What Wall Street Really Thinks About the AI Trade Now

It has been a big week for the AI trade — we've seen wobbles in the market, many of them in response to headlines like the Anthropic S-1 and earnings from the hyperscalers (Oracle, Microsoft, etc.). So what does Wall Street make of all the news, and how are they processing an increasing sense that the laws of the economy barely apply to AI? Today, we speak with Alexander 'Alty' Altmann, global head of equities tactical strategies at Barclays, and he helps us make sense of how Wall Street really feels about the AI trade right now. We also talk about the KOSPI-fication of the S&P 500, if there are any historical precedents for the capex going into the AI buildout, and if AI is really immune to interest rates. Read More: Microsoft Reports Rising Cloud Sales That Show Payoff From AI https://www.bloomberg.com/news/articles/2026-10-28/microsoft-reports-quarterly-cloud-sales-that-beat-estimates?srnd=homepage-americas?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox, plus unlimited access to the site and app. bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So, search Barclays Brief wherever you get your podcasts.

• 0:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees. With the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 1:09Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 1:51Speaker 01

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:06Tracy Alloway?

  Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.

• 2:10Joe Weisenthal?

  And I'm Joe Weisenthal.

• 2:11Tracy Alloway?

  Joe, interesting times in markets.

• 2:14Joe Weisenthal?

  You know what?

• 2:16Joe Weisenthal?

  I kind of feel like I lost the plot.

• 2:17Tracy Alloway?

  I know.

• 2:18Joe Weisenthal?

  I like, I was like, I started, I had this realization. I don't know what anything's going on anymore. We're just talking markets. And obviously I lost the plot with life in general, like no one's disputed that. But just like, what are the consensus trades these days? Like, what are people actually worried about with some of these data center stuff? Like, what core weave, what, et cetera? I have no idea what anyone thinks anymore. Like, I need a reality check badly.

• 2:42Tracy Alloway?

  So we're recording this on October 28th. And in terms of market reality checks, we're actually doing better on this one because we often end up recording these right before a Fed decision or right before an S1 comes out or right before earnings guidance or something. This time, we've actually, we've timed it pretty well. So we just had the FOMC decision. Earlier this week, we had the S1 filing from Anthropic. During the Fed presser, Oracle came out with some additional guidance. There's a lot of stuff going on, even though we're going to be able to talk about some of it. There's more stuff coming up later this week. And so I feel like it's a really good moment in time to kind of stop and figure out what's going on.

• 3:24Joe Weisenthal?

  What's going on? Seriously. So you mentioned Oracle headed to some Investor Day data coming out. The stock is up 12%.

• 3:31Tracy Alloway?

  I know.

• 3:32Joe Weisenthal?

  I would say this was a bigger story today than the FOMC.

• 3:36Tracy Alloway?

  Yeah.

• 3:36Joe Weisenthal?

  Right? Like, the questions about capital expenditures, how much debt the big hyperscalers and so forth are going to take on. Clearly, I would say in the minds of many participants, much bigger questions than like, oh, do they are going to hold in October or whatever.

• 3:51Tracy Alloway?

  Not a high bar, given Kevin Warsh's ability to deflect.

• 3:57Joe Weisenthal?

  I turned in for a few minutes at a press conference.

• 3:58Tracy Alloway?

  But you're right.

• 3:59Joe Weisenthal?

  That guy's good, not saying much.

• 4:00Tracy Alloway?

  All right. Well, we do in fact have the perfect guest. We're going to be speaking with someone who we've had on the podcast before. Last time we were talking about levered ETFs. This time, we're going to get a general sort of market overview. It's Alex Altman, Global Head of Equities Tactical Strategies over at Barclays. So Alex, thank you so much for coming back on All Thoughts.

• 4:18Speaker 03

  Thank you very much for having me again.

• 4:20Tracy Alloway?

  So.

• 4:20Joe Weisenthal?

  What's going on?

• 4:21Tracy Alloway?

  What's going on? No, I mean, what? Is there, is there like a consensus AI outlook at the moment?

• 4:29Speaker 03

  Yeah, there is. The consensus AI outlook is, is that AI is still going to, this train is in motion. We're not stopping this train. That's still the consensus, like to be very clear. And let's say if you were to sort of take a sample of an invest, bunch of investors across different cohorts, whether it's in the US, Europe, Asia, and ask them gun to the head, do you want to still be bullish or bearish the AI story? You're going to get an overwhelming positive answer.

• 4:59Joe Weisenthal?

  Yeah.

• 4:59Speaker 03

  Right? And we can debate like where people are on the positioning scale, but like, that's the general view, right? And this is why I think that if you, you know, you've probably seen that chart of where we are in like the bubble kind of thing. And then that, as it begins to roll over, the first dip down is the denial one.

• 5:18Joe Weisenthal?

  Yeah, of course.

• 5:19Speaker 03

  I'm not going to say we're at kind of this bubbles popped. I know there's commentary out there that actually has said that, but I definitely, if you were to sort of juxtapose those two narratives, we're in the denial phase right now because everyone is still extremely bullish.

• 5:32Joe Weisenthal?

  Yeah.

• 5:33Speaker 03

  Yeah. You've got, you've got guys saying like, oh, semiconductors, you've got Hynix or whatever, or there's some of these Korean memory stocks. They're on three times earnings. I'm like, you can look up three times earnings on a Bloomberg terminal. That requires no work at all. Right? So everyone is out there.

• 5:47Tracy Alloway?

  Thank you for plugging the utility of the Bloomberg terminal, by the way.

• 5:50Joe Weisenthal?

  What do you mean they're on three X earnings?

• 5:53Speaker 03

  There are memory stocks that are, that are.

• 5:56Joe Weisenthal?

  They're traded with an EPS of, not an EPS, a PE of three.

• 5:59Speaker 03

  Correct.

• 5:59Joe Weisenthal?

  Because people, there is, and because the perception is that we're at such a peak and we know how cyclical of an industry it is. That when the earnings are this good, you're not going to pay up for them because like.

• 6:14Speaker 03

  Exactly. I mean, the old mantra is you don't, you don't buy cyclical companies, especially ones as historically cyclical as semiconductors, when they're, when they're at peak earnings.

• 6:23Joe Weisenthal?

  I didn't realize they were that low. Okay. So in addition, so let's put some pieces together. So we have the fact that the PE is actually quite low. People do not expect exponential growth from the memory companies in terms of their EPS anytime soon is implied by the PE ratios. What is going on with the NeoClouds? Why is it that despite, as you say, the consensus is bullish, still everyone wants to be long the AI trade? Suddenly there's all this anxiety about, you know, the people are quoting CoreWeave CDS charts and all that stuff.

• 6:55Speaker 03

  All right. So let's take a step back for a second, right? Because I want to talk about NeoClouds in the context of the broader AI ecosystem, right? So obviously NeoClouds are a group of businesses that are effectively in some way, shape or form mandated to build compute, which they will then sell to predetermined customers, some of which predetermined, some of them will be speculative. Regardless of what you may believe in that business model or not, these are tip of the spear. These businesses don't have operating cash flow today or minimal operating cash flow today in many cases. And so they represent the riskier part of the financing aspect of the AI spectrum, right?

• 7:36Speaker 03

  And I think that's, that's an irrefutable fact. You know, people can talk about, well, actually they're REITs in disguise. And actually, they're not, they're nowhere near as risky as people think they are. Sure, let's have that debate, but compared to say the hyperscalers, whether it's, you know, the Googles and the Amazons who have got huge, I mean, they're cash volcano businesses. They are different, different sort of category. And, and the reason I want to make that distinction is because if you think of NeoClouds as periphery and hyperscalers as core.

• 8:04Joe Weisenthal?

  Yeah.

• 8:04Speaker 03

  And I want you to draw a parallel, not directly, because I'm not trying to make some sensational statement here, but draw a parallel to the GFC, right? The problem doesn't, didn't start with GSEB banks, right? It started with subprime vehicles 12, 18, 24 months beforehand, right? And so what I find most interesting is that there is evidently a financing problem within NeoClouds, right? That is evident. Cypher tried to, they did their convert, nuked their own share price in doing so because they clearly couldn't tap the debt markets directly.

• 8:39Joe Weisenthal?

  Cypher?

• 8:40Speaker 03

  It's another NeoCloud, exactly. A company that you've never heard of. And yet, the reason why CoreWeave bonds sold off was not because of CoreWeave. They didn't say anything that week. It was because Cypher, another NeoCloud, tried to get, tried to tap financing. And in doing so, materially hurt their own share price. And then all of a sudden, a bunch of investors, quick off the mark, put two and two together, right? And then it spilled over. But like, quite frankly, if you look at the data center bonds in isolation, whether like the Ben Yehs of this world, you know.

• 9:12Joe Weisenthal?

  That's the meta one.

• 9:13Speaker 03

  Exactly.

• 9:13Joe Weisenthal?

  Yeah.

• 9:14Speaker 03

  These had already been widening for months prior to that, right? And we'd seen a creep in IG hyperscale.

• 9:20Joe Weisenthal?

  Cypher is one of these ones that pivoted from Bitcoin mining to getting into AI. Yeah.

• 9:25Speaker 03

  Yeah. All right. So I guess the point I'm trying to make is, is that there's ripple effects in financing that start in, in the periphery. And we're seeing that. So what I find amazing, back to the original point in terms of you asked, what's going on? Are people bullish or bearish? And we literally just conducted a survey with, you know, a group of investors. Yep. And, and the only, I mean, you could make this argument, this is a high number, but from the responses that we've got so far, around about 60% of investors, we asked them a question, do you think financing is going to be a problem? AI financing is going to be a problem for the foreseeable future. Only 60% said yes. By definition, what's happened over the past couple of weeks mean that answer should be 100%, right?

• 10:07Joe Weisenthal?

  Yeah.

• 10:08Speaker 03

  And, and yet, let's just call it just over half thing or just under half thing. There is no financing issue, but there is. So what's happening in AI to me is evidence of like almost a denial of, of a reality that's already here.

• 10:22Tracy Alloway?

  To be fair, one of the reasons CoreWeave started selling off was because Brandon McBee gave an interview to the FT where he was talking literally about unlimited amounts of borrowing, which I think ties into what you're discussing when it comes to capital concerns. So on the financing side, I mean, we've seen, we've seen some differentiation in terms of lending money to different AI entities out there. Is the overarching point that we've been in a period where it seemed like there was in fact unlimited money and people could tap the IG markets or the loan markets for as much as they needed? And now we're moving to a period where things are more selective and not everyone is going to be able to get

• 11:06Tracy Alloway?

  the type of funding that they were tapping before.

• 11:09Speaker 03

  That is exactly it, right? Because.

• 11:13Speaker 03

  You know, part of the job that my team does is we travel the world, we talk to a lot of different investors, we ask questions, we collate the kind of feedback that informs our decisions. And there was this almost universal view that, and you guys would have heard it as well, AI was immune to higher interest rates.

• 11:31Tracy Alloway?

  Yeah.

• 11:33Speaker 03

  Evidently is not true, right? And so there is a spectrum. And even, I think that's where I think the meta results were pretty instructive in the fourteen C, in the sense that they highlighted the fact that financing does constrain, that financing does have limitations. And we wrote a load of, we did a load of work on this in the summer where we were looking, not specifically at AI, we were just looking at the holistic net issuance profile of the market. And maybe you guys saw this, and we looked at just the entire corporate markets, IG high yield, we looked at treasuries, and we looked at equity, and we went back to about nineteen ninety five, collated all the data, and looked at each market, the amount of net issuance in any given year as a percentage of each market's sort of market cap in that

• 12:18Speaker 03

  given year. And then we plotted it over time. And what we found was there was unsurprisingly a very strong relationship when interest rates went down, overall issuance went up, and vice versa, as you'd expect.

• 12:29Joe Weisenthal?

  The laws of the economy still exist.

• 12:31Speaker 03

  Well, apparently, apparently not so much in twenty twenty five, twenty twenty six.

• 12:34Tracy Alloway?

  Yeah, here's the punchline.

• 12:36Speaker 03

  Yeah, this is, this is the, yeah, exactly. This is the punchline. Twenty twenty six is completely shattered what you would, what you'd conceived in the, in the norms. I think Tracy used, you looked at that chart.

• 12:45Tracy Alloway?

  Yeah, so you had, you have this great chart plotting the relationship between the two-year yield and net issuance. And you can see the relationship really breaks down in twenty twenty six. So we are issuing a lot more, we're selling a lot more bonds, a lot more debt related to benchmark rates than pretty much like ever in history. It's, it's kind of biblical.

• 13:08Speaker 03

  It's certainly, we have data back to the nineties. So, you know, if you compare to say dot com, and the interesting about dot com is, of course, there was a lot of equity issuance, but, and the interest rates were high, but the US government was basically running a surplus and all this kind of stuff. So today is very unique. And the reason why I bring it back to the sort of AI financing is because there is this competition for capital. It is real. AI is not issuing debt in a vacuum. There are other verticals that need to tap financing to. And there is a finite amount, right? So IG issuance and a high yield, this year on a net basis, we forecast to be one point one trillion dollars, right? And we just throw around trillions, as though it's just this casual number that everyone's got. But like, there is limitations, right?

• 14:09Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got ten minutes and just want to know what's moving markets, fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 14:36Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices. But according to recruiters,

• 15:20Speaker 01

  advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 15:59Joe Weisenthal?

  Reconcile this. If there is this perception that people are still bullish, there is a, the train is still moving at full speed, why should capital be hesitant? Like, okay, so it's like, you could, you could see on the numbers, like the CoreWeaves and the Irenz and the Cypher and like a bunch of other ones that I had never heard of. Like, yes, clearly there's, the capital markets are telling something, telling them something. But why? If the view is that AI is still generally going straight up, what is the fear about these companies that are at the tip of the spear? Wouldn't they, wouldn't the bulls say, look, someone is going to pay for these GPUs? Like, the, the demand

• 16:44Joe Weisenthal?

  is going up. There, if they buy or rent or whatever, if they have electricity, if they have GPUs, they bought them, whatever, they're not going to zero, they're going to be worth a lot of money somewhere or another.

• 16:55Speaker 03

  Yeah, so that, that is the bull argument is.

• 16:57Joe Weisenthal?

  Yeah, and what's wrong with that?

• 16:58Speaker 03

  There's nothing wrong with it in terms of build it and they will come. I would say that, that the challenge will be to the early, two things, to the earlier point, tip of the spear. So when you start to see cracks or canaries in coal mines, or however you want to characterize it, you should probably pay attention, right?

• 17:14Joe Weisenthal?

  Yeah.

• 17:15Speaker 03

  And, and the second point is, is that, thank you. The second point is, we, we need to think about revenues. At the end of the day, and this is something which we addressed at the end of August in a note called placing your AI chips more carefully.

• 17:29Joe Weisenthal?

  Okay.

• 17:29Speaker 03

  And the idea was, is that we basically decomposed, it was around the time of the SpaceX TAM, if you remember, that was around about thirty trillion dollars.

• 17:40Joe Weisenthal?

  Oh, yeah.

• 17:40Tracy Alloway?

  It was a total addressable market of like the entire universe, not just Earth, something like that.

• 17:46Speaker 03

  Yeah, thirty trillion dollars, which is obviously around about the GDP of the United States. And so we went, again, to the point about people throwing around trillions. Fun fact for you, since nineteen ninety, I can't actually take credit for this stat, by the way, this actually belongs to Cameron Crace at, who also works.

• 18:02Tracy Alloway?

  Our colleague, yeah.

• 18:03Speaker 03

  Yeah. And, and so, you know, give him, give him the, the, the necessary plug on this. Looking at the cumulative revenue of the two most successful tech companies in modern history, it was Microsoft and Apple, and it was the cumulative TAM of those two was, I think, inflation adjusted, not even ten trillion dollars since nineteen ninety.

• 18:25Joe Weisenthal?

  Wow.

• 18:25Speaker 03

  Right? So, but, you know, SpaceX's addressable is talking three times that number, right? So the reason I, so that kind of prompted us, where's all this money going to come from?

• 18:35Joe Weisenthal?

  Yeah.

• 18:35Speaker 03

  So punchline again, seventeen trillion dollars of S and P top line revenue, right? And they've got around about eleven or twelve trillion dollars of expenses. And so that means that the net profit approximately of the, of the S and P is somewhere between five and five and a half trillion dollars, right? So it's like, all right, we can make some bold claims about the amount of money that's going to get allocated to AI expenditures and all the rest of it. But last time I checked, like, we all look at the ramp data or the open router data, and we can clearly see that that token expenditure has kind of begun to level off a bit, right? At least near term. So it's like, all right, our company's going to spend this much money. And that's where the other point to answer your question, Joe, is.

• 19:19Joe Weisenthal?

  Well, you know, your company Barclays is, I know, managing the Anthropic IPO, so, or as, you know, involved in this, so we're not going to ask any Anthropic questions to you, but I will say to Tracy.

• 19:32Tracy Alloway?

  Okay.

• 19:32Joe Weisenthal?

  No, I won't make you comment, you know, we understand the rules here. But I will say to Tracy, that Anthropic numbers on the top line look great. And I do not think that, no, but, and, and I don't think we learned that much about open route, open router data, because that captures a specific slice of people who are usually looking for cheap Chinese models, which they're doing well, but the top line numbers for Anthropic look unbelievably good. That's the answer, Tracy.

• 20:00Tracy Alloway?

  Thank you. There's earnings progress there in the S one. Like, you can see the earnings progression. However, like, billions in earnings versus valuations at trillions, like, I think that is the gap that people are debating.

• 20:14Joe Weisenthal?

  I'm just pointing out that you, there's lots of charts, there's ramp data that's floating around, lots of people look at the ramp data, and lots of people look at the statistics on open router. And they start to say, oh, the, the, the American Frontier Labs, like, are they in trouble? And they might be, but I'm just saying, if you look at the data that's filed with the SEC, as of pretty recently, at least one of the companies, the one that is filed in S one, that number is going straight up still.

• 20:40Tracy Alloway?

  Why don't we talk about the frontier models more generally? So, you know, the argument has been that they can come up with a better model, a better agent, a better technology, and that people are ultimately going to pay for it. And the persistent, I guess, doubt in the market has been, well, you know, open source models are kind of catching up very quickly. They're worse on their benchmark test, but not by that much anymore, and they're a lot cheaper to operate. What are people saying about the open source versus frontier debate?

• 21:09Speaker 03

  I would say here, this is weirdly, is a bit of a contradiction versus that bullish narrative, because the data is the data you can evidently see on a whole bunch of different, different sources, that open weight has kind of gone from a twenty percent market share to anything up to about an eighty percent market share.

• 21:28Tracy Alloway?

  Yeah.

• 21:29Speaker 03

  And then you'll also see that the, the token cost of, is a fraction, one one hundredth versus.

• 21:37Joe Weisenthal?

  Incredible token deflation has happened every year.

• 21:39Speaker 03

  It might be one of the fastest deflating assets in, in history. It makes those NFTs back in twenty twenty one, two.

• 21:46Joe Weisenthal?

  But GPU rental rates have been going up.

• 21:48Speaker 03

  They have. Yes, absolutely. And so there is clearly a two-way debate. And I think it again goes back to the evolution of this broader AI narrative. It's not just a necessarily a one-way train, rising tidbits or boats. There's going to be degrees of differentiation. But you asked about open, open weight models. And I think where one of the leading edge questions right now is not even just open weight, but combine that with locally run open weight. And this is something which I'd like to call being long or short human creativity, right? In so far that.

• 22:24Speaker 03

  If when the iPhone came out in two thousand and seven, stay with me here. That if I had, if someone from the future had said twenty years from now, you're going to have whatever the orders of magnitude compute differential and the battery is going to be the same size, that two thousand and seven person would have said impossible. You'd need an iPhone the size of this table, right? So clearly we got there amongst many other things. And so the idea that we necessarily need to ping a bunch of hoppers or Vera Rubens in an Ohio data center, just so that we can sort of get our, you know, agent.

• 22:59Tracy Alloway?

  Manage my email for me.

• 23:01Speaker 03

  Yeah, or to, you know, to send an angry response letter to the hotel.

• 23:05Joe Weisenthal?

  You're gonna be able to do that with the chip on your phone by next year.

• 23:07Speaker 03

  Right, if not already. So we've all kind of got supercomputers in my, in our pocket. And the ability to run, say, multi-billion parameter models locally, using whether an open weight model or a closed weight model, but that's provided by Nvidia's Nematron or, you know, whatever Meta's putting out, which Meta's already put out a, a, a multi-billion parameter model that's run locally on, on your laptop.

• 23:30Joe Weisenthal?

  It's crazy.

• 23:31Speaker 03

  Right, but, but it's not because that's technology, right? And so, and so I think that's the other point of the debate is it's not even so much about open weight, it's about the fact that you're moving to along this efficiency curve. And that was also bringing in the revenue question as well, which, you know, ties in with those frontier models as well. Frontier models, we're not going to be producing, you and I, with the greatest respect to everyone in this room, we're probably not going to be discovering the new biotechnological drugs.

• 24:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 24:58Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, must be willing to work extended hours and weekends as needed. One major perk for all that hard work? Employees access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 25:39Speaker 04

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  One partner powering how business gets done for companies of every size all around the globe. When you add it all up, no one does business like Comcast business.

• 26:33Joe Weisenthal?

  I was actually, I was talking to someone when I was out in San Francisco recently and I'm actually want to ask you about east and west coast views on the technology maybe. But while I was talking to someone in, in San Francisco who had this term, he, he called it the frontier sync. And it's like, what are the industries that actually need PhD level and beyond technology? And there's a few that we could come up with pretty easily. One of them is probably biotech, right? You could probably never have too much intelligence when it comes to medicine. Another one actually is probably semiconductor design itself. You probably never be too smart, et cetera, for that. Maybe another one of them has to do with quant, is like quant trading, where you can never be too smart. I'm not sure, who knows?

• 27:17Joe Weisenthal?

  But like, it actually does get to be hard to think about, like, there might just be a lot of industry for which there is a certain level of intelligence that is enough.

• 27:29Speaker 03

  I mean, for the moment, again, do you remember when the, I, I like going back to the iPhone as an analogy because it really was a technological revolution at the time. And do you remember when we thought like peak iPhone in oh seven, oh eight was when you had that app which had like the pint of beer in it?

• 27:45Joe Weisenthal?

  Oh, yeah, I know, exactly.

• 27:46Tracy Alloway?

  And you could drink it.

• 27:47Joe Weisenthal?

  And we thought that was so cool. I didn't, but no, everyone is like, oh, this is so cool. You could pretend. I know exactly.

• 27:52Tracy Alloway?

  Joe, you're allowed to take joy in small things. No?

• 27:57Joe Weisenthal?

  This looks like whimsy to me. I don't, I don't get it.

• 27:59Tracy Alloway?

  Oh, yeah, Joe hates whimsy.

• 28:00Joe Weisenthal?

  I hate fun, but keep going. But I remember how, yo, why was everyone going crazy about the fact that you could like, this is a very good point, keep going.

• 28:06Speaker 03

  And so, and I just don't think we know what the future of AI really looks like. So yes, you're right, today, we, we probably say we, we just don't need more than a hundred IQ person sitting in our pocket, managing our emails, sending angry messages to the car rental company because they charge me two thousand dollars for a ding. I do think the consumer layer AI is going to be, people ask me all the time, like, what will get you really constructive on AI again? I said, when we figure out that killer consumer application layer. Because at the end of the day, the consumer is everything. It's the economy. It's where, to the point about revenues, like enterprise revenues, I just don't think is going to plug that gap.

• 28:44Joe Weisenthal?

  Really?

• 28:45Speaker 03

  I just don't see how, like we.

• 28:46Joe Weisenthal?

  Yeah, no, you say, you're right, the numbers.

• 28:48Speaker 03

  I, I don't see, it can probably get there eventually, but it can't get there in the timeframe that the market wants to see the ROI. And you need to bust into the consumer layer. And, and so, like, back to the point about frontier, the consumer probably doesn't need frontier for the time being to do all of these things. And so I, one, I'm, I'm, my big mantra is, is that one of the best technological changes that we experience as humans is actually not necessarily some new advanced tech. It's, it's changing the application of existing tech. And so it's very possible that we take the hundred IQ agentic workflow that's still kind of becomes almost ubiquitous within the next twelve to eighteen months and we find really cool ways to use it.

• 29:32Speaker 03

  And I think that's probably where you're really going to get the next upswing in AI.

• 29:37Joe Weisenthal?

  Can I just say, by the way, Tracy, um, last several days, my wife was traveling out of town. My kids are at a very easy age, so it's not, you know, it's not a big challenge or anything to solo parent for a few days. But it happened to be a very busy schedule for them, birthday parties and a few other things. And it was very nice having ChatGPT, um, being able to, it's like, where should I be in the next hour? Where should I be the hour? Because there were a lot of things going on and, um, it's very easy. It's very nice.

• 30:08Tracy Alloway?

  I saw your tweet on this, Joe.

• 30:09Joe Weisenthal?

  No, you saw the tweet on the.

• 30:10Tracy Alloway?

  This is part of the problem. You tweet everything before you tell it to me and so I can't react to it in real time.

• 30:15Joe Weisenthal?

  And now I'm really upset that you said that because you saw the tweet from my private alt. I did not tweet that from my main account. And now a bunch of people are going to know that I have an alt and they're going to ask me for it and you're not going to get it. So I wish you hadn't said that.

• 30:27Tracy Alloway?

  Sorry, sorry, I can't, I can't differentiate the two.

• 30:30Speaker 03

  Can I, can I, can I jump in on that?

• 30:32Tracy Alloway?

  Yeah, of course.

• 30:32Speaker 03

  So what, what's that worth to you a month?

• 30:35Joe Weisenthal?

  What?

• 30:35Speaker 03

  Well, just to have that ability, okay, let's just say almost like an account executive or something, or like an administrator, you know? Because that, the answer, answer that question, it matters. It matters for the revenue profile, right?

• 30:47Tracy Alloway?

  I mean, also, if you just had the right user interface on a calendar, this would be solved too, wouldn't it? If you know you have to be somewhere at three PM, four PM, five PM.

• 30:57Joe Weisenthal?

  There's a lot of things that are in so many different emails. So for example, my daughter goes to, I take her to play rehearsal and some days she, it's, it's from one to six in the afternoon and on Sundays. But some days they don't do the full cast for the five hours. So somewhere on the email it says, oh, these students or these, uh, participants, they can leave at three and stuff. And it's scattered across so many emails and I don't know which emails to, uh, read, which ones they're in. And so being able to say ChatGPT, it's Sunday, October twenty fifth or whatever, what time am I supposed to pick up my daughter three or six? It's very easy and nice to have.

• 31:36Tracy Alloway?

  Fair enough. Um, I just want to go back to the beginning of the conversation. You talked about Neo clouds as the sort of tip of the spear and maybe being in the beginning of the denial phase. What do you think would spook investors? Like, what should we look out for next in terms of a degradation in the AI bull belief?

• 31:58Speaker 03

  That's a great question.

• 32:01Speaker 03

  Off the top of my head, I would say it would be some level of CapEx being reined in by one of the hyperscalers. In fact, on the walkover here, I was asked by one of my clients who was saying whether, questioning whether that would actually even come up potentially in the results this week. And famous last words, it's probably still premature. Joe, to answer your question about West Coast, East Coast, if you think about West Coast, the further you are closer to the epicenter of this technology, oh, sorry, the closer you are to the epicenter, the more I would say that both the companies and investors are bought in on that narrative. And there's definitely kind of almost like an echo chamber

• 32:44Speaker 03

  within that certain ecosystem. You think about the rooms that people are sitting in. So we're, my suspicion is, is that it's not going to be these set of results. And that may be, we have to wait till the new year, that we get some kind of a potential temperament of the enthusiasm. But like, Google, Google kind of set this all off again for the next wave, because on the CapEx side, it was actually the last set of results where they said, it's going to be, I forget the exact wording they used, but they were talking about CapEx means significantly higher. And that got everyone enthused once again and got them all gee'd up.

• 33:25Tracy Alloway?

  Well, Oracle just said it's Investor Day, that it was going to limit its additional fundraising to, I think, 20 billion for, through May. So, so we might be getting close to that. But again, like the reaction so far is this is a good thing. And the build out can continue as long as people are raising a reasonable amount of capital, I guess.

• 33:45Speaker 03

  Yeah. And that kind of goes back to maybe just a slightly more holistic market view, which is this, this almost S and P does nothing because what, what's good for hyperscalers will be bad for memory. So you just get this constant violent rotation. And I, I call it like a knife fight in a phone booth, you know, for all these funds that have to run long short portfolios. It's a nightmare.

• 34:06Joe Weisenthal?

  I'm glad you asked this because this is a question that I wanted to ask you. So it's like, we look at the core weaves and there's this anxiety and we see all the volatility. We're seeing volatility everywhere except our measures of volatility. So if we look at realized volatility, it's pretty low. If we look at the VIX, it's not that high. Can you explain why it is that there's all this anxiety about certain parts of the most important trade in the entire world? And yet, when we actually look at the way we measure volatility, it looks very benign.

• 34:36Speaker 03

  Yeah, I've got, I've been asked, this is probably the most asked question that I get in some way, shape or form. And there's, there's two parts to the answer, right? There's a structural part, and then there's a really like technical part, right?

• 34:49Joe Weisenthal?

  Yeah, let's hear it.

• 34:49Speaker 03

  All right. So the structural part is got to do with the fact with the way that money's deployed these days. So obviously, equities are meant to be a long only product, really. But in this day and age, they're not, right? We've got 2020, the AUM deployed in multi-manager funds was about $300 billion. And today, it's in excess of a trillion dollars, right? And if you think about the lever.

• 35:14Joe Weisenthal?

  The pod shops we were talking about.

• 35:16Speaker 03

  Yeah. I mean, not, not just pods, but obviously, let's just think about like that sort of ilk. And it makes perfect sense, right? Because if, especially in a higher interest rate environment, high interest rate environment is perfect to be running a long short strategy. Because I deploy money on my gross long side and on my gross short side. And actually, I'm not really deploying, I'm deploying units of risk, but the actual capital being deployed is really only what I'm actually posting as margin on my long and my short. Remember, I can leverage that too, through the prime, prime businesses. So actually, what I'm doing is I'm taking a large chunk of capital, and I can put that into, say, a high interest bearing, a high interest instrument, clip a very nice coupon, and then I try and generate alpha on that gross capital deployed. That's the business

• 35:59Speaker 03

  model. And it's for the most part, a very good business model, right? The problem is, is that you've effectively tripled, more than tripled the AUM, plus obviously leverage. And the number of securities you can trade has stayed roughly the same or actually shrunk over time. So that creates crowding out. So how do I, how do I organize? Or how do I mitigate that crowding out effect? Well, I've got all kind of cool risk parameters. So you have Barra, I'm sure you've heard, or Axieoma, just, you know, all these different style factors, quality, value, size, growth, you know, all these different things. You would have heard us talk about them quite a lot. They've become ubiquitous and obviously funds spend an enormous amount of time and computing power trying to neutralize those

• 36:42Speaker 03

  factors. So that's cool. And you try and isolate the idiosyncratic risk of whatever you're trying to get. Now, the problem is, is that at the end of the day, everyone's still doing this, which means all you're creating is different kinds of crowding. And so that's why the volatility isn't showing up so much at an index level, right? Because ultimately, a lot of this AUM is kind of index agnostic, so to speak.

• 37:09Joe Weisenthal?

  I see what you're saying.

• 37:10Speaker 03

  And you're seeing the violent factor rotations happening, because ultimately, you've got a huge amount of crowding sitting there. And the one thing that leads me into sort of the technical aspect, which is the one thing that I think a lot of funds have not yet been able to solve, is the AI factor, right?

• 37:28Joe Weisenthal?

  Yeah.

• 37:29Speaker 03

  Because you could be.

• 37:29Tracy Alloway?

  Everything either is or isn't AI now.

• 37:31Speaker 03

  Right, exactly. And this is a problem, right? It is sort of, it's dawned on me recently because I've been asked a series of questions by investors specifically, along the lines of, have you managed to map the AI factor? And the answer is no, because the AI factor is changing all of the time. The betas are changing all of the time. Remember the beginning of the year, you had a lot of people that wanted to be short software.

• 37:53Joe Weisenthal?

  Yeah, that's right.

• 37:54Speaker 03

  Right? Now software's trading close to 12 month highs. And so the idea of being short software, it was part of the AI factor. And now is it so much, well, not necessarily, unclear. So because the narrative is shifting, the factor of AI is shifting too. And that in turn complicates the ability to funds to actually try and hedge that. And bottom line is, is you're either long AI or you're short AI, right? And let's face it, the past three years, being short AI probably hasn't been a particularly lucrative trade.

• 38:22Joe Weisenthal?

  By the way, Tracy, in the time that Alex was giving us, that Alty was giving us this great answer.

• 38:28Tracy Alloway?

  You sorted out your entire weekend schedule using ChatGPT?

• 38:31Joe Weisenthal?

  No, in that time, we just got earnings from Alphabet and Microsoft. And it's very interesting. Alphabet down 7.9% revenue ex tech misses estimates. Microsoft jumped 6.4% after Q1 cloud revenue tops estimate. So you get two gigantic stocks. They both have very violent reactions. But if you're the indexed investor, on net, looks like it all kind of washes out.

• 38:54Tracy Alloway?

  Yeah, it does indeed.

• 38:55Joe Weisenthal?

  But man, some of these, like, these numbers are incredible. Microsoft Q1 Asia revenue ex, Azure, this is their cloud platform.

• 39:03Speaker 03

  Azure.

• 39:04Tracy Alloway?

  Azure.

• 39:04Joe Weisenthal?

  Azure. What do you think, what's your guess? You're not looking at a terminal the way.

• 39:08Speaker 03

  No, so.

• 39:09Joe Weisenthal?

  What do you think it got? This is fun.

• 39:10Speaker 03

  The bogey was, I think, 47% growth?

• 39:15Joe Weisenthal?

  Yeah, well, man, you're really good at your job. So the official estimate from, that we had collated at Bloomberg was 44.8%. They hit 48%, 48% growth for these gigantic companies.

• 39:28Speaker 03

  That's a good number.

• 39:28Joe Weisenthal?

  That's, that's unbelievable. Cloud revenue at Google was 30 billion. I'm not seeing what the, what the growth number was. But these are unreal.

• 39:37Speaker 03

  Yeah, it's, I mean, they are. And this goes back to the point about, you know, kind of AI winners and losers. If you're a, if you've got a fantastic legacy business and you're a cash volcano in your, you know, from your operating, legacy operating business, then if you want to go and embark upon the largest, you know, CapEx experiment really in the history of America, total non sequitur, by the way. I was trying to work out, because we're spending, if you believe the CapEx numbers in the terms of the forward, and I'm sure that they're going to change from what the consensus looks like now, but on face value, it's about 12% of GDP, right? It's like two Netherlands, right? And I was thinking,

• 40:20Speaker 03

  you have, not in modern history, like the Louisiana Purchase, the railroads, it's blown all that out of the water. What have we done as a human society where we've spent that much money, certainly in a short period of time? And I had to start getting like really creative. I'm sure like Joe, you can, you'll, you'll be awake at night thinking about this and trying to find like some historical work on it. Pyramids, maybe, but they took hundreds of years, if not thousands. Great Wall of China, maybe. But I just can't, I can't think of a period where, where we've spent.

• 40:48Joe Weisenthal?

  All right, wait here. What do you think? How fast do you think Google, Google cloud revenue grew? Again, I'm turning my laptop away from you. I actually don't even, I'm, I can't even believe this number's room, giving you a hint.

• 40:58Speaker 03

  30 something percent?

• 41:00Joe Weisenthal?

  I don't really understand. I don't, I almost, 103%? Google cloud revenue grew 103%? It seems great. I don't know. All these numbers are insane. Anyway, that's what it says.

• 41:13Speaker 03

  They, they, I mean, that these are impressive businesses. And this is, this is why, you know, a lot of people say S and P undefeated, right? I mean, by the way, funny, the concentration of the S and P, it basically, given, Tracy, to your point, everything's kind of AI. Concentration of S and P, next year, 75% of your earnings growth in the S and P is going to come from, from memory, from, from semi, from semiconductors.

• 41:34Joe Weisenthal?

  What percent?

• 41:34Speaker 03

  Seventy, sorry, a bigger one. It's actually, it's about two thirds from semiconductors. And then the broader AI ecosystem gets you to around about 75%. So you basically, S and P has become cosmey.

• 41:48Joe Weisenthal?

  Yeah.

• 41:50Joe Weisenthal?

  Oh, cosmification, that would be a good.

• 41:52Tracy Alloway?

  Cosmification, yeah. All right. Well, Alex, we're going to leave it there because we want to get this episode out pretty quickly. But thank you so much for coming back on All Lots. Really appreciate it.

• 42:00Speaker 03

  Thank you.

• 42:00Joe Weisenthal?

  Yeah, we'll see you next week. Thank you so much.

• 42:16Tracy Alloway?

  Joe, it was great catching up with Alex. I think he does a great job of sort of synthesizing a lot of different things going on in the market right now. But I do think the key thing that's emerging is this differentiation idea and the idea that we're moving from this sort of capital abundant environment into an area where people are perhaps a little bit more selective and what that means for the business models.

• 42:39Joe Weisenthal?

  I do think, completely agree. I also think, you know, the classic, it's different this time is, oh, interest rates don't matter anymore, right? And this is a classic thing. Oh, this is not going to be a rate sensitive industry because the numbers are so unbelievably high. If you're growing 44% in a year, will you care about whether rates are 5% or 5.25? It's completely irrelevant. You're just going to keep building, et cetera. But that is a lie that investors tell themselves. Rates, at least at the margin, at least at the tip of the sphere, spear, at least for some of these leveraged companies like the Neo Clouds or whatever. For one thing, it looks like, oh, rates matter.

• 43:22Tracy Alloway?

  Yeah. And also, I mean, just the cospification idea of the market, it is really quite stunning because a lot of the earnings power of the tech companies, the hyperscalers, is predicated on the fact that, well, other companies are going to buy the services so that they can boost their own productivity and get their earnings up. But like, we're not actually seeing that materialize in their earnings numbers just yet. And in the meantime, everything, the whole index just becomes AI more and more on the expectation that eventually it won't just be about AI.

• 43:52Joe Weisenthal?

  This is the thing that like, you know, when you talked about the pod shops, for example, the whole premise of a pod shop is that like, everyone is supposed to find their own undifferentiated alpha.

• 44:03Tracy Alloway?

  Yeah. Where is that right now?

• 44:06Joe Weisenthal?

  So I think like, basically, if you're an investor and you made money in the last year, at scale, I mean, of course, like, you might be able to like, oh, I opened, you know, a new like pasta restaurant in the East Village, that's a separate question. But if you're at scale and you made money in the last year, in some way, it was connected to AI. Because you have all these different pods and some of them are chips and some of them are industrials, et cetera. But it's hard for me to believe that the ones who are making money aren't just in some way finding a way to belong to AI factor.

• 44:40Tracy Alloway?

  Levered along the AI factor, I would imagine.

• 44:42Joe Weisenthal?

  The AI factor. You know, I was talking to, it's so funny, you know, we try to, Alex has such a good read on the industry, but also it's great to talk to him because he talks to classic at the Wall Street view and so forth. I was talking to this computer science student at Stanford recently, and they were like, oh, Wall Street is an AI pill. I was like, what are you talking about? Wall Street is an AI pill. Look at all these stocks that are going to the moon.

• 45:06Tracy Alloway?

  The numbers on my screen tell a different story.

• 45:08Joe Weisenthal?

  What are you talking about? But that person's view was that if you're even having a discussion about the possibility of overabundance of GPUs, you just don't get it. Like, what do you, you're like, oh, you don't, you don't get AI sufficiently. It's so funny.

• 45:26Tracy Alloway?

  It's, yeah, definitely an interesting time in markets. Shall we leave it there?

• 45:31Joe Weisenthal?

  Alphabet, they do 32 billion tokens per minute. That was up 40%. I don't even know what these words mean. Let's leave it there.

• 45:39Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alockway. You can follow me at Tracy Alockway.

• 45:45Joe Weisenthal?

  And I'm Jill Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Arment, Dashell Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. You can chat about all these topics 24/7 in our Discord, discord.gg/oddlots. For more Odd Lots content, check out our daily newsletter, which you can find at Bloomberg.com/oddlots.

• 46:09Tracy Alloway?

  And if you enjoyed this conversation, if you like it when we check in on the markets, then please leave us a positive review on your favorite podcast platform. And if you're watching on video, then please like or leave a comment or better yet, subscribe.

• 46:21Joe Weisenthal?

  And remember, if you're a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there.

• 46:32Tracy Alloway?

  Thanks for joining.

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