 HOURS SINCE THE F1 DROPPED AND SINCE YOU -- S1 DROPPED. HIS OF THE REVENUE GROWTH OR THE STRUCTURE, THE UNIQUE STRUCTURE? ED: PEOPLE ARE TAKING THEIR TIME TO READ THE DOCUMENT BECAUSE IT IS A FIRST. A FIRST OF A FRONTIER LAB FILING PUBLICLY FOR AN IPO. THE HEADLINE STORY IS VERY CLEAR. EXTRAORDINARY GROWTH THAT IS RAPIDLY DECELERATING. THERE IS A VERY CLEAR WARNING THAT THE GROWTH, THE HISTORIC GROWTH RATE CANNOT CONTINUE FOR A MULTITUDE OF REASONS. IF YOU GET PAST THE FIXATION WITH THAT TOPLINE GROWTH, THE HEALTH OF ANTHROPIC'S BUSINESS AND ROBUSTNESS OF WHICH THEY RAISE CAPITAL TODAY, $141 BILLION, AND THE CHANGING ECONOMICS OF WHAT IT IS COSTING ON A COMPUTE SIDE PROBABLY PEOPLE FEEL CALM HER ABOUT THAT. THE AI TRADE GOT A SHOT IN THE ARM BECAUSE OF IT. ISABELLE: YOU SEE THE BROAD BASED INDEXES IN THE GREEN. S&P AT LEAST AND NASDAQ FOR THE SECOND STRAIGHT DAY OF GAINS. YOU HAD THE STORY THAT CAME OUT ONE MINUTE AGO. ANDURIL JOINING FORCES WITH QUALCOMM TO REDUCE LAPTOPS DESIGNED AND ASSEMBLED IN THE U.S. TALK ABOUT WHY INVESTORS SHOULD CARE. ED: QUALCOMM SHARES HAVE HAD A LITTLE SHOT IN THE ARM THIS MORNING IN THE PREMARKET. ANDURIL IS A LEADING HIGHEST MOMENTUM DEFENSE TECHNOLOGY START UP. QUALCOMM MAKES PROCESSORS AND WHAT THEY ARE SAYING AS THEY SEE A LACK OF SUPPLY CHAIN FOR COMPUTERS IN THE UNITED STATES AS BEING A NATIONAL SECURITY VULNERABILITY. THERE IS MASSIVE EXPOSURE TO CHINA ON THAT SIDE. THEY HAVE COME UP WITH A PROTOTYPE OF A LAPTOP UNDER A BROADER INITIATIVE CALLED BLUE-CHIP. THEY TRIED AND BASICALLY LEVERAGE WHAT ANDURIL IS GOOD AT. THEY WOULD ARGUE THE MANUFACTURING OF AUTONOMOUS DRONES AND WEAPONS IS SIMILAR TO BUILDING A LAPTOP. THEY WANT TO HAVE A FULLY ESTABLISHED U.S. SUPPLY CHAIN. QUALCOMM PROVIDES THE GPU, CPU AND OTHER AI COMPUTE ON BOARD THIS THING. IT IS VERY SMALL SCALE RIGHT NOW AND THERE IS A MISSION IN THE SHORT TERM THIS WILL BE -- ADMISSION IN THE SHORT TERM THIS WILL BE AN EXPENSIVE AIMED AT THE MILITARY, ETC. WITH THE TIMELINE THEY THINK THEY CAN SCALE IT TO HAVE A PROPER 100% U.S. MANUFACTURED LAPTOP WITH A U.S. SUPPLY CHAIN THAT IN TIME BECOMES ECONOMICALLY COMPETITIVE WITH THOSE MANUFACTURED OVERSEAS. ISABELLE: I DON'T KNOW HOW YOU DO IT BUT THANK YOU FOR GIVING US ON TOP OF EVERYTHING TECH. CATCH HIS INTERVIEW WITH PALMER LUCKEY ON BLOOMBERG TECH AT 11 A.M. EASTERN . UPS BOOSTING GUIDANCE FOR THE YEAR ABOVE ESTIMATES. THE REVISION COMES AS THE CEO SAYS THE COMPANIES ENTERING THE HOLIDAY SEASON FROM A POSITION OF STRENGTH. THE STOCK IS DOWN BY .8% PREMARKET. JOINING US TO EXPLAIN ALL THAT IS MATTHEW GRIFFIN. THEY ARE RAISING SALES OUTLOOK. IS THIS A SIGN CONSUMERS ARE HOLDING UP BETTER THAN EXPECTED OR COULD THE STRING TO BE DRIVEN BY SOMETHING ELSE? MATTHEW: IF IT DOES SEEM LIKE THE U.S. CONSUMER IS MUDDLING THROUGH THIS ENVIRONMENT WE ARE IN WITH HIGH INTEREST RATES, HIGH FUEL PRICES. THE COMPANY SPOKE TO BEING IN A POSITION OF STRENGTH. THAT IS HARD TO ACHIEVE GOING INTO THE HOLIDAY SEASON WHICH IS THE BUSIEST TIME OF YEAR FOR UPS. IF THE CONSUMER IS NOT WILLING TO SPEND, VOLUMES HELD UP SO THEY RAISED THEIR PRICES TO OFFSET HIGHER FUEL PRICES. CONSUMERS CAP SHIPPING PARCELS WITH THEM, WHICH IS A GOOD SIGN FOR NOW. INTERESTING TO SEE WHEN WE GET REPORTS FROM FEDEX TOMORROW AND CONSUMER COMPANIES, SOME OF THE BIG ONES NEXT MONTH IF THEY CONSUME THE SAME NARRATIVE. ISABELLE: HOW MUCH OF THIS IS HIGHER VOLUMES FOR SHIFTING -- FOR SHIPPING VERSUS PRICING IN GENERAL? MATTHEW: WE DON'T HAVE A FULL BREAKDOWN YET BUT PRICING WAS REALLY STRONG FOR THIS COMPANY. THE AVERAGE REVENUE FOR EACH PARCEL RO 6.1% IN THE U.S. AND THE MOST RECENT QUARTER. WHEN YOU BREAK INTO THAT, HALF OF THAT WAS FUEL. THE MAKING OF HER HIGHER COST. THAT LEAVES HALF THAT IS FROM INCREASING THEIR CORE PRICING. UPS AS WE WANT TO SHIP MORE PREMIUM PARCELS AND DITCH LOWER MARGIN BUSINESS. THERE COULD BE SOME GREEN SHOOTS. THEY HAVE INVESTORS DISAPPOINTED WITH WHAT THEY SAID ABOUT VOLUMES IN THE FOURTH QUARTER. WE ARE LAPPING THE -- WHAT USED TO BE HIGHER VOLUMES WHEN THEY DID BUSINESS WITH AMAZON. ISABELLE: TALK ABOUT HOW UPS AND THE COMPANIES YOU COVER ARE MANAGING HIGHER FUEL COSTS AND HOW IT IS AFFECTING THEIR TOP AND BOTTOM LINES. MATTHEW: A LOT OF THE TRANSPORTATION COMPANIES CAN PASS THIS ON WITH FUEL SURCHARGES. UPS IS RAISING PRICES. THE RAILROADS HAVE RECAPTURED A LOT OF THAT COST. TRUCKERS HAVE SURCHARGES BUT NOT EVERYONE IS ABLE TO MAKE OF ALL THE MONEY RIGHT AWAY. WE HAVE SEEN HITS TO MARGINS EVEN HERE. UPS MARGIN WAS HEARD BY HIGHER FUEL COSTS. THE DRAGHI -- TRUCKING COMPANIES HAVE STRUGGLED TO MAKE THE QUARTER ON QUARTER RESULTS LOOK GOOD. WE ARE ABOUT TO GET REPORTS FROM CATERPILLAR ON THURSDAY FROM COMPANIES THAT DON'T PASS THESE PRICES ON AS EASILY. I'M WATCHING CLOSELY HOW THAT SHOWS UP IN THE BOTTOM LINE. ISABELLE: MATTHEW, THANK YOU FOR JOINING US. I APPRECIATE YOU STOPPING BY. THAT IS BLOOMBERG'S MATTHEW GRIFFITH. CAROL TUMBLE JOINED THE CLOSER AN INCLUSIVE INTERVIEW THIS AFTERNOON. BOEING IS IN THE RED AFTER POSTING A WIDER THAN EXPECTED LOSS IN ITS COMMERCIAL AIRLINE BUSINESS. JETBLUE SAYS IT WILL RETURN TO PROFITABILITY NEXT YEAR AND IT IS UP IN THE PREMARKET. JUMPING BY NEARLY 15%. SHE CORRESPONDED SAID PHILIP JOINS US. JETBLUE IS INTERESTING BECAUSE THE STOCK RALLIED AFTER HOURS. WHAT CHANGED THE NARRATIVE? SID: THE INVESTORS ARE THE COMPANY'S MESSAGING ABOUT HOW THEY EXPECT TO TURN THE CORNER AND EXPECT TO BE PROFITABLE IN 2027 AND EXPECT TA FREE CASH FLOW IN 2028. THE SHARES PLUMMETED THE DAY BEFORE THEY REPORTED EARNINGS ON CONCERNED THEY MAY HAVE LIQUIDITY ISSUES, THEY MAY STRUGGLE WITH THEIR $9 BILLION WORTH OF DEBT AT A TIME WHEN THE AIRLINES ARE HARD-HIT BY SURGING FUEL PRICES. ISABELLE: WHAT ABOUT BOEING? THERE ARE DIVERSION EARNINGS AT THE COMMERCIAL AND DEFENSE UNITS. CAN YOU EXPLAIN THAT TO A NORMAL PERSON? SID: BOEING HAS THE BIGGEST DIVISION IS THE COMMERCIAL AIRPLANE DIVISION THAT MAKES THAT THERE IN 37 -- THE 737 AND THE 777. UNDER THE NEW CEO, BOEING IS LOOKING AT WAYS THEY CAN WRAP U -- RAMP UP PRODUCTION AND DELIVERIES AND GET QUALITY BACKUP. THIS QUARTER WAS NOT THE GREATEST QUARTER FOR BOEING. THEY TALKED ABOUT HOW DELIVERIES STAGNATED IN THE RAMPED UP SPENDING AS THEY LOOKED TO RAMP UP OUTPUT ON THEIR 737 MAX, THE BIGGEST CASH COW. THIS QUARTER HAS BEEN A MIXED BAG. THE DEFENSE BUSINESS HAS SEEN HIGHER ORDERS FROM THE GOVERNMENTS AROUND THE WORLD BECAUSE OF THE INCREASED DEFENSE SPENDING WE HAVE SEEN IN THE LIGHT OF THESE RECENT WARS AND THE GEOPOLITICAL UNCERTAINTY. THE DEFENSE BUSINESS WAS ALSO PROPPED UP BY THE SALE OF A STAKE IN HRL LABORATORIES, A UNIT THEY CO-OWNED WITH GM AND SOLD IBM. ISABELLE: ANY UPDATE ON POTENTIAL BACKLOGS IN THE SAFETY CRISIS THAT HAS HOUNDED THEM IN THE PAST YEARS? SID: THEY ARE IN THE MIDST OF A TURNAROUND. THEY JUST GOT CERTIFICATION FOR THEIR MAX 10, THE LARGEST VARIANT OF THE 737 MAX. THAT IS BOEING'S ANSWER TO THE A3 21,AIRBUS' -- AIRBUS'S BEST-SELLING MODEL. THEY GOT CERTIFICATION FOR THE 3737 MAX 7 AND THE 777X. THEY ARE TRYING TO GET DELIVERIES OF THE 787. IT IS A MIXED BAG IN EARLY DAYS AND MID TURNAROUND. ISABELLE: THANK YOU FOR JOINING US. THAT IS SAID PHILIP -- SID PHILIP. S&P FUTURES AND AS HIRED BY .3%, ON TRACK FOR THE SECOND STRAIGHT DAY OF GAINS. IT'S MAYBE AMID THE ANTHROPIC AND THE SOLUTION FROM THE U.S. AND AROUND MORE. POSITIVE RESULT FROM A SLEW OF COMPANIES, INCLUDING UPS. WE HAD MATTHEW GRIFFIN. COCA-COLA HELPING BOOST SENTIMENT. BRENT CRUDE FALLING BELOW $115 A BARREL AFTER RISING TO $117. SENIOR OFFICIALS DISCUSSING TALKS ON HOW TO POTENTIALLY END THE WAR. 10-YEAR YIELD FLAT AT 4.99%. LET'S LOOK AT THE OTHER MEMBERS WITH SALLY BAKEWELL. SALLY: GENERAL MOTORS PLANS TO SHIFT ITS STOCK LISTING TO THE NASDAQ FROM THE NEW YORK STOCK EXCHANGE AS IT EMBRACES AUTOMATED DRIVING AND ELECTRIC VEHICLES. ANOTHER WIN FOR NASDAQ WHICH IS IN COMPANIES LIKE WALMART AND HILTON PIVOT FROM NYSE. ROYAL CARIBBEAN HAD A STRONGER THAN EXPECTED THIRD DRIVEN BY SOLID DEMAND FOR EUROPEAN AND CARIBBEAN CRUISES. ANALYST OF THE COMPANY IS PERFORMING WELL CONSIDERING THE HIGHER COST OF FUEL, CITING HIGH DEMAND FOR TRAVEL EXPENSES. SOFI IS SURGING AFTER BEATING ESTIMATES AND RAISING HIS FULL YOUR OUTLOOK. THE FINTECH ISSUE STRONGER THAN EXPECTED 2027 GUIDANCE AS RECORD LENDING AND USER GROWTH CONTINUED TO DRIVE THE BUSINESS. THOSE ARE YOUR MORNING MOVERS. ISABELLE: THANK YOU FOR THAT, SALLY. YOU WILL JOIN US BACK IN THE HOUR. WE HAVE GOLDMAN SACHS LEADING MORE THAN $210 BILLION IN A IDEALS THIS WEEK FOR THE LIKES OF ANTHROPIC, META, SPACEX. DETAILS ON THOSE NEXT. THIS IS "BLOOMBERG OPEN INTEREST ." ISABELLE: NOW THE HIGH INTEREST, WHAT'S MAKING HEADLINES AROUND THE WORLD. IRAN'S SUPREME LEADER MET WITH SECURITY OFFICIALS REPEATING TEHRAN'S CONDITIONS FOR ENDING THE WAR WITH THE U.S. THE TALKS FOCUSED ON THE STRAIT OF HORMUZ AS REGIONAL POWERS PUSHED FOR DIPLOMACY AND EFFORTS TO PREVENT ANOTHER ROUND OF STRIKES. ISRAELIS ARE VOTING TODAY IN A CLOSELY FOUGHT ELECTION THAT COULD DETERMINE'S -- DETERMINE BENJAMIN NETANYAHU'S POLITICAL POSITION. IT RAISES THE PROSPECT OF WEEKS OF COALITION NEGOTIATIONS OR EVEN ANOTHER ELECTION. GOLDMAN SACHS IS CATCHING THE FRENZY AND LANDING AT OVER 210 BILLION DOLLARS IN DEALS TIED TO META, SPACEX AND ANTHROPIC. IT'S A HUGE PAYDAY OPPORTUNITY AS THERE IS A RACE TO FIND THE COMPANIES POWERING THE AI BOOM. THEY WILL BE ON TOP OF MY DEBIT BLOOMBERG INVEST TODAY IN OUR OWN DANI BURGER IS SPEAKING WITH A SLEW OF INVESTORS, INCLUDING THE HAVE INVESTMENT BANKING AT GOLDMAN SACH S. DANI: IT WILL BE A FASCINATING CONVERSATION AND YOU SHOWED THE BACKDROP FOR THIS DEAL. SPECIFICALLY AROUND AI. GOLDMAN SACHS HAS BEEN INCREDIBLY ACTIVE, WINNING THE POLE POSITION ON THE ANTHROPIC IPO TO THE SURPRISE OF SOME WHO THOUGHT MORGAN STANLEY MIGHT TAKE IT. IT IS SOMETHING YOU AND I TALKED YESTERDAY ABOUT WITH BRUCE RICHARDS. THE IDEA THAT BANKS ARE TAKING INCREASING EXPOSURE TO AI. SOME HAVE BEEN TRYING TO HEDGE THEIR BETS. WE HEARD ABOUT THAT. RICHARDS WAVING THE RED FLAG, SAYING MAYBE THERE A REASON TO BE CONCERNED. LISTEN TO WHAT HE TOLD US. >> WE WOULD NOT TAKE THAT RISK. THE BANKS HAVE IT IN A BIG WAY. THEY HAVE BEEN DOING A LOT OF THE CONSTRUCTION RISK AND NO ONE IS TALKING ABOUT HOW MUCH IS ON THE BANK BALANCE SHEET FOR CONSTRUCTION RISK FOR DATA CENTERS THAT ARE STILL IN THE FLUX OF WHETHER IT WILL BE SUCCESSFUL OR NOT BE SUCCESSFUL. DANI: THAT STORY IS PARTICULARLY RELEVANT IN TEXAS WITH RECENT DATA CENTER MORATORIUMS AND AN IMPORTANT ELECTION INTO THE MIDTERMS. THE FUTURE AND THE STATE IS ON THE BALLOT. WE ARE HAVING THESE CONVERSATIONS AND MORE. I WILL SPEAK WITH GOLDMAN SACHS. HE RUNS MID MARKET INVESTMENT BANKING. MAYBE THIS IS ALMOST THE HEDGE, THE REAL WORLD IN TEXAS IN DALLAS, A GROWING OFFICE AND WHERE THEY CAN FIND OPPORTUNITIES. ISABELLE: YOU HAVE INTERVIEWS WITH AT&T. UIS HAVE THE MOST FASCINATING CONVERSATIONS. WE WILL DIP IN TO GETTING THEM SO THAT YOU WILL JOIN US IN THE BACK HALF OF THE SHOW. DON'T MISS A SPECIAL EDITION OF "BLOOMBERG DEALS" AT NOON EASTERN WITH A SURGE OF INTERVIEWS FROM BLOOMBERG INVEST IN DALLAS WITH DANI. WE TALK TECH POSITIONING WITH NANCY TENGLER. THIS IS "BLOOMBERG OPEN INTEREST ." ♪ >> WE HAVE SEEN FIVE DOUBLE DIGIT PULLBACKS FOR THE TECH SECTOR OF 10% OR MORE. THE SECTOR IS UP ABOUT 240 PERCENT, MORE THAN DOUBLE THE S&P 500. ALL THESE CONCERNS ARE LEGITIMATE. SOME OF THIS IS PRICED IN AND THE. EARNING TRENDS ARE POSITIVE. ISABELLE: THAT WAS EARLIER TODAY. FOR MORE ABOUT WHAT'S HAPPENING LET'S BRING IN LAFFER TENGLER CIO NANCY TENGLER. THERE ARE SO MANY CROSSCURRENTS. WE HAVE ANTHROPIC AND WE STILL HAVE -- IT'S A WEEK AWAY FROM THE MIDTERM ELECTIONS AND THERE IS STILL THE ONGOING IRAN WAR, ALTHOUGH THERE IS OPTIMISM OUT OF THAT. LET'S START WITH TECH. THREE COMPANIES ALL REPORTING THIS WEEK. ANYTHING YOU ARE WAITING TO HEAR? NANCY: WELL, IT IS KIND OF DAMNED IF YOU DO AND DAMNED IF YOU DON'T. IF YOU MAKE A STATEMENT LIKE ELON MUSK ABOUT NEO-CLOUDS AND GUPPIES, MARKETS INTERPRET THAT AS A PULLBACK. IF YOU ANNOUNCE A BIG SPENT LIKE MEDA DID, YOU GET PUNISHED IN THE MARKET. -- META. WE WANT TO HEAR THE REVENUE NUMBERS. THAT IS WHAT MATTERS IN THE LONG TERM. EARNINGS ARE SOMEWHAT FUNGIBLE. THOSE ARE THE THINGS WE ARE PAYING ATTENTION TO. I WOULD RATHER OWN A COMPANY THAT IS SPENDING ON FUTURE GROWTH THAN ONE THAT IS PULLING OUT BACK TO PROTECT FREE CASH FLOW. ISABELLE: WHEN DOES SPENDING STOP BEING BULLISH AND START BECOMING A RED FLAG? SOMETIMES OF CAPEX HAS INCREASED COME INVESTORS DON'T LIKE IT. IF YOU DON'T SPEND ENOUGH, THEY DON'T LIKE IT. YOU MADE A GREAT POINT. WHERE DO WE GO FROM HERE QUESTION MARK -- HERE? NANCY: IN THE 1990'S, COMPANY BUILDING AHEAD OF DEMAND AND ANTICIPATING DEMAND. WHAT WE HAVE AGAIN TODAY AND ALL OF THE ANNOUNCEMENTS, META AND NVIDIA AND APPLE RECENTLY. WHAT YOU ARE SEEING IS THE DEMAND CONTINUES. THIS BAND CONTINUES. IN THE ANTHROPIC IPO OR THE S 1, THEY TALKED ABOUT THE SPEND FOR AMAZON, GOOGLE AND META -- NO, AND SPACEX. THAT IS HUNDREDS OF BILLIONS OF DOLLARS THAT HAS BEEN COMMITTED. WILL IT ALL GETS SPENT? THE BOTTLENECK IS NOT NECESSARILY CAPITAL. IT IS POWER. THAT WILL BE THE CHALLENGE. ISABELLE: WHERE DO WE GO FROM THERE? NOW INVESTORS ARE BECOMING MORE DISCERNING WHEN IT COMES TO AI. IT USED TO BE IF YOU MUST BACK EVERYTHING AI BUT NOW THERE IS PICKS AND SHOVELS AND INVESTORS ARE BECOMING MORE NUANCE. IT'S A SPECIFIC NEO-CLOUD. HOW DO YOU PICK THE WINNERS AND LOSERS SPECIFICALLY? YOU PREFER A THAT SPENDS. NANCY: IF I HAD A CHOICE I WOULD RATHER THEY SPEND FOR FUTURE GROWTH AND PULLBACK. WE HAVE SEEN A NUMBER OF THOSE IN MY CAREER THAT ARE NOW IN THE TRASH HEAP OF CORPORATE AMERICA. THEY MISSED IT. THE PAYROLL IN THE MARKET IS WISE TO PAY ATTENTION. THE PERIL IS THE SPENT TOO MUCH LIKE THEY DID IN THE 1990'S. YOU HAVE TO PAY ATTENTION TO MANAGEMENT. IF THEY ARE PIVOTING -- WHAT'S INTERESTING IN THIS DEBATE IS MICROSOFT AND AMAZON ARE FLOATING ABOVE IT. THEY ARE SPENDING. MICROSOFT TEST POSITIVE FREE CASH FLOW. I HAVE THREE DEFENSE OF TECH NAMES WE HAVE BEEN TALKING ABOUT. ONE IS MICROSOFT. LOTS OF CASH ON THE BALANCE SHEET. THE OTHER ONE IS APPLE. SAME THING. I HEARD THE STORY ABOUT THE CRACKS IN THE DUO. I LOOKED AT THEM YESTERDAY FOR THE BABY TRIED ONE? ISABELLE: MY DAD HAS BEEN WANTING ONE AND I SHOWED HIM THE STORY. SEE, GOOD YOU DO NOT GET ONE. NANCY: I THINK IT WAS AN ISOLATED MANUFACTURER. APPLE IS ANOTHER AND THE THIRD IS -- I'M SORRY, THAT IS A MICROSOFT? ISABELLE: MICROSOFT AND APPLE. NANCY: WHY DOES THIS HAPPEN ON TV? ISABELLE: I DO WANT TO ASK ABOUT ANTHROPIC. THEY RELEASED THEIR S1. 100 PAGES ABOUT THE RISKS. WHAT WAS YOUR TAKE AWAY? NANCY: THE INFERENCING MARGINS AT 80%. A FEW MONTH AGO WE WERE TALKING ABOUT TRAINING IS WHERE IT IS AT AND NOW WE HAVE SHIFTED INFERENCING. FOR ME THE RISKS SMACK OF PLEASE REGULATE US. I DON'T THINK THAT IS THE STRATEGY I WOULD CHOOSE BUT IT IS CLEARLY THE STRATEGY THEY HAVE CHOSEN. AND DIVERSIFICATION OF REVENUE IS IMPORTANT. THEY HAVE A NUMBER OF CUSTOMERS. 80% OF CUSTOMERS MAKE UP -- SORRY, THE TOP FIVE CUSTOMERS ARE 20% OF REVENUES. STILL SOMEWHAT CONCENTRATED BUT NOT NEARLY AS MUCH AS WE WOULD HAVE THOUGHT. ISABELLE: WE HAVE A TON TO DISCUSS AND HAVE NOT GOTTEN TO THE BROADER EARNINGS, THE FED, OR THE MIDTERMS. STAY WITH US. THAT IS NANCY TENGLER. SHE IS STAYING WITH US THROUGH THE OPEN. A QUICK CHECK OF THE MARKETS. WE HAVE AROUND FIVE MINUTES. THE S&P AND NASDAQ HIGHER BY .3%.. 10-YEAR YIELD UNCHANGED BY 4.99 %. BRENT CRUDE NOW AT $114 A BARREL. THIS IS BLOOMBERG OPEN INTEREST. ♪ ISABELLE: MOMENTS AWAY FROM THE START OF TRADING. THIS IS "BLOOMBERG OPEN INTEREST ." DANI BURGER IS ON ASSIGNMENT. IN DALLAS, TEXAS. LET'S CHECK THE MARKETS. S&P AND NASDAQ FUTURES IN THE GREEN, HIGHER BY .3%. ON TRACK FOR THE SECOND STRAIGHT DAY OF GAINS. CROSSCURRENTS ARE REASONS WHY WE ARE SEEING A LOT OF OPTIMISM. WE HAVE THE FED, TECH EARNINGS, AND WHO CAN FORGET THE ANTHROPIC S1 THAT DROPPED 24 HOURS AGO AND THAT REVIVED THE AI TRADE. INVESTORS ARE REALLY PILING INTO THAT AND YOU ARE SEEING HOPES AND OPTIMISM WHEN IT COMES TO THAT. DOW FUTURES FLAT BY 1/10 OF 1%. LET'S LOOK AT SOME OF THE ACTION IN THE STOCK MARKET. THE BELL RINGING LET START TO MY LEFT. THIS IS A REIT CELEBRATING THEIR 35TH LISTING. YOU SEE A LOT OF SMILES. TO MY RIGHT IS LEONARDO DRS. A LOT OF HAPPY SMILES THERE. THEY ARE MARKING BREAST CANCER AWARENESS MONTH AND SUPPORT FOR MILITARY PEOPLE. IT IS NOW A LOT OF ACTION. LET'S GET A LOT OF STOCKS TO WATCH WILL STOP THE TECH TRADE IS IN FOCUS AS INVESTORS DIGEST THE ANTHROPIC S1, AND META RAISING ITS EQUITY OFFERING TO NEARLY $100 BILLION. WE HAVE BROADCOM ALSO GETTING A LIFT FROM ITS 63 BILLION DOLLAR FINANCING DEAL TIED TO ANTHROPIC CHIPS. DEFINITELY A LOT TO DISCUSS. LET'S BRING BACK LAFFER TENGLER CIO NANCY TENGLER. YOU JUST HEARD ALL THE HEADLINES. WHAT YOU MAKE OF ALL THE FINANCING? WHERE ARE WE GOING TO GET DEMAND. DANI MADE THE POINT THAT, WELL, WON'T THIS BE INFLATIONARY GIVEN ALL THE SPENDING? NANCY: IT IS FOR NOW AND ULTIMATELY WILL BECOME DEFLATIONARY OR DISINFLATIONARY. THERE IS A LOT OF MOVING PARTS AS WE STARTED THE SHOW WITH. THE DYNAMIC PRICING IS RAISING INFLATION. I WAS BOOKING A FLIGHT AND KEPT GETTING TIMED OUT BECAUSE I WAS BUSY DOING OTHER THINGS. EACH TIME I WENT BACK IT WAS $1000 MORE. BY THE TIME I WAS DONE AND WENT TO BOOK IT, IT WAS $8,000 ROUND-TRIP FROM SAN FRANCISCO TO NEW YORK. IT IS CRAZY, THE DYNAMIC PRICING I THINK WILL CHANGE ULTIMATELY BUT IT'S PUTTING UPWARD PRESSURE ON PRICES. ALL THAT SAID, I THINK THE FINANCING -- I KNOW PEOPLE ARE QUITE CONCERNED ABOUT IT BUT IF YOU LOOK AT WHO IS CONSUMING THE DEBT, INSURANCE COMPANIES, PUBLIC PENSION PLANS. WHAT RYAN REYNOLDS CALLS THE SHADOW BANKING SYSTEM. SIMILAR TO WHAT WE HAD IN THE 1990'S BUT THEY ARE CONTINUING TO CONSUME $2 TRILLION IN DEBT ISSUE THIS YEAR AND NOT ALL FROM TECHNOLOGY OBVIOUSLY. I THINK THERE IS ROOM. SPREADS ARE NOT WHINING IN A MATERIAL WAY. WITH A CREDIT MARKET IS FOR NOW THIS IS SOMEWHAT SUSTAINABLE. ISABELLE: CCC SPREADS ARE TIGHTENING A LITTLE BIT. YOU DID SAY THE MARKET CAN KEEP RUNNING BUT WHAT WILL MAKE YOU CHANGE YOUR MIND? IS IT ONE AI COMPANY BUCKLING? NANCY: IT IS MORE THAT THE DECELERATION OF EARNINGS WHICH WE WILL GET AND THE QUESTION IS HOW MUCH. THE SECOND THING WE ARE WATCHING FOR, WE SIT ON THE COMPANY CALLS AND HOW ARE THEY UTILIZING AI. COST CUTTING ALONE IS NOT ENOUGH. THERE NEEDS TO BE PRODUCTIVITY, NEW PRODUCT DEVELOPMENT. GOOGLE SAID THEY ARE CLOSING MORE SALES USING AI. THAT IS WHAT WE ARE PAYING ATTENTION TO. ISABELLE: WHAT ABOUT THE FED? TODAY THEY KICK OFF THEIR MEETING. INVESTORS ARE LARGELY PRICING AND A HOLD AND MAYBE A HIKE IN DECEMBER. WHAT IS YOUR OUTLOOK ON INFLATION? IT IS CONTINUING TO ACCELERATE. NANCY: IT IS FUNNY. THIS IS WHAT THE MARKET DOES WHEN YOU GET A NEW FED CHAIRMAN. THEY SUDDENLY JUDGE HIM BY A DIFFERENT STANDARD. WE HAD 9% INFLATION UNDER POWELL. THE FED MADE A NUMBER OF MISTAKES. THEY WAITED TOO LONG. THEY STARTED CUTTING TO EARLY. I THINK WHAT YOU HAVE TO THINK ABOUT IS, IS THIS UNSUSTAINABLE? WE HAD HIGHER INTEREST RATES. THE DIFFICULTY IS THAT NONE OF THIS IS NEW BUT MOST INVESTORS WERE NOT AROUND THEN. THEY DON'T HAVE THE ACTUAL REAL-LIFE EXPERIENCE. ALL THIS CAN COEXIST TO SOME EXTENT. THAT SAID, I THINK THE FED IS WISE TO NOT GIVE GUIDANCE. I'M NOT IN THE MAJORITY ON THAT. WALL STREET SHOULD STOP GRIPING AND DO THEIR JOB AND START PAYING ATTENTION TO WHAT WE HAVE TO DO ON THE EQUITY SIDE, WHICH IS DO YOUR RESEARCH, MAKE DECISIONS THAT ARE SOMETIMES WRONG. ISABELLE: WHAT ABOUT THE ELECTIONS. ? THOSE MOMENTS HAVE BEEN VOLATILE FOR STOCKS. HAVE THOSE LARGELY BEEN PRICED IN OR ARE YOU EXPECTING MAYBE MORE DOWNSIDE CATALYSTS? NANCY: THE MARKET IS PRICING IN A BLUE SWEEP. I'M NOT CONVINCED THAT IS WHAT WE ARE GOING TO SEE. I KNOW THE PRODUCTION MARKETS, ONE OF DANI'S FAVORITES IS SAYING THAT. THE SURPRISE WILL BE IF WE GET A DIVIDED CONGRESS. WILL IT BE BAD? I DON'T THINK MUCH IS GOING TO GET DONE IN EITHER SCENARIO. THE PRESIDENT WILL VETO BLUE LEGISLATION. IF YOU HAVE DIVIDED CONGRESS, YOU WILL ALSO SEE NOT AT YOUR MISSED AMOUNT -- A TREMENDOUS AMOUNT OF GETTING ALONG. ISABELLE: WE HAVE BIG TECH EARNINGS. $10 TRILLION IN MARKET CAP. COMPANIES REPRESENT 36% OF THE S&P. DO YOU HAVE ONE COMPANY IF ARE GOING TO LOOK OUT FOR? NANCY: I WOULD SAY MICROSOFT. ISABELLE: YOU LIKE MICROSOFT. NANCY: I DO. THAT WAS ONE OF THE DEFENSE OF NAMES AND THE OTHER WAS NVIDIA. I DON'T KNOW HOW I FORGOT THAT. ISABELLE: HE REMEMBERED THE THIRD. IT'S NVIDIA. NANCY: MICROSOFT. THEY DON'T HAVE THE BEST AI PRODUCT BUT THEY ARE EMBEDDED IN THE ENTERPRISE. WE WANT TO SEE HOW THEY ARE GROWING, WHAT KIND OF MONETIZATION. WE SAW SOME LAST QUARTER. AI MONETIZATION THROUGH AZURE. WILL THEY GROW IN THAT REGARD? THIS LAYOFF OR VOLUNTARY EXIT PROGRAM IS 60,000 POTENTIAL EMPLOYEES. THAT IS 25% OF MICROSOFT'S WORKFORCE. I WOULD LIKE TO LEARN MORE COLOR ON THAT AND WHY THEY OFFERED IT NOW. ISABELLE: YOU AND ME AND THOUSANDS WILL WANT TO KNOW ABOUT THAT. IT IS SO NICE TO SEE YOU. THANK YOU FOR JOINING US. THAT IS NANCY TENGLER. THANK YOU AGAIN. A QUICK LOOK AT WHERE YOUR MARKETS ARE STANDING. SIX MINUTES AFTER THE OPENING BELL AND YOU ARE SEEING THE S&P HIGHER BY .3%. YOU ARE SEEING MORE WINNERS THAN LOSERS IF I'M NOT MISTAKEN. YES, -- I'M WRONG. MORE DOWN COMPANIES. 300. JUST AROUND 200 COMPANIES IN THE GREEN. HERE ARE THE BIG WINNERS. BROADCOM, NVIDIA, AMD, TESLA. IT'S AN EARNINGS STORY AT THE BACK OF IT ALL. A LOT OF TECH COMPANIES REPORT EARNINGS THIS WEEK AND INVESTORS HAVE TWO QUESTIONS. WHAT IS THE AI SPENDING WE ARE GOING TO SEE AND WHEN WE START TO SEE THOSE PAYOUTS? IN THE RED, META PLATFORMS, DHARNA. META ON A POINTS BASIS BY 1.5%. BERKSHIRE HATHAWAY AND VALERO ENERGY CORP. THE BIG WINNERS ARE INFOTECH. A LOT OF HYPERSCALERS. CONSUMER DISCRETIONARY INDEX ALSO. WE WILL HEAR ABOUT THE K-SHAPED ECONOMY FROM A LOT OF THESE COMPANIES. MAYBE THE TOP OF THE K WILL BE SPENDING MORE AND THE OTHER WAS POWERING THE MARKETS HIGHER. FOR LOSERS HEALTH CARE INDEX DOWN BY .6% AND CONSUMER STAPLES LOWER BY .6%. META IS RAISING NEARLY 100 BILLION DOLLARS TO BANKROLL ITS AI AMBITIONS. WE DISCUSSED ALL THE MOVING PARTS TO GET THAT DONE AND MORE. THIS IS "BLOOMBERG OPEN INTEREST ." ♪ TIME FOR THE TOP CALLS. HERE IS SALLY BAKEWELL WITH SOME ANALYST ACTION AND FOCUS. SALLY: FIRST UP ANALYSTS ARE MIXED ON. CASH TO GET THROUGH THE YEAR BUT THEY STILL NEED TO RAISE MORE MONEY. TD COWEN SAYS THE PATH BACK TO PROFITABILITY DEPENDS ON FUEL PRICES. WILLIAM BLAIR IS DOWNGRADING MODERNA, SAYING THE STOCK'S RALLY REFLECTS THE PROMISE OF ITS MELANOMA VACCINE. THE FIRM REMAINS ENCOURAGED BUT SAYS EXPANDING THE VACCINE AND OTHER CANCERS CARRIES RISKS. FINALLY, DA DAVIDSON IS A GRADING BROADCOM TO BUY, SAYING ANTHROPIC'S IPO AND POTENTIAL OPENAI IPO NEXT YEAR COULD UNLOCK SIGNIFICANT UPSIDE FOR BROADCOM AS BOTH COMPANIES RAISE MORE CAPITAL FOR AI SPENDING. THOSE ARE YOUR TOP CALLS. ISABELLE: THANK YOU FOR THE UPDATES, SALLY. ANTHROPIC'S IPO IS EXPECTED TO RAISE MORE MONEY THAN ANY FIRM IN HISTORY. BILLIONS OF DOLLARS OF SALES BUT ALSO EXTREME LOSSES. HEAD OF GLOBAL TECH RESEARCH MANDEEP SINGH JOINS US LIVE. YOU WERE WITH US WHEN THE S1 DROPPED AND IS JUST BEEN 24 HOURS. THAT'S THE POINT. WE ARE SEEING EXTRAORDINARY GROWTH BUT ALSO EXTRAORDINARY SPENDING AND YOU ARE SEEING A LOT OF FIRSTS FOR THE COMPANY, FROM THE GOVERNANCE STRUCTURE AND THE 100 PAGE EXISTENTIAL RISK. WHAT ARE YOUR TAKEAWAYS AFTER 24 HOURS? MANDEEP: THE BIG SURPRISE TO ME WAS HOW MUCH THEY ARE SPENDING ON INFERENCING VERSUS TRAINING. EVERYONE HAD THE ASSUMPTION THAT TRAINING COSTS ARE GOING DOWN. THESE COMPANIES ARE SPENDING MORE ON INFERENCING BECAUSE THEY HAVE TO SHOW THE ROI. AT LEAST THE WAY THEY CATEGORIZE THEIR EXPENSES, THEY SAID INFERENCING MARGINS ARE 85% AND THEY ARE JUST ALLOCATING LESS THAN A THIRD OF THEIR TOTAL COMPUTE ON INFERENCING. ALL THE OTHER TWO THIRDS OF THE COMPUTE IS ON R&D AND TRAINING SIDE, WHICH IS VERY COUNTERINTUITIVE TO WHAT EVERYONE THOUGHT. FROM THAT PERSPECTIVE, SCALING LAWS ARE INTACT. ALL THE LABS ARE SPENDING A LOT MORE ON TRAINING THE NEXT VERSION OF THE MODEL DESPITE ALL THE COMPUTE CONSTRAINTS. THEY COULD BE GENERATING A LOT MORE REVENUE THROUGH INFERENCING IF THEY WANTED TO BUT THEY WANT TO SPEND MONEY ON TRAINING. THAT WAS A REAL SURPRISE. ISABELLE: WOULD YOU HAVE DONE THAT IF YOU ARE IN THE BOARD OF ANTHROPIC? MANDEEP: I THINK THE BOARD'S STRUCTURE IS UNIQUE IN THE SENSE THAT THE COFOUNDERS CLEARLY HOW THE VOTING RIGHTS. IT IS NOT AS DIFFERENT FROM WHAT WE HAVE SEEN WITH META AND THE LIKE. I THINK THEY ARE MAKING THE JUDGMENT CALL THAT IF YOU INVEST IN TRAINING NOW, YOU WILL STAY AT THE FRONTIER. EVEN THOUGH WE TALK ABOUT OPEN-WEIGHT MODELS CATCHING UP, IF YOU LOOK AT THE BUSINESS MODEL OF ANTHROPIC, IT IS CONSUMPTION-BASED. THE ONE BIG VARIABLE THAT WILL DETERMINE THEIR REVENUE GROWTH TRAJECTORY IS TOKEN PRICING. IF TOKEN PRICING FALLS BECAUSE OPEN-WEIGHT MODELS CATCH UP, THIS WILL BECOME A SLOW GROWTH COMPANY. THERE IS A REAL RISK THAT TOKENS WILL GET COMMODITIZED. THAT IS WHY THEY ARE SPENDING SO MUCH ON TRAINING WHICH IS THE JUSTIFICATION TO ALLOCATING A LARGE PORTION OF THEIR COMPUTER TOWARDS TRAINING THE NEXT VERSION OF THE MODEL. ISABELLE: ARE WE ENTERING A NEW PHASE OF THE AI BOOM? WE WERE SEEING BIG TECH EARNINGS THIS WEEK. INVESTORS WILL BE JUST REALLY LISTENING OR HEARING HOW MUCH THE CAPEX SPEND WILL BE. META RAISING $100 BILLION. SPACEX STRIKING A $40 BILLION CHIP DEAL. THERE IS SO MUCH MONEY DEMAND BUT ALSO SUPPLY. ANYTHING YOU ARE LOOKING THROUGH HERE? MANDEEP: THE LEADTIMES ARE SO LONG THAT THESE COMPANIES HAVE TO ALLOCATE CAPITAL NOW FOR SOMETHING THEY WILL GET UP AND RUNNING SIX TO 12 MONTHS FROM NOW. I CAN SEE WHY THEY WANT TO ALLOCATE CAPITAL FOR HYPERSCALERS. I'LL BE SURPRISED HOW WELL THEY ARE DOING FOR THE RETURN ON INVESTMENT WITH THEIR CAPEX. EVEN FOR ANTHROPIC, 48% OF THEIR SALES HAPPEN THROUGH THE HYPERSCALE CAPEX PLATFORMS. THEY ARE PAYING A CUT OF THE REVENUE TO AMAZON, MICROSOFT AND GOOGLE. I EXPECT A BIG ACCELERATION AND CLOUD GROWTH FOR ALL THESE HYPERSCALERS. I THINK THAT WILL BE THE JUSTIFICATION TO KEEP RAISING THEIR. -- RAISING THEIR CAPEX. ISABELLE: I THINK THEY ARE GETTING IMPATIENT. MANDEEP: CLOUD GROWTH GREW 82% AND I EXPECT THAT TO ACCELERATE SEQUENTIALLY. I WOULD NOT BE SURPRISED IF IT IS 100%. SAME FOR MICROSOFT AZURE. IT GREW 43%. IT SHOWED SEQUENTIAL EXPELLER -- ACCELERATION. IT PROBABLY IS ONE OF THE BEST INDICATORS. ISABELLE: GOING BACK TO THE POINT YOU MADE, I WONDER IF ACCESS TO CAPITAL IS BECOMING THE BIGGEST ADVANTAGE FOR A COMPANY NOW. IF YOU ARE A BIGGER COMPANY WITH BIGGER ACCESS AND A SMALLER, YOU KIND OF GET LEFT BEHIND. MANDEEP: THAT IS WHAT YOU SEE PRESSURE ON NEO-CLOUDS. NEO-CLOUDS HAVE THE BACKLOG BUT THEY DON'T HAVE THE SCALE OF ANTHROPIC OR MICROSOFT OR AMAZON. FROM THAT PERSPECTIVE YOU ARE IN A QUEUE IN TERMS OF GETTING THAT COMPUTE ALLOCATION AND THE BIGGER YOU ARE, YOU HAVE THAT POWER TO NEGOTIATE FOR YOUR SUPPLIERS. ISABELLE: WHAT IS THE BIGGEST RISK THE MARKET IS ESTIMATING? YOU ARE SEEING THIS INFRASTRUCTURE COMMITMENT AND MASSIVE EQUITY RAISES. OUR INVESTORS BECOMING TOO BULLISH? -- OUR INVESTORS BECOMING TOO BULLISH? -- ARE INVESTORS BECOMING TOO BULLISH? MANDEEP: PEOPLE ARE UNDERESTIMATING HOW MUCH OR WHY THESE COMPANIES WILL BE ABLE TO SHOW. AT THE SAME TIME, THE REST IS TOKEN PRICING. IF OPEN-WEIGHT MODELS GET TO A SIMILAR FUNCTIONALITY AS THE FRONTIER MODELS, YOUR TOKEN PRICING COMES DOWN. WE DON'T HAVE ANY EVIDENCE OF THAT SO FAR. TOKEN VOLUMES ARE GROWING BUT GROWING FOR EVERYONE. THE FRONTIER MODELS AND OPEN-WEIGHT MODELS. THERE IS NO EVIDENCE OPEN-WEIGHT MODELS HAVE CAUGHT UP IN TERMS OF THE FRONTIER FUNCTIONALITY. THAT IS THE KEY TO DETERMINING THE PRICING. ISABELLE: THANK YOU FOR JOINING US. YOU ARE ONE OF THE SMARTEST PEOPLE IN THE SPACE. I CAN ASK YOU ANYTHING AND EVERYTHING AND WE DO ASK YOU ANYTHING AND EVERYTHING. THAT IS MANDEEP SINGH A BLOOMBERG INTELLIGENCE. COCA-COLA SHARES FLUCTUATING AS INVESTORS WEIGH STRONG OVERALL RESULT AGAINST A SALES MISS IN NORTH AMERICA. THE STOCK IS DOWN BY .2%. WE DISCUSSED THAT AND MORE. THIS IS "BLOOMBERG OPEN INTEREST ." ♪ ISABELLE: THIS IS "BLOOMBERG OPEN INTEREST." YOU ARE SEEING THE S&P AND NASDAQ HIGHER BY .2% AND .4% RESPECTIVELY. BOTH SEEING THEIR SECOND STRAIGHT DAY OF GAINS ON THE BACK OF A LOT OF OPTIMISM, EARNINGS, IT MAY BE THE FED, AND OF COURSE ANTHROPIC S1 JUST DROPPED ALMOST 24 HOURS AGO. WE ARE SEEING A NEW PHASE OF THE AI BOOM AND INVESTORS ARE ALL IN AND PILING AND EVERYTHING AND ANYTHING AI. IT IS NOT REALLY GOING TO BE AS EASY AS IN THE PAST BECAUSE INVESTORS ARE MORE NUANCED. WE HAVE A SLEW OF EARNINGS THIS WEEK FROM MICROSOFT AND META. WE WILL HEAR FROM THE COMPANIES ON HOW MUCH WE WILL SPEND AND WHEN INVESTORS WILL SEE A PAY OUT WHEN IT COMES TO THAT. THE DOW JONES KIND OF FLAT. BRENT CRUDE PARING BACK THEIR GAINS. NOW IT'S UNDER $15. -- $115. SOME STOCKS, NVIDIA AND THE GREEN. BOWING DOWN BY NEARLY 1.5 PERCENT AFTER POSTING A WIDER THAN EXPECTED LOSS. GENERAL MOTORS ARE MOVING TO THE NASDAQ FROM THE NEW YORK STOCK EXCHANGE. WHEN COMPANIES MOVE IN OR STOCK EXCHANGES, IT'S USUALLY SYMBOLIC. MAYBE THEY WANT TO SIGNAL THEY ARE BECOMING A LITTLE MORE TECHY. FOR COKE, LOWER BY .3%. INVESTORS ARE WEIGHING OVERALL RESULTS WOULD ALSO SEEING A SALES MISS IN NORTH AMERICA. FOR MORE ON THAT WE ARE JOINED BY FOOD INDUSTRY REPORTER CHRISTINA PETERSON. THEY RAISED THE REVENUE GUIDANCE BUT INVESTORS ARE CLEARLY UNHAPPY. TELL US MORE ABOUT THAT. CHRISTINA: I THINK PEOPLE WERE EXPECTING TO SEE GOOD RESULTS FROM COCA-COLA THIS MORNING AND THE COMPANY DID RAISE THE FULL-YEAR GUIDANCE. THERE HAS BEEN SOME FOCUS ON ITS RESULTS IN NORTH AMERICA WHERE SALES VOLUMES WERE FLAT, WHICH WAS LOWER THAN EXPECTED. SODA VOLUMES DID INCREASE IN NORTH AMERICA BUT THAT WAS OFFSET BY A DECREASE IN WATER, SPORTS DRINKS, COFFEE AND TEA. YOU ARE SEEING INVESTORS ZEROING IN ON THAT RIGHT NOW. ISABELLE: WHAT KIND OF BEVERAGES ARE DOING WELL? ZERO SUGAR IS GROWING 16% BUT NORTH AMERICA IS FLAT. IS THE BIGGEST GROWTH OPPORTUNITY OUTSIDE THE U.S.? NANCY: COKE -- KRISTINA: COKE IS SEEING TREMENDOUS GROWTH OVERSEAS. DIET COKE IS DOING WELL. SOMETIMES WE HAVE SEEN YOUNGER CONSUMERS FAVORING THE ZERO SUGAR VERSIONS WHICH ARE NOT ALL THAT DIFFERENT FROM THE DIET VERSIONS. IT CAN BE A DIFFERENT MIX OF SWEETENERS. PEOPLE GET USED TO WHAT THEY LIKE AND DON'T ALWAYS WANT TO CHANGE. WHAT'S INTERESTING IS THAT WE ARE SEEING BOTH DIET COKE AND ZERO SUGAR COAT DO WELL. THEY HAVE A ZERO ZERO WHICH IS ZERO YORKER AND ZERO CAFFEINE THAT THEY SAID IS DOING WELL IN REGIONS WHERE THEY RELAUNCHED THAT RECENTLY. ISABELLE: 00 IS NEW TO ME AND I CAN'T TELL BETWEEN ZERO SUGAR AND DIET COKE. MAYBE THAT IS ME. COKE IS OUTPERFORMING PEPSI BY A WIDE MARGIN AT LEAST IN THE STOCK MARKET. WHAT IS DRIVING THAT GAP AND CANNOT CONTINUE? KRISTINA: A COUPLE OF THINGS. PEPSI ALSO SELLS SALTY SNACKS THROUGH ITS FRITO-LAY DIVISION AND QUICKER DIVISIONS. THEY HAVE STRUGGLED A LITTLE TO FIND THE RIGHT PRICING THERE. CONSUMERS ARE BEING SELECTIVE IN THEIR PURCHASING. AT A CERTAIN POINT PRICES GOT TOO HIGH ON THE SNACKS. I THINK WE ARE SEEING THEM STRUGGLE ON THAT AREA A LITTLE BIT AND PEPSICO SAID THEIR BEVERAGE BUSINESS IS NOT DOING WHAT THEY WOULD LIKE IT TO BE DOING. PEPSI ALSO OWNS THE OPERATIONS FOR THE MOST PART THAT BOTTLE ITS BEVERAGES AND THEN DISTRIBUTES THEM. COKE WORKS WITH INDEPENDENT BOTTLERS. I THINK SOME OF THE INFLATIONARY PRESSURES WE ARE SEEING HAVE ENDED UP WITH THE BOTTLERS RATHER THAN COKE ITSELF, ALTHOUGH THE OVERALL STATE OF THE CONSUMER DOES IMPACT COKE. ISABELLE: COKE IS SEEING THE STRONGEST GROWTH. DOES IT HAVE A STRONGEST BEVERAGE OR A DRINK LINE THAT INVESTORS -- THAT CONSUMERS ARE WANTING? KRISTINA: I WOULD SAY THAT ONE IMPORTANT PIECE OF NEWS IS THAT TOPO CHICO IS COMING BACK TO TEXAS AND WILL BE EXPANDING AROUND THE STATES. THAT WAS PULLED EARLIER DUE TO SUPPLY ISSUES BUT WE LEARNED IT IS COMING BACK. ISABELLE: WE HAVE TO KEEP AN EYE OUT FOR THAT. KRISTINA PETERSON, THANK YOU FOR UPDATING US ON THE LATEST WHEN IT COMES TO COKE. COMING UP, BROOKE MAY DISCUSSES HOW SHE IS POSITIONING AHEAD OF SUCH A BUSY WEEK THIS WEEK. ALL THAT AND MORE COMING UP. THIS IS "BLOOMBERG OPEN INTEREST ." ♪ ISABELLE: WE ARE 30 MINUTES INTO THE TRADING DAY. I'M ISABELLE LEE. DANI BURGER IS ON ASSIGNMENT IN DALLAS. I HOPE SHE'S HAVING FUN. A CHECK ON THE MARKETS. THE S&P IS ADVANCING HIGHER FOR THE SECOND STRAIGHT DAY. TIP STOCKS IN THE GREEN AHEAD OF RESULTS FROM A HUGE TECH GIANTS LIKE ALPHABET, MICROSOFT AND AMAZON. COMBINED, SOMETHING LIKE $10 TRILLION IN MARKET CAP. YOU HAVE BRENT CRUDE BACK HIGHER BY .2%. BREAKING NEWS HERE. CONSUMER CONFIDENCE AND HOME SALES AND OTHERS. MICHAEL MCKEE ARE TO BREAK IT DOWN. MICHAEL: A LITTLE BIT OF GOOD NEWS HERE IN A WAY. OCTOBER CONSUMER CONFIDENCE JUMPS TO 91.7. THE ESTIMATE WAS 81. 81.9 IN THE LAST MONTH. A BIG JUMP THERE. NEW HOME SALES, 676,000 ANNUAL RATE. THE ESTIMATE WAS 651,000. BETTER NEWS THAN EXPECTED ON BOTH OF THOSE. LET ME BREAK DOWN THE NUMBERS HERE FOR THE CONSUMER CONFIDENCE REPORT. WHEN WE LOOK AT WHAT IS HAPPENING WITH THE PRESENT SITUATION -- EXCUSE ME JUST A MOMENT. WE WILL SEE -- EXCUSE ME. ISABELLE: IT'S OK. YOU ARE DOING THIS LIVE. MICHAEL: IT IS MY ADOBE PDF POPPING UP THE RIGHT WAY. 120.4 UP FROM 111.8. WE HAVE SEEN GASOLINE PRICES FALL A LITTLE BIT BUT STILL WELL OVER FOUR DOLLARS. EXPECTATIONS, 72.6 FROM 65.7. PEOPLE ARE MORE CONFIDENT ABOUT THE FUTURE AND FEELING BETTER ABOUT THE WAY THINGS ARE GOING RIGHT NOW. IN TERMS OF THE OTHER NUMBER PEOPLE WATCH, THE EMPLOYMENT FIGURES, 26.7 FROM 24.3. THIS IS UNCHANGED FROM AUGUST. THE INTERESTING FROM SEPTEMBER IS THAT WE HAVE SEEN PEOPLE GET PESSIMISTIC ABOUT JOBS BECAUSE NOBODY HAS BEEN HIRING AND HOW PEOPLE ARE FEELING A LITTLE BETTER. SOMETHING HAPPENED IN THIS REPORT THAT SUGGESTS PEOPLE ARE FEELING BETTER ABOUT THE BASIC STATUS OF THE ECONOMY. DOES THAT MEAN SOMETHING CHANGES IN THE POLITICAL POLLS? WE WILL HAVE TO WATCH THAT. ISABELLE: THE S&P SOFTENING ON BREAKING NEWS. LOWER BY .1%. TOMORROW IT IS ALSO THE COMBINATION OF THE FOMC MEETING. MARKETS ARE ASSIGNING A 10% PROBABILITY OF A RATE HIKE, WHICH IS BASICALLY PROBABLY NONEXISTENT. A STRONGER ONE IN DECEMBER. WHAT ARE YOU ON THE LOOKOUT FOR? IT'S ALMOST BAKED IN BUT MAYBE FED CHAIR KEVIN WARSH WILL SAY? MICHAEL: THE ODDS ARE LONG WE WILL GET ANY KIND OF SURPRISE INCREASE IN THE FED FUNDS RATE. THE QUESTION BECOMES, IF YOU ARE LOOKING FOR A TIMELY RETURN FOR THE FED'S 2% RATE TARGET, WHICH THEY MENTIONED IN THE STATEMENT IN SEPTEMBER, HOW DOES PAUSING HELP THAT? WHY ARE YOU PAUSING AT THIS POINT? WHY DIDN'T YOU GO AHEAD AND RAISE RATES? DOES HE GIVE US SOME INDICATION THAT MORE RATE INCREASES ARE COMING? IF SO, WHEN, BECAUSE HE DOES NOT DO FOR GUIDANCE. THE QUESTION IS WHETHER WALL STREET WILL FIND OUT ANYTHING OR THEY WILL HAVE TO WAIT UNTIL EVERYBODY ELSE ON THE COMMITTEE STARTS SPEAKING. WE EXPECT A COUPLE OF DISSENTS. USUALLY THE DISSENTERS PUT OUT THE STATEMENTS ON THE FRIDAY AFTER TELLING US WHY. THAT COULD GIVE US CLUES ABOUT THE DEBATE AS WELL. ISABELLE: YOU WILL BE NDC TO BREAK THE NEWS AND ASK A QUESTION. -- IN D.C. DO YOU PREP QUESTIONS BEFOREHAND OR JUST TO THE ROOM? MICHAEL: BOTH. IT DEPENDS ON WHAT THE MOOD IS AND WHAT HE'S BEEN SAYING. ISABELLE: ALL THE BEST TO YOU, MICHAEL MCKEE. GOOD LUCK TOMORROW WHEN IT COMES TO THE FOMC. JOINING US FOR MORE IS BROOKE MAY. WE JUST GOT CONSUMER CONFIDENCE RISING, BEATING ALL ESTIMATES. TALK ABOUT THAT AND WHAT THAT MAY MEAN FOR THE BROADER MARKETS. BROOKE: I LOVE SEEING CONSUMER CONFIDENCE COMING IN SO HIGH. THERE'S BEEN A LOT OF PESSIMISM AND IT'S INTERESTING BECAUSE RETAIL SALES ARE COMING IN AT 6.3%. WE KNOW WAGE GROWTH IS ONLY 3%. WHEN YOU HAVE HEADLINE CPI AT 3.7% BUT WAGE IS ONLY GROWING AT 3%, YOU WILL READ THE CONSUMER IS GETTING SQUEEZED. CONSUMER CONFIDENCE COMING IN SO STRONG, THAT'S APPEALING. ISABELLE: YOU SAY THAT IT TAKES A WHILE FOR CONSUMERS TO GET SQUEEZED BUT WE HAVE BEEN SEEING PRICES RISING AND THAT WILL TAKE TIME TO FILL -- FILTER THROUGH TO CONSUMERS. DO YOU THINK THAT IS REFLECTIVE OF THE CORE CPI AND PCU NUMBERS WE ARE SEEING THAT THE FED MAY BE TAKING INTO ACCOUNT? HOW YOU INCORPORATE THAT WITH MARKET DECISIONS? BROOKE: HEADLINE CPI AT 3.7%. PPI AT 6.3%. THAT IS THE PRODUCER PRICE INDEX. DIESEL PRICES AT SEVEN DOLLARS A GALLON. 65% OF GOODS ARE SHIPPED BY TRUCK. IT TAKES UP TO SIX MONTHS TO SEE THE PRICES FLOW THROUGH TO CONSUMERS. WE DON'T THINK WE ARE OUT OF THE WOODS YET. IT'S ALMOST EMINENT WE ARE GOING TO SEE A RATE HIKE IN DECEMBER. POSSIBLY FUTURE RATE HIKES TO COME. EVEN IF WE GET A RESOLUTION IN THE MIDDLE EAST, WE EXPECT TO SEE INFLATION CONTINUE TO TAKE HIGHER -- TICK HIGIH HER. ISABELLE: THERE ARE RISKS WHEN IT COMES TO HOLDING BACK WHEN IT COMES TO RAISING INTEREST RATES, ESPECIALLY WITH INFLATION STILL ELEVATED. BROOKE: I DON'T THINK THEY SHOULD PAUSE. TOMORROW WE DON'T EXPECT A RATE HIKE BUT IN DECEMBER I THINK WE NEED A RATE HIKE. THEN WE WILL BE DATA-DEPENDENT. WARSH DOES NOT GIVE A LOT OF GUIDANCE, SIMILAR TO THE GREENSPAN ERA WHERE WE SEE GREEN SPEAK AND I THINK HE WILL INDICATE INFLATION IS A CONCERN THAT THEY WILL TACKLE INFLATION. THE OTHER PART OF THE EQUATION IS THE LABOR MARKET AND THE LABOR MARKET HAS BEEN STRONG. IT'S BEEN THE BACKBONE OF THE ECONOMY. THE UNEMPLOYMENT IS ONLY 4.2%. WE HAVE SEEN UNEMPLOYMENT UNDER 4.5% NOW FOR FIVE YEARS. THAT DOES NOT TELL THE WHOLE STORY. WE LOOK AT WAGE GROWTH AT 3%,, WE ARE IN A SLOWER TO HIRE AND FIRE ENVIRONMENT, NO JOB SWITCHERS, THOSE THAT LEAVE THEIR COMPANY AND GO ELSEWHERE TYPICALLY GET ABOUT A 4.7% INCREASE IN COMPENSATION. JOB STAYERS ONLY GET ABOUT A 3.4% INCREASE IN COMPENSATION. WHENEVER WE LOOK AT WAGE GROWTH, THAT IS NOT HELPING THE SCENARIO. IN ADDITION TO THOSE OUT THERE LOOKING, IT IS DIFFICULT RIGHT NOW TO FIND EMPLOYMENT. ISABELLE: WHAT WOULD YOU NEED TO BELIEVE THAT INFLATION IS REALLY ON ITS WAY BACK DOWN TO 2%? BROOKE: YOU WOUL -- HE WOULD NEED TO SAY WE HAVE TACKLED INFLATION, OUR JOB IS ALMOST DONE, BUT I DON'T THINK HE WILL SIGNAL MUCH. WE WOULD NEED TO HEAR HIM SAY IT AND I THINK INFLATION IS A CONCERN, THEIR PRIORITY, AND THEY WILL DO WHAT THEY NEED TO DO TO GET PRICES UNDER CONTROL. ISABELLE: WE ARE ABOUT TO HEAR FROM ALPHABET, AMAZON, MICROSOFT, META. KENNY YOU ARE FOCUSED ON TO CONVINCE INVESTORS THAT THE AI SPENDING WE ARE SEEING IS GOING TO PAY OFF DOWN THE LINE SOONER RATHER THAN LATER? BROOKE: WE LOVE THE HYPERSCALERS. WE LOVE A LOT OF THE. BIG TECH NAMES YOU MENTIONED WE THINK YOU WANT EXPOSURE THERE. WE ARE NOT OVERWEIGHT THOSE NAMES ANY LONGER. FOR A LONG TIME, TWO THIRDS OF THE EARNINGS WERE COMING FROM THE MAG7. IT'S A DIFFERENT ENVIRONMENT NOW. WE EXPECT EARNINGS GROWTH THIS QUARTER TO BE ALMOST 30%. IF YOU STRIP OUT SOME OF THE BIG NAMES THAT HAVE REALLY CARRIED EARNINGS FOR THE LAST FEW YEARS, WE ARE EXPECTING 27% OR 20% EARNINGS GROWTH AND THEY ARE DOING IT WITH REALLY STRONG MARGINS. WE THINK WE COULD SEE MARGINS AROUND 15% THIS QUARTER. IT'S NOT AN ANOMALY. WE EXPECT 15% PLUS MARGINS FOR THE NEXT THREE QUARTERS. THIS IS THE TYPE OF ENVIRONMENT WHERE YOU COULD HAVE BROAD EXPOSURE TO U.S. EQUITIES. LARGE-CAP. WE ARE KEEPING A CLOSE EYE ON SMALL CAP RIGHT NOW. SMALL-CAP IS MUCH MORE INTEREST RATE SENSITIVE. A LOT OF THE DEBT IS VARIABLE. IF WE SEE RATES TO HIRE, THAT COULD CUT INTO SMALL CAP EARNINGS. WE HAVE NOT PARED OUR SMALL-CAP EXPOSURE AND YEAR TO DATE IT HAS DONE WELL BUT IT IS SOMETHING WE ARE CAUTIOUS IN KEEPING AN EYE ON. ISABELLE: WHAT ABOUT AI ADOPTION? TORSTEN SLOK SAYS INVESTMENTS HAS PROVIDED ZERO PAYOFF TO CORPORATE AMERICA OUTSIDE OF TECHNOLOGY. BROOKE: I DISAGREE. GOLDMAN HAD A REPORT THAT INDICATED WE ARE SEEING 20% TO 30% PRODUCTIVITY INCREASE WHERE COMPANIES ARE USING AI. THERE IS EVIDENCE THAT AI IS GOING TO HAVE AN IMPACT. FROM A DOLLARS AND CENTS STANDPOINT, THE MATH MIGHT NOT WORK RIGHT NOW. WE ARE EXPECTING TO SEE ALMOST A TRILLION DOLLARS IN AI SPEND GLOBALLY. MORE THAN HALF OF THAT IS COMING WITHIN THE U.S.. I THINK -- I DON'T THINK WE ARE IN A BUBBLE ABOUT TO BURST. WHEN WE LOOK AT AI SPEND THERE WILL BE SOME WINNERS AND LOSERS IN THE HEADLINES WHEN WE SEE A COMPANY STRUGGLING OR HAVING TO OVER THEMSELVES WITH THE BUILDOUT, THAT WILL CREATE VOLATILITY IN THE MARKET. REALITY IS WE ARE NOWHERE NEAR CAPACITY WHEN IT COMES TO AI INFRASTRUCTURE. WE ARE SEEING A DOUBLE ABOUT EVERY 12 TO 16 MONTHS. WE HAVE A LONG WAY TO GO. THERE WILL BE VOLATILITY IN THE NEAR TERM WHENEVER WE SEE DISAPPOINTMENT AMONG SOME OF THE NEO-CLOUDS OR OTHERS WHO HAVE INVESTED EXTENSIVELY IN AI. IF THEIR BUSINESS MODEL DOES NOT COME TO FRUITION. IN THE BROAD MARKET, IT WILL PAY OFF. ISABELLE: WE WILL BE ON THE LOOKOUT THIS WEEK WHEN IT COMES TO THOSE EARNINGS. BROOKE MAY, THANK YOU FOR JOINING US. LET'S HEAD TO DALLAS WHERE FINANCIAL LEADERS ARE GATHERING FOR BLOOMBERG INVEST WITH HEAVY HITTING CONVERSATIONS EXPLORING THE FUTURE OF CAPITAL MARKETS COMING THROUGHOUT THE DAY. DANI BURGER IS THERE NOW AND JOINS US LIVE. WHAT IS THE LATEST? DANI: IT IS GOING TO BE A FANTASTIC DAY. WE WILL KICK OFF THE CONVERSATION ABOUT 20 MINUTES TIME. I WILL START WITH A PANEL WITH BOTH REPRESENTATIVES FROM NEW YORK STOCK EXCHANGE TEXAS AND FROM AT&T, WHICH HAS DONE A LISTING HERE IN DALLAS ON THE NYSE TEXAS. A LOT OF CONVERSATION ABOUT THE GROWTH OF THE STATE AND THE CITY SPECIFICALLY. I'M LOOKING FORWARD TO AT 12:00 EASTERN, AND CHARLES WILL JOIN. HE JUST GOT APPROVAL FOR AN ADDITIONAL NFL STAKE IN THE ATLANTA TEAM, THE FALCONS, AND THAT BRINGS THE TOTAL NUMBER OF INVESTMENTS IN THE NFL UP TO FOUR. FOR THOSE WHO KNOW THE RULES, SIX IS AS MANY AS YOU CAN HAVE. WHAT WILL HE DO WITH THE FINAL TWO? HE'S POSITIONING IS THE ANTI-AI TRADE. MAYBE SPORTS IS AN EXCELLENT PLACE TO GO. YOU CAN SEE THE TRAIT IS ALIVE AND WELL. YOU HAVE THIS BOOM IN HYPERSCALERS. WHERE DO YOU WANT TO HIDE OUT? MAY BE LIVE SPORTS IS THE ANSWER. ISABELLE: SPORTS IS KIND OF UNCORRELATED WITH AI. CAN YOU TALK ABOUT THE VIBE? TEXAS IS TRY TO BECOME THE NEXT WALL STREET SO TO SPEAK AND THAT IS WHY USING THE NEW TEXAS EXCHANGE RAMPING UP AND A LOT OF COMPANIES MOVING THEIR LISTING FROM NEW YORK OR NASDAQ TO THE TEXAS STOCK EXCHANGE. WHAT IS THE OVERALL VIBE? DANI: IT DOES FEEL LIKE ALMOST AN EXCHANGE WAR AND THAT'S HOW I WILL KICK OFF THE PANEL. THE NYSE TEXAS, THE TXSC, A NEW EXCHANGE WRESTLING OVER COMPANIES TO LIST WITH IT. YOU HAVE THE NASDAQ EXPANDING LOCALLY HERE. PART OF WHAT IS HAPPENING IS YOU HAVE A LOT OF FINANCE COMPANIES MOVING. GOLDMAN HAS A VERY LARGE PRESENCE IN TEXAS IN DALLAS SPECIFICALLY AND I WILL SPEAK WITH THE HEAD OF THE DALLAS OFFICE, ISSAM KALIL, WHO OVERSEES THE MID-CAP MARKET INVESTMENT BANKING STRATEGY. I WILL SPEAK WITH HIM ABOUT THIS. NOW YOU HAVE DALLAS WITH MORE FINANCE WORKERS SINCE 2020 THREE VERSUS L.A. OR CHICAGO. THE GROWTH IS NOTABLE. TRYING TO CATCH THE CLIENTELE, WHETHER IT IS ENERGY COMPANIES OR OTHERWISE IN THE STATE IT IS A BOOMING ECONOMY BUT THEY HAVE A LOT OF POLITICS TO DEAL WITH. IT'S AN IMPORTANT SENATE RACE HAPPENING HERE ALONG WITH THE GOVERNORSHIP. HOW WILL THAT IMPACT THE FUTURE OF DATA CENTER DEALS? A LOT OF QUESTIONS HERE AT BLOOMBERG INVEST DALLAS. ISABELLE: THANK YOU SO MUCH FOR JOINING US. WE CANNOT WAIT TO WATCH YOUR SPECIAL EDITION OF BLOOMBERG DEALS TODAY AT NOON EASTERN AS YOU INTERVIEW EXCLUSIVE EXECUTIVES FOR YOUR SHOW LIVE FROM BLOOMBERG INVEST IN DALLAS. LET'S CHECK THE MARKETS RIGHT NOW. ABOUT AN HOUR AND A HALF AWAY FROM TRADING. THE S&P AND THE NASDAQ HIGHER BY .3%. FOR THE NASDAQ. THE S&P SOFTENED SOME OF THE GAINS. YOU SEE INDEX IS REALLY FLUCTUATING, ALL THE CHIPMAKERS, A RENEWED ADVANCE OFFSET BY LOSSES IN OTHER INDUSTRIES. IT IS A CROSS CURRENT ARE MANY THINGS. IT IS THE EVE OF THE FED DECISION AND GEOPOLITICAL DECISIONS FROM TO RON. IT'S A VOLATILE SESSION. SHORT-TERM TREASURY YIELDS ARE RISING. IT'S ACTUALLY FLAT AS OF NOW. WE HAVE U.S. CONSUMER CONFIDENCE UNEXPECTEDLY RISING FOR OCTOBER AND THAT IS THE FIRST TIME IN FOUR MONTHS AS BUSINESS CONDITIONS IMPROVE OVERALL. LET'S LOOK AT THE MOVERS ON THE RADAR WITH SALLY BAKEWELL. SALLY: FIRST UP, BROADCOM IS ARRANGING A $63 BILLION DEAL TO FINANCE ANTHROPIC'S CHIPS. PROMPTING AN UPGRADE FROM DA DAVIDSON THIS MONEY. THE AGREEMENT INCLUDES COMMITTED FINANCING FROM BANK OF AMERICA, BLACKSTONE, CITI AND MORGAN STANLEY. GENERAL MOTORS IS PLANNING TO SHIFT ITS STOCK LISTING FROM THE NASDAQ TO THE NEW YORK STOCK EXCHANGE AS IT LOOKS TO POSITION ITSELF AS A TECH FORWARD COMPANY. IT IS SET TO KEEP THE TICKER GM SYMBOL WHEN IT TRADES ON THE NASDAQ ON NOVEMBER 17. UPS IS BOOSTING ITS FINANCIAL GUIDANCE FOR THE YEAR ABOVE WALL STREET ESTIMATES. THE MOVE COMES AS THE CEO SAYS THE COMPANY IS ENTERING THE HOLIDAY SEASON FROM THE POSITION OF STRENGTH. DON'T MISS OUR EXCLUSIVE INTERVIEW WITH HER ON THE CLOSED AT 3:30 P.M. IN TIME. THOSE ARE YOUR MORNING MOVERS. ISABELLE: COMING UP, BRUCE RICHARDS SAYING ANTHROPIC COULD RAISE $100 BILLION IN AN IPO. WE WILL DISCUSS THE FILING THROUGH A PRIVATE CREDIT LENS NEXT. THIS IS BLOOMBERG OPEN INTEREST. ♪ ISABELLE: A LOOK AT WHAT IS MAKING HEADLINES AROUND THE WORLD. BLOOMBERG LEARNED THAT TO SIGMA'S COFOUNDERS ARE EXPLORING A SALE TO BREAK A YEARS LONG GOVERNMENT STALEMATE.THEY DISCUSSED THE DEAL WITH A MIDDLE EAST INVESTOR OR U.S. PENSION FUND. POTENTIALLY BRINGING IN A TIE-BREAKING SHAREHOLDER. ANY DEAL COULD TAKE UP TO 18 MONTHS. ARES CAPITAL'S BUYING MID-CAP FINANCIAL INVESTMENT FROM APOLLO AND A $2.6 BILLION IN CASH AND STOCK DEAL. SHAREHOLDERS WILL RECEIVE $10.88 A SHARE, A ROUGHLY 30% PREMIUM AND IT HIGHLIGHTS CONTINUED CONSOLIDATION ACROSS THE NEARLY $2 TRILLION PRIVATE CREDIT MARKET. FORCE MAJEURE HAS PROTECTED COMPANIES FROM ACTS OF GOD. NOW SOME BORROWERS ONE PROTECTION FROM ACTS OF AI. PRIVATE EQUITY FIRMS ARE ADDING CLAUSES TO DELAY DEFAULT CONSEQUENCES OF AI DISRUPTION CAUSES MISSED INTEREST PAYMENTS. THEY ARE WARNING LANGUAGE COULD WEAKEN BASIC CREDITOR PROTECTIONS. STICKING WITH AI, THE CDC MARATHON HEAD BRUCE RICHARDS TOLD DANNY AND ME YESTERDAY THAT CAPITAL MARKETS WILL CONTINUE TO FIND ANTHROPIC. WE SPOKE WITH HIM ON OPEN INTEREST FOLLOWING ANTHROPIC'S IPO FILING. >> ANTHROPIC, WHATEVER THE NUMBER WILL BECOME A WE WILL SEE. RAISING $100 BILLION IN THE IPO WILL DO JUST FINE. IT IS A SOLID COMPANY. THEY ARE GROWING RAPIDLY. THEY HAVE A RAISED REVENUE TRAJECTORY. THEY CAN FINANCE THEMSELVES IN THE CAPITAL MARKETS WILL FIND THEM LIKE THEY HAVE OTHER TRILLION DOLLAR COMPANIES. ISABELLE: LET'S GET MORE ON FINANCING WITH EITHER CREDIT REPORTER OLIVIA FISH LOW AND YOU FLAGGED THE MID-CAP JUMPING AFTER ARES ACQUIRING IT IN A CASH AND STOCK DEAL. TALK ABOUT THE IMPORTANCE OF THE DEAL AND HOW IT INFLUENCES THE STATE OF THE PRIVATE CREDIT MARKET. OLIVIA: WE HAVE SEEN THE GOLDEN AGE OF PRIVATE CREDIT WHERE EVERY LENDER WAS DOING AMAZING AND NOW WE ARE STARTING SEE THE MARKETS GET A LITTLE MORE COMPLICATED, A LITTLE MORE DIVERGENT FOR SOME LENDERS. WE ARE SEEING ARIES TO THAT AS AN OPPORTUNITY TO ACQUIRE SOME UNDERPERFORMERS AND GET MORE SCALE THERE. ISABELLE: ARE WE SEEING A BROADER WAVE OF CONSOLIDATION AND WHAT IS DRIVING IT? OLIVIA: WE DEFINITELY ARE. IT'S AN INFLECTION POINT FOR PRIVATE CREDIT WHERE ARIES IN THE PAST HAS GROWN THROUGH THE ACQUISITIONS WHERE THEY FIND FUNDS AT A DISCOUNT AND ARE ABLE TO GROW AND SCALE AND LENDERS ARE LOOKING RIGHT IN SAYING WHAT IS THE BEST WAY TO CONSOLIDATE TODAY? ISABELLE: HOW MUCH RISK IS BUILDING IN THE SPACE AND MAYBE WHERE ARE YOU SEEING A LOT OF MISPRICING? OLIVIA: WE ARE STILL HEARING A LOT AROUND SOFTWARE BECAUSE THE LOANS WERE UNDERWRITTEN AT A TIME WHERE THE FINANCIALS WERE SO DIFFERENT FOR THE COMPANIES, THE LEVERAGE WAS DIFFERENT. I FEEL LIKE AI WAS NOT REALLY UNDERSTOOD AS IT IS TODAY. THAT'S AN AREA THAT LENDERS ARE DEFINITELY FOCUSED ON. ISABELLE: PRIVATE CREDIT IS FINANCING A LOT OF THE AI BOOM. HOW ARE THEY TAKING ADVANTAGE OF THIS HUGE MASSIVE BOOM? OLIVIA: EVEN AS THEY ARE WORRIED ABOUT SOFTWARE AND HAVING PORTFOLIO COMPANIES DISRUPTED, THEY WANT TO BE INVOLVED IN THE NEXT PHASE OF PRIVATE CREDIT. IT IS TRANSITIONING MORE TO THE INFRASTRUCTURE, FINANCING, AI BUILDOUT. THESE HUGE $30 BILLION DEALS. ISABELLE: ARE YOU BUSY WHEN IT COMES TO REPORTING? OLIVIA: WE ARE ALWAYS LOOKING AROUND FOR WHAT ELSE IS GOING ON. ISABELLE: THANK YOU FOR JOINING US AND TAKING A BREAK FROM YOUR DESK. OLIVIA FISHLOW. WE HAVE ADVENT DEFYING THE SLOW DOWN, RAISING SOME $30 BILLION FOR ITS GLOBAL BUYOUT STRATEGY. WE WILL HEAR MORE FROM THE FIRM'S MANAGING PARTNER. THIS IS BLOOMBERG OPEN INTEREST. ♪ ISABELLE: THIS IS "BLOOMBERG OPEN INTEREST." THE S&P AND NASDAQ BOTH IN THE GREEN AND THE RUSSELL 2000 AND ASKED WHICH IS A BENCHMARK OF SMALL CAPS. IT'S OPTIMISM AHEAD OF THE BIG TECH EARNINGS WE ARE SEEING META , AMAZON REPORTING $10 TRILLION IN MARKET CAP WHICH REPRESENTS 36% OF THE S&P. ALL EYES ON HOW MUCH MONEY THEY WILL BE SPENDING ON THEIR AND WHEN INVESTORS WILL SEE PAYOFF. A LOT OF THE PEOPLE ON THE SHOW IT IS BECOMING NUANCED. IT IS NOT EVERYTHING ALL IN ON AI. THEY WANT TO BE MORE SELECTIVE WHEN IT COMES TO THAT. BRENT CRUDE COMING OFF OF HIGHS OF $170 A BARREL. NOW AROUND $114 A BARREL. A QUICK LOOK AT SOME OF THE STOCKS. PAYPAL DOWN BY 1/10 OF ONE PERCENT. THEY RAISE GUIDANCE PROMISING GROWTH IN THE KEY BUSINESSES. BOEING IN THE RED, DOWN MORE THAN 2%. THEY POSTED A WIDER THAN EXPECTED LOSS. GM MOVING TO THE NASDAQ AND THAT IS WHY THEY ARE HIGHER BY FIVE PERCENT. INVESTORS ARE LIKING THAT BECAUSE THEY MAY BE SHIFTING TO BECOME A MORE TECH FOCUSED COMPANY. COKE DOWN BY .4%. STRONG OVERALL RESULTS WITH THE SALES MISSED IN NORTH AMERICA. COMING UP, ADVENT RAISES 30 BILLION DOLLARS, DEFYING THE SLOWDOWN. WE WOULD HEAR FROM JOHN MALDONADO UP NEXT. THIS IS "BLOOMBERG OPEN INTEREST ." ♪ >> ADVENT RAISING $30 BILLION FOR ITS GLOBAL BUYOUT STRATEGY AND ITS NEW MID MARKET FUND. THE RAISE BUCKING THE TREND OF SLOWDOWN IN THE P.E. SPACE. DANI BURGER SAT DOWN WITH THE MANAGING DIRECTOR. >> THIS HAS BEEN A PERIOD OF SELECTION ON THE PART OF INVESTORS, SO WE FEEL FORTUNATE ABOUT THEIR SUPPORT. I ATTRIBUTE OUR SUCCESS TO PRIMARILY TWO THINGS. WE’RE A PURE PLAY PRIVATE EQUITY MODEL WITH A TRACK RECORD OF REALIZATIONS. THIS YEAR WAS NO DIFFERENT THAN SOME OTHERS. IT WAS A GREAT YEAR FOR REALIZATIONS. SECONDARILY, WE BUILT A FRANCHISE THAT CAN DEPLOY IT. WE’VE GOT 18 OFFICES AROUND THE WORLD. WE’VE GOT INCREDIBLE SECTOR DEPTH, A COMBINATION OF THOSE TWO THINGS GIVES OUR INVESTORS A LOT OF COMFORT THEY CAN GIVE CAPITAL TO ADVENT, AND WE CAN DEPLOY IT. DANI: IS THERE ANY SPECIFIC OPPORTUNITY YOU’RE LOOKING AT WITH THIS CASH IN HAND THAT YOU THINK IT IS RIPE FOR ADVENT TO GET INVOLVED IN? >> I WOULDN’T SAY ANY SPECIFIC OPPORTUNITY. BUT THEMATICALLY, THE FIVE SECTORS THAT WE’VE HISTORICALLY SPENT TIME ON, WITHIN THOSE FIVE SECTORS, WE HAVE SOURCING SELLS, PLACES WHERE WE REALLY FIND OUR CAPABILITIES ARE WELL SUITED TO THE MARKETPLACE, PLACES LIKE AEROSPACE DEFENSE, SOME POCKETS OF CHEMICALS. PAYMENTS HAS BEEN A LONG-STANDING FRANCHISE WHERE WE INVESTED CAPITAL OVER THE LAST FEW YEARS. SO WE’RE ALWAYS TRYING TO MARRY THAT LOCAL PRESENCE THAT WE HAVE ACROSS 18 OFFICES WITH THAT SECTOR DEPTH THAT WE’VE GOT ACROSS THE GLOBE. DANI: IT’S NOT JUST THE INVESTMENTS YOU’VE DONE THIS YEAR, BUT YOU’VE HAD REALLY, REALLY LARGE EXITS. ULTRA, JUST AS AN EXAMPLE. THIS IS A MARKET THAT MANY HAVE SAID IS STUCK. PEOPLE HAVE HAD TROUBLE EXITING, IT HASN’T MADE ITS WAY THROUGH. WHAT’S DIFFERENT? HOW ARE YOU ABLE TO PUT OUT THESE EXITS AND LARGE ONES WHEN IT FEELS LIKE THE NARRATIVE FOR PRIVATE EQUITY HAS BEEN A STRUGGLE TO EXIT INVESTMENTS? >> YOU SAID IT EXACTLY RIGHT. WE THINK THIS EXACT PROBLEM IS REALLY AT THE BUYING PROBLEM, BECAUSE IN ORDER TO HAVE THE SUCCESSFUL EXIT, AT THE UNDERWRITING STAGE YOU NEED TO HAVE VERY CLEAR-EYED VIEW WHO HAVE YOU ARE BUILDING THE BUSINESS TO SELL TO, AND THAT HAS BEEN PART OF OUR UNDERWRITING FOR A VERY LONG TIME. WHEN WE ARE MAKING THE INVESTMENT DECISION, WE’RE HAVING VERY INTENTIONAL DISCUSSIONS ABOUT WHO WILL THE BUYER BE, AND THEN EVERYTHING WE DO DURING OUR OWNERSHIP PERIOD AND WHAT WE CALL THE PLAN IS MEANT TO BUILD A BETTER BUSINESS THAT PERFECTLY SUITED FOR THE BUYER. YOU MENTIONED ULTRAGOING TO LOCKHEED MARTIN. WE ALSO SOLD ELEVATOR TO CONEY, ONE OF THE LARGEST TRANSACTIONS IN PRIVATE EQUITY IN SOME TIME. WE ALSO SOLD A PAYMENTS BUSINESS TO SOUTH AMERICA. SO IT’S EXACTLY THIS INTENTIONALITY OF KNOWING WHO THE ULTIMATE BUYER WILL BE AND FOCUSING YOUR EFFORTS DURING YOUR OWNERSHIP PERIOD TOWARD THAT BUYER. DANI: WE’VE SEEN SOME OF THE GIANTS, IF YOU TAKE BLACKSTONE EARNINGS LAST WEEK, WHOSE REALIZATIONS WERE DOWN FOR THE QUARTER, THEY BASICALLY LAID OUT RATE VOLATILITY IS AN ISSUE, AND ENERGY MARKETS, AND THAT’S LEADING TO THIS MACRO ANGST. YOU’RE ABLE TO EXIT, BUT ARE YOU ALSO SEEING AN ANGST? IS IT MORE DIFFICULT THAN USUAL BECAUSE OF RATES AND INFLATION WEIGHING ON THINGS? >> WE ALWAYS TAKE ACCOUNT OF THE MACRO ENVIRONMENT, BUT WE FOCUS ON THE FUNDAMENTALS OF THE COMPANY AND THE SECTORS, AND WE’RE LOOKING FOR PLACES WHERE WE CAN DRIVE THE OPERATIONAL IMPROVEMENT THAT HAS BEEN THE CORNERSTONE OF HOW WE FOUND SUCCESS OVER 42 YEARS. SO YOU’RE NOT WRONG THAT THE GEOPOLITICAL INSTABILITY, THE QUESTION AROUND WHERE INTEREST RATES ARE GOING, INFLATION IS NOW PART OF THE DIALOGUE, THOSE ARE ALL THINGS THAT ARE IN THE PETRI DISH OF WHAT WE’RE EVALUATING, BUT ULTIMATELY WE’RE LOOKING FOR GREAT MICROSTORIES WHERE WE BELIEVE WE CAN DRIVE VALUE WITH THESE PORTFOLIO COMPANIES. AND AGAIN, FIND A GOOD HOME FOR THEM WITH THE STRATEGIC AT THE END OF OUR OWNERSHIP. DANI: ANOTHER INTERESTING PART OF IT, YOU’RE LAUNCHING A DEDICATED MID MARKET VEHICLE, AND THIS IS THE MOMENT WHERE ALSO THERE HAS BEEN ANGST IN THIS SPECIFIC PART OF THE MARKET. SO JUST SOME OF THE STATS. U.S. MIDDLE MARKET DEAL FELL 8.7% IN THE SECOND QUARTER. THE ZOMBIE FUND PROBLEM HAS BEEN POINTED OUT AS BEING PARTICULARLY ACUTE FOR THE MID MARKET. THE RATE HIKE CERTAINLY NOT HELPING THESE COMPANIES THAT OFTEN HAVE FLOATING RATE DEBT. WHY IS NOW THE TIME TO BE LAUNCHING THIS STRATEGY, GIVEN ALL OF THAT? >> LOOK, IT IS A GREAT QUESTION. WE GO BACK TO THIS NOTION OF WE BUILT AN ENGINE THAT IS READY TO DEPLOY IN A DISCIPLINED MANNER, THE CAPITAL THAT WE’VE RAISED. WE’VE, IN FACT, BEEN DOING MIDDLE MARKET INVESTING THROUGHOUT ADVENT’S 42-YEAR HISTORY, INCLUDING THROUGH MODERN DAY. WHAT WE REALIZED IN TALKING TO OUR ORGANIZATION WAS THERE WAS THIS REAL DESIRE TO DO MORE OF IT. WE HAVE THE CAPABILITY. WE HAVE THE DESIRE. WE HAVE THE ECOSYSTEM OF ADVISORS. WE HAVE THE SUB SECTOR SOURCING ALREADY NOT OUT, AND WE REALIZE THAT WE WERE WASTING AN ASSET THAT WAS READY BUILT TO DO MORE IN THE MIDDLE MARKET RELATIVE TO WHAT WE WERE DOING IN OUR FLAGSHIP FUND. THAT’S WHY WE DECIDED NOW IS THE TIME. DANI: CERTAINLY THE A.I. ELEPHANT IN THE ROOM, ESPECIALLY FOR A MID MARKET, I KNOW YOU INVEST, BUSINESS, FINANCIAL SERVICES, HEALTHCARE, THOSE ARE SECTORS THAT HAVE BEEN RIPE FOR A.I. DISRUPTING. ROUGHLY 20% OF P.E.-OWNED SOFTWARE COMPANIES FACE ZOMBIE RISK FROM THE DISRUPTION OF A.I. WOULD YOU AGREE WITH THAT, THAT IT’S SOMETHING LIKE ONE IN FIVE COMPANIES FACE DISRUPTION RISK? >> I WOULD SAY EVERY COMPANY IN EVERY SECTOR WE INVEST IN HAS TO THINK ABOUT THE A.I. IMPACT, BUT WE VIEW IT FROM TWO LENSES. WE VIEW IT FROM THE OFFENSIVE LENS, SO IT’S NOT ALWAYS THE THING THAT A.I. IS GOING TO HAVE A DISRUPTIVE ZOMBIE-LIKE IN PORTFOLIO COMPANIES. IT COULD BE COMPANIES THAT ARE LATER GROWTH, THAT STAND BECAUSE OF THE A.I. IMPACT, AND THEN AS YOU’RE POINTING OUT, THERE’S GOING TO BE COMPANIES THAT YOU NEED TO THINK ABOUT, WHAT IS THE DOWNSIDE, WHAT IS THE DISRUPTION RISK? WHAT IS THE PRICING RISK. WE VIEW ALL OF THE PERSPECTIVE INVESTMENTS, OFFENSE AND DEFENSE, AND BY THE WAY, WE’RE LOOKING AT OUR EXISTING PORTFOLIO COMPANIES THROUGH THE SAME LENS AND TRY TO MAKE THE BEST DECISIONS WE CAN FOR THE EXISTING COMPANIES WE OWN AND HELPING DEPLOY THE A.I. RESOURCES THAT WE HAVE AT THE FIRM, BOTH OFFENSIVELY AND DEFENSIVELY INTO THE PORTFOLIO. DANI: AGAIN, AT THE TOP, YOU DESCRIBED SOME OF YOUR SUCCESS, THIS IDEA THAT YOU ARE PURE PLAY PRIVATE EQUITY, AND YOU ARE AN INCREASINGLY RARE BREED, ESPECIALLY AT YOUR SIZE. THEY’RE ALL MOVING IN THE OPPOSITE DIRECTION. I WONDER IF THERE IS A WORLD WHERE YOU WOULD EVER CONSIDER THAT, WHERE YOU WOULD EVER CONSIDER STRENGTH FROM JUST EQUITY AND MAYBE DOING SOME M&A OF YOUR OWN AND ADD ON OTHER CABLES. CAPABILITIES. >> WE ARE NOT GOING DOWN THAT PATH. WE MADE THIS DECISION, WHEN WE DID A 40-YEAR CELEBRATION OF WHAT IT TOOK TO GET TO WHERE WE ARE AND WHAT IT’S GOING TO TAKE TO BE SUCCESSFUL OVER THE NEXT 40 YEARS, ONE OF THE THINGS THAT STOOD AT THE TOP OF THAT LIST WAS BEING REALLY ALIGNED WITH OUR INVESTORS. AND IT IS QUITE HARD TO DO THAT IF YOU’RE PUBLIC, IF YOUR FOCUS IS ON DIVERSIFICATION, IF YOUR FOCUS IS ON DRIVING F.R.E. GROWTH. WE WANT TO DRIVE ALPHA ORIENTATION. WE CHALLENGE OURSELVES TO DO THAT. THAT IS WHAT OUR INVESTORS AND THE FUNDS WANT, AND WE THINK BY STICKING TO OUR PURE PLAY PRIVATE EQUITY FOCUS, PARTNERSHIP IS THE BEST WAY TO ACCOMPLISH THAT. DANI: HOW OFTEN ARE YOU GETTING CALLS OF PEOPLE LIKE, HEY, DO YOU WANT TO BUY US? CAN WE JOIN YOU? >> THERE ARE CALLS ALL THE TIME. WHAT WE DON’T DO IS LET OURSELVES GET DISTRACTED BY THEM. WE WANT TO STAY FOCUSED ON WHAT’S MOST IMPORTANT TO THE EMPLOYEES AT ADVENT AND TO OUR INVESTORS, AND THAT’S FINDING THE BEST OPPORTUNITIES, DRIVING SUCCESS OF PORTFOLIO COMPANIES, AND FINDING A GOOD HOME FOR THEM. ISABELLE: LET’S GET A QUICK CHECK ON THE MARKETS, AN HOUR AND A HALF SINCE THE MARKET AND A HALF, AN HOUR ACTUALLY. YOU’RE SEEING THE S&P AND NASDAQ HIGHER BY .2%. NASDAQ IS UP .7%. A RALLY IN TECH COMPANIES LIFTING EQUITIES AHEAD OF RESULTS FROM INDUSTRY GIANTS, AT LEAST $10 TRILLION IN MARKET CAP. TRADERS ARE ALSO BRACING THEMSELVES FOR THE FED MEETING, WHICH CONCLUDES TOMORROW. WE HAVE FED CHAIRMAN KEVIN WARSH, WHO’S REALLY A FORWARD GUIDANCE, HE WILL BE FACING A TRICKY TEST THAT INVESTORS WILL BE LOOKING AT. BRENT CRUDE DROPPING $115 A BARREL. AND YOU’RE SEEING TREASURIES WAVE AS WELL. EARLIER THIS MORNING, WE GOT U.S. CONSUMER CONFIDENCE RAISING IN OCTOBER, PERHAPS A SIGN THAT MAYBE INVESTORS VIEW THE JOB MARKET, AND THIS IS CONDITIONED A LITTLE BETTER THAN EXPECTED. LET’S LOOK AT SOME OF THE MOVERS ON THE RADAR THIS MORNING WITH SALLY. SALLY: THANK YOU, ISABELLE. BOEING REPORTED A WIDER THAN EXPECTED LOSS AT ITS MAIN COMMERCIAL AIRPLANE BUSINESS. THE COMPANY RAMPING UP SPENDING FOR FUTURE PRODUCTION AFTER THE DELIVERY STORE IN THE THIRD QUARTER. AND STICKING WITH EARNINGS, JET BLUE IS REASSURING INVESTORS THAT IT WILL RETURN TO PROFITABILITY NEXT YEAR. THE COMPANY IS STILL FORECASTING A LARGER OPERATING MARGIN LOSS THIS YEAR AS AIRLINES CONTEND WITH SOARING JET FUEL PRICES. AND FINALLY, ENDING WITH ANOTHER TRAVEL NAME, ROYAL CARIBBEAN IS BOOSTING ITS FULL-YEAR GUIDANCE AFTER A STRONGER THAN EXPECTED THIRD QUARTER. THE COMPANY IS BEING SOLID DEMAND FOR EUROPEAN AND CARIBBEAN SAILING THAT HELPS OFF SET FUEL COSTS. THOSE ARE YOUR MORNING MOVERS. THANK YOU, ISABELLE. ISABELLE: THANK YOU SO MUCH FOR ALL OF US. COMING UP, IN THE LANDMARK MOMENT FOR A.I., ANTHROPIC MAKES OFFICIAL STEPS TO GO PUBLIC. WE LOOK AT THAT UP NEXT, AND ALSO HAPPENING RIGHT NOW, DANI BURGER IS SPEAKING WITH THE NEW YORK STOCK EXCHANGE TEXAS PRESIDENT BRIAN DANIEL AT THE BLOOMBERG INVEST IN DALLAS. YOU CAN WATCH IT BY TYPING LIVE GO ON THE TERMINAL. FOR NOW, LET’S LISTEN IN. >> I THINK IT CARRIES WELL OVER INTO OURS AND SOMETHING THAT WE’RE DEFINITELY EXPECTING, SOMETHING WE’RE PREPARED FOR, AND SOMETHING WE’RE REALLY EXCITED TO BE PART OF THIS SPACE. DANI: AS FATE WOULD HAVE IT, WE HAVE ONE OF YOUR COMPANIES HERE ON THE PANEL, ALMOST AS IF WE HAD PLANNED IT. AT&T WAS AN EARLY MOVER, DUAL LISTING ON THE NEW YORK STOCK EXCHANGE TEXAS. CAN YOU JUST TALK ABOUT WHAT TANGIBLE RETURNS YOU’VE HAD ON MAKING THAT MOVE? >> WELL, FIRST OF ALL, WE WERE THRILLED TO BE PART OF THE FOUNDING CLASS OF NYSE TEXAS. THIS HAS BEEN A MILESTONE YEAR FOR AT&T. IT IS OUR 150TH YEAR. EARLY THIS YEAR, WE CELEBRATED THE 150TH ANNIVERSARY OF THE FIRST PHONE CALL AM WE CELEBRATED THAT AT THE NYSE. LAST MONTH WAS THE 125TH YEAR OF OUR LISTING ON THE NYSE. WE WERE ABLE TO CELEBRATE THAT TO A DEGREE COMING INTO THE NYSE TEXAS OFFICES. THEY’RE BEAUTIFUL, AS WE WILL DO AN INTERVIEW THERE. ANY TIME WE HAVE A BIG MILESTONE, WE ALWAYS WANT TO GO TO THE NYSE. MAKING THE DECISION TO BE PART OF THE FOUNDING CLASS REALLY JUST LISTING NYSE TEXAS ENDED UP BEING A NO-BRAINER. IF YOU ARE ALREADY A NYSE-LISTED COMPANY, ESPECIALLY A COMPANY BASED IN TEXAS, IT’S REALLY ALL UPSIDE. IT’S VERY EASY TO DO. THERE’S NO COST. THERE’S NO INCREMENTAL OBLIGATIONS. THERE’S A LITTLE PAPERWORK. YOU GUYS HELP US WITH ALL OF THAT. THE INVESTMENT THAT WE WERE MAKING INTO THE EXCHANGE AND BEING PART OF THE FOUNDING CLASS, YOU MADE THAT WITH US. WE DID IT AT AT&T STADIUM. COULDN’T THINK OF A BETTER PLACE TO BE THERE. AND WHAT WAS REALLY EXCITING ABOUT IT WAS JUST THE ENTHUSIASM THAT WE SAW AMONG OUR CO-C.E.O.’S AND COMPANIES DOWN HERE IN TEXAS. I DIDN’T REALLY KNOW WHAT THAT EVENT WAS GOING TO BE LIKE. WE LOVE THAT IT WAS GOING TO BE IN THE STADIUM WITH OUR NAME ON IT. WE LOVED THAT OUR C.E.O. WAS A BIG PART OF THE CEREMONY. I DID NOT THINK IT WAS GOING TO BE STANDING ROOM ONLY. IT WAS A REMINDER THAT THE BUSINESS COMMUNITY IN TEXAS STEPS UP AND TRIES TO INVEST, EVERYONE RUSHES IN. ANTHROPIC MOVING CLOSER TO BECOMING THE FIRST OF THE A.I. DEVELOPERS TO GO PUBLIC. THE COMPANY WILL TRADE ON THE NASDAQ UNDER ANT. THE STOCK IS EXPECTED TO BEGIN TRADING BEFORE THANKSGIVING. LET’S DISCUSS WITH OUR BLOOMBERG TECH EDITOR, WHO JOINS US LIVE. THANK YOU FOR JOINING US. WE’VE HAD AROUND A DAY TO DIGEST ANTHROPIC. THE NUMBERS ARE EXTRAORDINARY. HOW SUSTAINABLE DO YOU THINK THAT IS AND HOW WORRIED SHOULD INVESTORS BE? >> WELL, I THINK THAT THE PROGRESS THAT INVESTORS SEE ANTHROPIC FILING IS CALMING DOWN FROM THE FEARS IN THE MARKET THAT WE WERE SEEING LAST WEEK. THAT SAID, THIS IS ONLY THE FIRST HALF. THIS IS ONLY THE METRIC FOR THE FIRST HALF. WE ARE GOING TO WANT TO SEE, WE REPORTED SOME NUMBERS FROM THE THIRD QUARTER WHERE WE’RE INTERESTED IN WHAT WILL HAPPEN WHEN THEY UPDATE THAT. AND THEY HAVE SAID IN THEIR FILING, THIS IS NOT GOING TO BE THE BIG TECH COMPANIES, THIS IS GOING TO BE POTENTIALLY SPOTTY GROWTH PATTERN, BECAUSE IT REQUIRES SO MUCH UPFRONT INVESTMENT. THE I.P.O. IS REALLY THE KICKOFF. NOW WE’RE A PUBLIC COMPANY, BUT WE ARE STILL GOING TO NEED THAT, WE ARE STILL GOING TO NEED MORE MONEY DOWN THE LINE, BECAUSE OF HOW EXPENSIVE THE BUILDOUT IS FOR A.I. YOU HAVE TO PUT IN BILLIONS, TENS OF BILLIONS, HUNDREDS OF BILLIONS OF DOLLARS TO TRAIN THESE NEW MODELS BEFORE YOU EVEN KNOW IF THEY’RE GOING TO WORK. SO I THINK THAT OVER TIME, WE’LL SEE IF THAT AFFECTS INVESTMENT APPETITE. IT’S BEEN VERY INTERESTING TO SEE ANTHROPIC I.P.O. ALONGSIDE THIS AND JUST SO MUCH INTEREST IN TRYING WRAP UP THE LARGE DEALS BEFORE WE GET TO THE HOLIDAYS. I WONDER IF WE’LL SEE MORE OF THAT. ISABELLE: YOU DID MENTION META, SPACEX. IS THE NEW STRENGTH HAVING ACCESS TO THOSE CAPITAL? BECAUSE WE ALSO SAW WHAT HAPPENED TO THE LIKES OF SMALLER, I SHOULD SAY, NEOCLOUD COMPANIES LIKE COREWEAVE. THEY REALLY HAD VOLATILITY. THESE BIG COMPANIES, I GUESS THEY CAN JUST TAP WHATEVER MARKET THEY WANT TO TAP. >> ONE REASON TO TAP WITH EQUITIES, BECAUSE IT DOESN’T AFFECT YOUR DEBT, THEY MAY STILL NEED TO RAISE DEBT OVER TIME IN ORDER TO CONTINUE THIS DRAMATIC BUILDOUT. SO I’M REALLY CURIOUS, WE GET EARNINGS THIS WEEK FROM GOOGLE, FROM AMAZON, FROM MICROSOFT, WHAT ARE THEY GOING TO SAY ABOUT THEIR CAPITAL NEEDS? ARE WE EVENTUALLY GOING TO HIT SOME SORT OF LIMIT OR WALL IN TERMS OF THE ABILITY FOR FOLKS TO RAISE CAPITAL, MAYBE NOT THE BIG NAMES, BUT EVERYBODY ELSE, BECAUSE SO MUCH IS BEING DEPLOYED ON THIS. ISABELLE: FROM WHERE YOU SIT IN THE TECH TEAM, WHICH I WAS A PART OF FOR A FEW MONTHS WAY BACK WHEN, A FANTASTIC PIECE, WHAT DO YOU THINK IS THE BIGGEST RISK THAT MARKETS OR INVESTORS ARE UNDERPRICING RIGHT NOW? IS IT JUST HOW DISAPPOINTED INVESTORS WILL BE IF THEY DON’T HEAR ENOUGH ABOUT HOW MUCH CAP EX THEY’RE GOING TO SPEND OR WHEN THEY THINK THAT THEY WOULDN’T SEE A PAYOUT? WHAT IS IT? >> I THINK THE BIGGEST RISK IS REALLY THAT THE END USER WON’T PROVIDE A RETURN ON INVESTMENT. ALL THIS BUILDOUT, IT IS IN SERVICE OF FINDING A CUSTOMER WHO’S GOING TO INTEGRATE A.I. INTO THEIR BUSINESS, INTO THEIR LIVES AND PAY FOR IT. THERE ARE PLENTY OF GOOD OPEN SOURCE MODELS. LESS EXPENSIVE WAYS TO DO IT, AND THERE ARE ALSO SOME PEOPLE WHO MAY NOT THINK THAT THEY NEED A.I. SO THAT IS THE ULTIMATE RISK FOR THIS WHOLE TRILLIONS OF SPENDING AND MONEY RAISING, WHAT IF PEOPLE DON’T BUY IN AT THE LEVEL THAT THEY NEED TO BUY IN IN ORDER TO JUSTIFY ALL OF THIS INVESTMENT. ISABELLE: SUCH A BUSY WEEK, ESPECIALLY FOR YOUR TEAM. THANK YOU SO MUCH. COMING UP, TRUMP MAKES HIS FINAL CAMPAIGN STOPS IN DEEP RED STATES AHEAD. NEXT WEEK’S MIDTERMS. THIS IS "BLOOMBERG OPEN INTEREST." ♪ >> THE LAST TIME THE RADICAL DEMOCRATS HAD POWER, THEY GAVE US THE WORST INFLATION IN AMERICAN HISTORY, THE HIGHEST ENERGY PRICES IN AMERICAN HISTORY, THE WORST RATE DEFICIT IN AMERICAN HISTORY, AND THEY WIN THE MEMPHIS, THEY WILL DO IT ALL AGAIN. ISABELLE: PRESIDENT TRUMP STUMPING IN MISSISSIPPI WITH JUST ONE WEEK TO GO BEFORE THE MIDTERMS. LET’S BRING IN OUR CHIEF WASHINGTON CORRESPONDENT, TYLER KENDALL, FOR MORE. TYLER, WHY IS TRUMP CAMPAIGNING SO AGGRESSIVELY IN A STATE THAT HE WON BY A LARGE MARGIN? WHAT DOES THAT TELL YOU ABOUT THE POLITICAL ENVIRONMENT HEADING INTO THE MIDTERMS? TYLER: ISABELLE, AT THIS POINT WE’RE SEEING SOME OF THE RELIABLY RED STATES TURN TO TOSSUPS. MISSISSIPPI FROM STRONG REPUBLICAN TO LIKELY REPUBLICAN IN A DOWNSHIFT IN TERMS OF THE RATING. BUT IF YOU LOOK AT SOME OF THE TOSSUPS, WE’RE TALKING ABOUT PLACES LIKE TEXAS AND KANSAS, WHEN TRUMP WON BY DOUBLE DIGITS IN 2024. TODAY HE’S GOING TO BE CRISSCROSSING TEXAS, WHERE HE’S EXPECTED TO HAVE A SERIES OF CAMPAIGN EVENTS WITH MOST OF THEM FOCUSED ON THE COST OF LIVING IN PARTICULAR, CONCERNS WHEN IT COMES TO HIGHER ENERGY COSTS. THERE’S REPORTING THAT PRESIDENT TRUMP TODAY WILL SHOWCASE AN OIL TANKER THAT SPILLED WITH VENEZUELAN CRUDE THAT’S SET TO BE PROCESSED AT TEXAS REFIBERIES, AS WELL AS UNVEIL A PLAN TO SEEKS TO REGULATIONS AT METHANE AND WHAT OFFICIALS TELL US IS A BID TO HELP PROMOTE MORE DOMESTIC OIL OUTPUT IN THE HOPES THAT WILL LOWER GAS PRICES DOWN THE LINE. BECAUSE ISABELLE, AS YOU KNOW, THIS IS THE NUMBER ONE ISSUE FOR AMERICAN VOTERS AFTER YESTERDAY WE SAW THE AVERAGE PRICE THAT AMERICANS ARE PAYING FOR GAS UNDER THE TRUMP ADMINISTRATION OFFICIALLY HIGHER THAN WHAT WE WERE PAYING UNDER THE LAST ADMINISTRATION, THOUGH WE SHOULD SAY FORMER PRESIDENT JOE BIDEN DOES STILL HOLD THE RECORD FOR THE SINGLE HIGHEST PRICE EVER OUT THERE, BUT WE ARE NOW TALKING ABOUT HIGHER PRICES THAT ARE LASTING FOR LONGER, BOOSTING THAT AVERAGE FOR PRESIDENT TRUMP. ISABELLE: TYLER, WITH SENATE CONTROL ON THE LINE, HOW MUCH PRESSURE ARE REPUBLICANS UNDER TO DEFEND THEIR SEATS IN DEEP RED STATES, AND WHAT COULD A LOSS OR CLOSE RACE SIGNAL FOR THE BROADER PICTURE IN YOUR VIEW? TYLER: AT THIS POINT WE HAVE TO KEEP IN MIND THAT DEMOCRATS ONLY NEED A NET GAIN OF FOUR SEATS. THAT’S HOW CLOSE THESE MARGINS ARE, THOUGH WE SHOULD SAY BROADLY SPEAKING, EVEN THOUGH WE ARE SEEING SOME OF THESE MORE RELIABLY RED SEATS COMPETITIVE, DEMOCRATS STILL FACE AN UPHILL BATTLE, OF COURSE, BECAUSE THESE ARE PLACES WHERE PRESIDENT TRUMP HAS A VERY STRONG BASE, AND WE’RE ALSO SEEING REPUBLICANS POUR A TREMENDOUS AMOUNT OF MONEY INTO THESE CONTESTS. OUR OWN DATA FROM BLOOMBERG SHOWS THAT REPUBLICANS ARE SET TO SPEND $1 BILLION ON ADVERTISING IN THE SEVEN TOSSUP STATES THAT WE’RE TRACKING. THAT IS NEARLY DOUBLE THE AMOUNT THAT DEMOCRATS ARE SET TO SPEND. WE’LL HAVE TO SEE WHERE IT GOES FROM HERE. OF COURSE, THIS WILL HAVE BROAD IMPLICATIONS ON THE AGENDA FOR WHICHEVER CONGRESS, WHICHEVER PARTY GETS CONTROL OF CONGRESS, BUT ALSO KEEP IN MIND THAT MANY OF PRESIDENT TRUMP’S AUTHORITIES HAVE STEMMED FROM EXECUTIVE AUTHORITY RATHER THAN RELYING ON CONGRESSIONAL APPROVAL. SO WE PROBABLY WILL STILL GET GRIDLOCK IN WASHINGTON NO MATTER WHAT HAPPENS GIVEN THE REPUBLICAN ADMINISTRATION. ISABELLE: WE’RE HEARING THAT IRAN’S SUPREME LEADER REITERATING CONDITIONS FOR ENDING THE WAR. WHAT IS THE LATEST ON THAT? WE HAVE AROUND 45 SECONDS. TYLER: NOT A LOT NEW. WE HEARD FROM THE SUPREME LEADER, WHICH IS SIGNIFICANT IN THAT WE VANITY HEARD FROM HIM IN A WHILE, BUT HE REITERATED DEMANDS LIKE THE U.S. NEEDS TO LIFT ITS NAVAL BLOCKADE, CAN BE TO BE A NONSTARTER FOR THIS WHITE HOUSE. IT DOES COME AMID A FLURRY OF DIPLOMATIC ACTIVITY RECENTLY, INCLUDING SENIOR OFFICIALS FROM SAUDI ARABIA, PAKISTAN, AND TURKEY VISITING IRAN YESTERDAY IN A BID TO TRY TO MOVE FORWARD THROUGH THE GRIDLOCK. WE’LL HAVE SEE WHERE IT GOES FROM HERE. IRAN’SPRESIDENT IS MEETING WITH VLADIMIR PUTIN. WE EVEN HAVE A REPORTING THAT CHINA IS CONSIDERING SENDINGEN INVOICES TO THE REGION AMID PRESIDENT TRUMP’S THREAT TO RESTART KINETIC ACTION AFTER THE MIDTERM ELECTIONS. ISABELLE: THANK YOU SO MUCH FOR ALL OF THE UPDATES. YOU ALWAYS KEEP US UP TO DATE. TYLER KENDALL IN WASHINGTON. DON’T MISS OUR SPECIAL MIDTERM COVERAGE ON TUESDAY STARTING AT 7:00 P.M. NEW YORK TIME. HAPPENING RIGHT NOW, BLOOMBERG INVEST IS UNDERWAY IN DALLAS. YOU CAN WATCH ALL OF THE CONVERSATIONS BY TYPING LIVE GO ON THE BLOOMBERG TERMINAL. THAT IS DANI BURGER RIGHT THERE ON YOUR SCREEN. COMING UP, DANI HOSTS "BLOOMBERG OPEN INTEREST" LIVE FROM DALLAS TOMORROW. WE’LL HEAR FROM A SLEW OF SOURCES ON YOUR SCREEN. TUNE IN, AND DON’T MISS IT. THIS IS "BLOOMBERG OPEN INTEREST." ♪