Powell Says No Plans to Leave Fed Until Investigation Over

20:20Carol Massar:Then buying options for retail or zero data expiry options is gambling. Then retail buying crypto is gambling. The more important line and the historical line that we've been taking under the law, but also, you know, as we think about it societally, is is the business model a gambling business model, which is a model where the revenue of the business and the profits are equal to the customer's losses, in which case the incentive is to promote more losses and block the winners? Or is it an open, free and fair marketplace where people can enter in and out freely and transparently, which is a financial exchange which Calci falls under?

20:51That's Kalshi, co-founder and CEO Tarek Mansoor. An exclusive interview on Bloomberg. Let's stay on Kalshi and prediction markets overall. Here with us is a member of our team who keeps track of them. She reports on them. She's Bloomberg News Crossass. I reported Denisa Sokova. She's here in our Bloomberg Interactive Brokers studio. Donita, the last question about gambling. When I got off air after this interview, I had IBs from customers, from colleagues. Some people came up to me. Every single one of them said to me, how is it not gambling? That seems to be the question that will be the biggest uphill battle for this company, because that's what the courts are going to decide.

21:32Carol Massar:It has been the big question we have been covering for months. If you speak to a lot of those CEOs, they're going to tell you we're a truth machine. We're so important from probability. Hedge funds will be able to hedge those super niche markets. But if you look at the volumes, it's often 60%, 80%. In certain cases, 90 % sports bets. And then it becomes really hard to explain to people how this will have economic hedging or any other value. That said, every platform is different. Kaoshi is especially strong when it comes to sports betting. Polymarket is seeing slightly different breakdown there.

22:08Carol Massar:But for example, crypto markets are really big there. Political markets are really big there. And of course, sports is big there. But so far, they've seen all that pushback. It's not gambling. We're regulated by the CFTC. In the interview, he talked a lot about, oh, if they sue us, they can sue the CME. And I think that's kind of a complicated argument to make, considering there aren't really other companies offending anything like that. Obviously, they were under a lot of scrutiny for sports, but we got scrutiny for war contracts for a lot of things. There are other companies that offer this.

22:38It's like FanDuel and DraftKings. Exactly. And those are regulated by states.

22:42Carol Massar:Exactly. That's where they're... What do the states want? I mean, is it that they want to be able to regulate these companies under state gambling rules? What is it? I mean, of course, those don't have the same protections as sports markets. But you can also imagine that states are losing a lot of revenue that usually they take from those companies. Nevertheless, we've seen some of the sports betting activity fall in some states. We've seen a really combined... I was curious about that. At the traditional gambling sites, are they losing some activity? Yeah, we've definitely seen that. And when it comes to app downloads, it's really couchy, soaring.

23:16Carol Massar:It's like, I don't know, 3 million downloads a week, a month. And that has nothing to do with the numbers we've seen, for example, from DraftKings, which was kind of a leader in that space. So they're definitely taking over. But at the same time, we're seeing kind of states combine forces and file all those lawsuits at the same time. So there is a lot of unity on the state side when it comes to their response. I thought it was interesting, too, Tim, your question about like if they limit their what type of activity. So maybe they walk away from the sports gambling. Right. And then it's economic.

23:45Carol Massar:Like, is that still a viable business? I mean, look what Danitza said. 60 to 80 percent in some cases, some cases up to 90 percent of the activity on these platforms. I'm not going to say Kalshi specifically, and it varies based on what's going on in the news. But that that is the bulk of the activity on the platform. So if they were to do that, Danitza, it would really limit what they offered. Yeah, for sure. And even you can see a lot of their marketing campaign, ad campaign. There is a whole new campaign house. You can win one billion if you get all the brackets in March Madness. And I don't know how can you explain that this is like all a truth machine if you're offering a contract like that and you're really emphasizing those super long shot bets.

24:26Carol Massar:Like it's one in 120 billion chance. 30 seconds. Got to ask both of you. Is this something that ultimately makes its way to the Supreme Court? Like where does it because the momentum seems to be building certainly the legal momentum. Yeah, I think that's pretty much the consensus. We have a pretty good estimate by Bloomberg Intelligence. They say pretty much headed there. That said, they give Kaoshi 60 % chance of winning in high court. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app.

24:58Carol Massar:Or watch us live on YouTube. All right, everybody, we are watching Micron here in the aftermarket. It's been bouncing around. We saw it kick up a couple percentage points right now. It is just up about four tenths of a percentage points. The numbers look certainly pretty strong here. But as we just talked about with Romain, this stock's on a tear up more than 60 % year to date. And that's after a triple digit percentage gain last year. Expectations were high. Sandisk is following Micron stock lower in the after hours, down about eight tenths of 1%. Worth repeating some of those headlines, Carol.

25:33Third quarter, adjusted revenue forecast did beat estimates$32.75 billion to$34.25 billion. The estimate was for$23.66. Adjusted EPS,$18.75 to$19.55. The estimate was for$11.29. When I see numbers like this, I'm like, I have to check this again. I know. Because these are so different than what the estimates said.

25:58Carol Massar:But the expectation, like sometimes these numbers are just off the charts. Micron also saying that AI server demand continues to be strong. So we're going to continue to track this here in the aftermarket. Let's get to our guest, Hendy Susanto. He's a portfolio manager at Gabelli Funds. They've got about$35 billion in assets under management. And they also, of course, hold Micron shares. Hendy, so glad that you could join Tim and myself. What do you make of this report? I guess this is, I believe this is the strongest record performance of Micron. and then looking at the way the share trade i think going to this earning i i did think that the biggest risk is investor high expectation and then fiscal third quarter guidance is very strong is way surpassing um analyst expectation and my own expectation as well and then gross margin is the is the strongest in in the in the history of micron um and then we are still in the early innings of HBM as precious semiconductors.

27:00High bandwidth memory. We do have precious metals, and then now we have precious semiconductors. So, Hendy, then why? I mean, the stock reaction is only up 0.8 % of 1%, despite the fact that, like you said, this is such a record. I think many people would say this was an incredible beat. I want to go to the conversation that we were just having with our colleague Romain a few minutes ago, which is about how much pricing power and how much sort of runway does Micron have to continue to raise prices and to continue to have these margins? How long does that last? Yeah, so in terms of pricing power, I think we can start based on the fact that there are only like three DRAM manufacturers, SK Hynix, Samsung, and Micron.

27:45So like structurally, Micron is in good positions. And then we believe that pricing is now based on quarterly negotiation. So companies like Micron, they will try to capitalize on the pricing trend. The pricing trend is still going up at least until the June quarter. And then companies like Micron will try to balance between taking the pricing advantage and managing long-term customer relationship while also trying to manage customer diversification as well?

28:29Carol Massar:Yeah. Yeah, right, because we do know that in terms of who are their big customers, it's definitely skewed, is it, towards NVIDIA specifically? NVIDIA is 17%. It's kind of a lot. Hendy, one thing I want to ask you as the headlines continue to cross, us. Micron says NAND demand to stay well above our available supply. AI, other server demand constrained by memory supply and says AI server demand continues to be strong. So this is kind of a mixed blessing. Demand is there, but they're having trouble meeting that demand. Is that the right read on this? That's the right read. And then I think what investors should keep in mind is that this calendar year 2026 all the memory makers will will rely on migration of their process technology so in other words there won't be any new capacity expansion and then capacity expansion we are we are expecting that to come in 2027 so i think for the 2026 when companies said that they are sold out on capacity, that will be indeed true, and then that will come with favorable pricing as well.

29:40The company also flicking at this idea that they're going to build out to match expectations and match demand. You did say that we're in the early innings of this, and I'm going to get right here. It says, we are investing in global manufacturing, in our global manufacturing footprint to support their growing demand, referring to customers. That's the words of Sanjay Marocha, the president, chairman and CEO of Micron. How long does it take to build that out? So I think in general, the rule of thumb in the industry is if you have the shell or the fab buildings and structure, you can expect new capacity within like six to 12 months.

30:26and then after that then you will have to work on the yield optimization okay uh so that that is the sort of time frame that we are looking so six months until if the shell is there they can be up and running and they can actually like one if you have a if you have the shell it can be done as as short as like six months yeah um yeah well i guess this is another way of asking look you said we're in early innings, but we always talk to Ian King, who covers chips for semiconductors for Bloomberg News, and he reminds us this is all cyclical, but we're just trying to figure out where we are in the cycle.

31:00So where do you think we are in the cycle? So I still think that we are still in the early innings. Many major customers, their priority is to secure supply and the pricing is secondary. And if somehow there's a disruption within one customer. Companies have said that they can find other major takers easily. And then on the other hand, I do think that it is the best of interest of customers to secure long-term supply agreement. Let's say when you build a large AI data centers or when you want to spend on like GPUs, you want to make sure that you will have supplies of memory chips for you.

31:46Carol Massar:So Hendy, it's been an interesting week, right? And I feel like we've talked about a lot of things when it comes to AI and chips and semiconductors. Because NVIDIA, of course, it's GTC meeting this week. Got a read certainly on the AI spend and build and what's going on. Here we have Micron. And of course, Micron, as Tim reminded us, 70 % of their business is from NVIDIA. Is there a read-through for you when it comes to that AI spend and build-out? So the AI spending built out, I think it will benefit all the major players. And then I would also emphasize that all the capital equipment that have major exposure to DRAM will see a strong year in 2027, driven by new capacity and then capital spending on the fab side.

32:38Carol Massar:Yeah, so I'm just curious, would you buy more shares of Micron on this earnings report? Are you waiting for the call? I'm just curious, what do you think? Micron is definitely a strong buy here. We can see Micron earning about like$40 in this current fiscal year and growing to at least like$50. dollars. So if someone wants to apply like 10 to 15 times of price to earnings ratio, there is still like meaningful upside based on that valuation approach. All right. Just to think 15 seconds. What are you listening for on the call? What do you need to hear really quickly? I think like pricing negotiation and then what what the latest thought on the capacity expansion, like how soon new capacity can come to the to like micron fabs.

33:29Carol Massar:Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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37:06Carol Massar:you're listening to the bloomberg business week daily podcast catch us live weekday afternoons from 2 to 5 eastern listen on apple carplay and android auto with the bloomberg business app or watch us live on youtube hey let's get more on the energy markets and really the economic and geopolitical uh implications back with us is bloomberg economics chief geo economics analyst She's Jennifer Welch, and she's live from the Bloomberg Washington, D.C. Bureau. Jenny, good to keep checking in with you, because I do feel like there's so much to keep track of, and it does kind of shift a little bit. First and foremost, Iran's hold on the energy markets right now and how it impacts the world differently, which brings us kind of to China.

37:47Carol Massar:They continue to get oil from Iran. That's true? Yeah, it does seem like some of the tankers that have been able to make their way out of the Strait of Hormuz once the war started have been linked to Iran, but also potentially linked to China and delivering oil there. We suspect Beijing is probably negotiating behind closed doors to Tehran to keep that oil flowing. And for its part, Iran seems willing to work with China, but also other countries, India and Pakistan, have also potentially been beneficiaries here to essentially allow their vessels to come through in order to pick up oil and other resources and transport it back to those economies that are facing a real need for that supply.

38:26Right now, it seems like Iran and Israel are trading strikes on key energy facilities in the Middle East. And I wonder, Jenny, to what extent this makes it more complicated or challenging or difficult for markets to sort of go back to where they were when or if I should say when this conflict ends. Qatar's Ras Laughan industrial city suffered extensive damage after an Iranian attack and facilities in Qatar, Saudi Arabia and the UAE were on a list of sites at risk of Iranian airstrikes. How do you watch that from a geoeconomics perspective?

38:57Carol Massar:Yeah, so this seems to be Tehran making good on its threat following an Israeli strike on its gas fields earlier today to hit other facilities in the Gulf. So it's more that the Israelis are hitting Iran and Iran is hitting Gulf rather than Israelis and Iran directly trading strides. The Gulfs are kind of taking some incoming, even though they're not directly party to this conflict yet. But I think that what this highlights is that even though we're three weeks into this war, it doesn't show any signs of de-escalating anytime soon. And we predict that this higher level of intensity of conflict could continue for at least another week or two and then potentially subside, although we don't anticipate a ceasefire is anywhere close.

39:37Carol Massar:Rather, what we anticipate is that maybe, for example, the United States will pull out. President Trump does seem to be looking for an exit ramp. And that could take some of the intensity out of the conflict, but by no means necessarily put it to an end. And indeed, we're likely to see risk continue to not just traffic in the Strait of Hormuz, but also to the Gulf and energy infrastructure there. Iran realizes now it has a rather powerful toolkit that it can play, and it's likely to continue leveraging that whenever it feels that it's being threatened. And Jenny, you mentioned something that really raised my eyebrows just now.

40:11And it was the idea that some of these geographical neighbors aren't part of the war yet. You use the word yet. Are you implying that you think that other countries will enter this war?

40:23Carol Massar:I think that other countries, well, they might define it differently. Some of them might say that they've been dragged into it because they've been having to shoot down projectiles coming out of Tehran. I think they are receiving pressure from the United States to enter in some way, shape or form. We've seen President Trump talk about not just trying to enlist U.S. allies in other countries like China and reopening the Strait of Hormuz, but having rather positive things to say about the prospect for Gulf countries to assist with that. Now, our assessment is that the vast majority do not want to be parties to this conflict.

40:53Carol Massar:They don't certainly want to get directly involved. Maybe some of them are allowing U.S. forces to, for example, use their airspace. But they're very wary of giving Tehran any additional reason to target them. Hey, one thing I want to get to before we wrap up here, China watching very closely. As Bloomberg has reported, China's military has been studying President Trump's war in Iran for lessons that could prove helpful in any future conflict of its own. That's according to Western officials familiar with the matter. Gosh, what do we need to know about this? I think the main thing to know is that China watches every conflict very closely, as do many U.S.

41:29Carol Massar:observers as well. But what China is watching for is lessons on how to defeat the U.S. military. And here, I think that they probably taken away that this was obviously, especially at its initial stages, a very impressive display of firepower from the U.S. military. But now what they're probably noticing is that the U.S. is using, especially at the higher end, a lot of munitions that would theoretically be useful in any fight with China. And I think that's what they're tracking closely. I think also at a strategic level, what they're watching is, especially with all this debate over reopening the Strait of Hormuz, that this is creating friction points between the U.S.

42:02Carol Massar:and its allies, and that the U.S. is, especially when it comes to Asian partners, having to withdraw some assets from that theater in order to back up what it's trying to do in the Middle East. So those are some of the dynamics that Beijing is going to be watching very closely in the weeks ahead. So Jenny, five seconds, advantage to China perhaps? Just quickly. I think strategically, yes. This is the Bloomberg Businessweek Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app.

42:40Carol Massar:You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

42:54The news doesn't stop on the weekends.

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