Prof G Markets
00:21:37 · Deirdre Bosa
[00:21:37] S8: I mean, that is... It's an interesting question. Right? Because you look at the bottlenecks in AI and you think about power. Right? That is a constraint. Chips are a constraint, but capital is increasingly a constraint when you're trying to fund this enormous build out. You're right that only Microsoft has said that it can self fund next year at the same time. Last week it priced in $25,000,000,000 of bonds. So even sort of the companies that have been holding out and saying that we're gonna fund all of this ourselves are tapping debt markets. And you're right. When you bring in rising interest rates, this makes this all the more trickier. And I wanna bring up something that people here talk about. It's this cone of uncertainty. Right? It's very relevant when you think about the build out and when it's going to pay off. So you have to commit the money now, even though the further out you look, the less certain you are about demand, costs, and those returns. Borrowing really adds fixed payments to that uncertain future. And at the same time, Ed, when you talk about the companies that reported last week, their core businesses are slowing. So I don't wanna say that this is just a debt and borrowing story that makes everything more urgent. But the core businesses you saw from Alphabet, right? A few years ago, we were talking about Alphabet cannibalizing itself, but it had AI overviews. It was gonna figure out this advertising piece. That actually hasn't happened yet. When you take a look at Amazon, it wants to be seen as sort of this AI company. But again, its core business isn't as healthy as investors would like it to look to say, okay. You can spend all of this money on the AI build out. So, I think that that is also playing out, and that's what the market is looking at. That's why you're seeing, these huge declines because investors are focused on the core businesses. But I will also give you the counterpoint. Do you want me to Yeah. Do that now?
00:23:28 · Ed Elson, Deirdre Bosa
[00:23:28] S4: Please. [00:23:28] S8: The counterpoint is just as interesting. There's this chart that I posted from the Financial Times, and it pulls on, you know, other data sources, but it shows that this free cash flow, squeeze shows that it's actually supposed to be temporary. So you can see that the hyperscalers... We'll talk about them for a moment. Amazon, Microsoft, and Google, the hyperscalers that are spending the most on this build out are eating into their free cash flow. As you mentioned, Ed, some of them is gonna go negative, but by 2030, that is all supposed to come back. This is Wall Street consensus estimate. This is not my estimate. Wall Street actually expects that Google, Amazon, Meta, and Microsoft are gonna be generating more than $600,000,000,000 in combined free cash flow by 2030. So if you believe those numbers, this is like an insane buying opportunity.
00:24:19 · Ed Elson
[00:24:19] S4: Yeah. And this seems to be part of the crazy thing about this moment in time is that everything, the entire market is... And your expectations around this market are based on projections that are way out in the future that actually no one can say with any real certainty, which means massive upside risk and also massive downside risk. And the two are kind of pushing and pulling against each other. I guess, you know, the thing that's so interesting, usually, I don't actually care that much about market sentiment because usually the way we try to think about on this show is like, what are the fundamentals? How is the business actually looking? And then everything else is noise. But now that we're in this moment where in order to actually fund their own business goals, they have to depend on the capital markets, and they have to go out and raise raise this money, which means that actually they're now dependent on sentiment in a lot of ways. They need investors to feel good about the AI story. Otherwise, they're not gonna be able to go out and raise the amount of money that they actually need to raise over the next few years. So just as we start to wrap up here, you know, you cover a lot of this. You're you're actually in San Francisco. You're, like, interacting with a lot of these people. You just spoke with Jensen Huang the other week. What is the sentiment like right now? Is... I mean, we've had the euphoria stage. I can't tell if we're in doomma stage or if people are still feeling optimistic. Like, what is the sentiment in your view?
00:25:48 · Deirdre Bosa
[00:25:48] S8: It is not doomer here in San Francisco. I mean, it remains sort of as bullish as ever, and what Jensen Huang focused on, what Gavin Baker focused on in that interview is demand, and that is undeniably still, you know, just at the earliest stages. What I would say though is, I mean, that is a very... That is a bit of a disconnect, right, from Wall Street. And I think that some will be able to withstand that better. NVIDIA's gonna be okay. Right? They're at the center of the entire trade, and you... We can talk about as well, you know, GPU futures, wave insurance, and the lifetime of these GPUs is lasting a long time. So there's a cohort of companies that are gonna be okay. We talked about a lot of them. The Mag seven, you know, SpaceX as well is able to tap markets and raise more money. Companies will be able to do that. I think the fear maybe are some of the neo clouds. Right? And is that the thing that sort of breaks the AI trade? So that may be something to look at a lot more closely because, Ed, I love that you look at the fundamentals. Me too. When you look at the big tech fundamentals, which I think these are the numbers that people here in tech focus on, like these cloud numbers were insane. AWS up nearly 40%, Azure nearly 50%, Google Cloud over a 100%. That is sort of indication that the demand is there, and it's paying off. But Wall Street is really focused on some of those other core businesses that have paid for the build out.
00:27:09 · Ed Elson, Deirdre Bosa
[00:27:09] S4: Deirdre Bosa is founder and host of Deirdre Bosa Live, which I understand is officially launching next week. Could you tell us a little bit about it, Deirdre? What's the launch gonna look like? What's the timing? [00:27:21] S8: Yeah. So we actually launch our daily show on Monday, November 9. We're gonna be live at 1PM Pacific, 4PM Eastern, right after the market's closed. Every day, I'm sitting actually in the office space, not the studio. It's still under construction. Final touches are putting, are being put on just across from me. So really excited, and Ed, hope to have you on to chat with me there as well. [00:27:43] S4: I would love to, and I'll be tuning in. Thank you so much, Deirdre. [00:27:46] S8: Thanks for having me.
00:27:46 · Deirdre Bosa, Ed Elson, Mark Zandi
[00:27:46] S8: Thanks for having me. [00:27:55] S4: It is election day in America, and voters are casting their votes in what could be a blockbuster election for the Democrats. But before we are able to break down the results of the midterms, let's take a moment to check-in on what will probably be the most important topic on many voters' minds, and that topic is the economy. How is it doing? Joining us to discuss this, where the American economy stands ahead of the midterms, we're speaking with Mark Zandi, chief economist at Moody's Analytics. Mark, thanks for joining us on Prof G Markets. So half of registered voters tell Gallup, they did a poll, that the economy is extremely important to their vote. I'm not surprised by this. This seems to me, to be the most important thing heading into these midterms. So I just wanted to get your update. How is the economy doing halfway through Trump two point o? [00:28:50] S3: Well, Ed, I have to tell you, I'm surprised. Only half? I would have thought it must be much more than that. [00:28:54] S4: Me too.