TikTok Buyers Group to Include Oracle, Silver Lake, Andreessen

24:49Carol Massar:All right. Going to leave it out there. Always, always appreciate your time and such a timely interview at that. Katie, be well. Katie Kaminsky, she's Chief Research Strategist and Portfolio Manager at Alpha Simplex Group, joining us from Boston, Massachusetts.

25:19Play Bloomberg 1130.

25:21Carol Massar:Hey, over the summer, one of the things that caught our attention, Bloomberg News reporting that the world's largest technology company, so we're talking Microsoft, Amazon, Google, all of them planning to spend billions of dollars, more than$344 billion on capital expenditures, with much of it, Tim, going to data centers for AI models. According to Bloomberg intelligence analyst Amanda Epsing, companies have, quote, basically tripled CapEx investment in cloud due to AI, with executives emphasizing the need to invest quickly to get ahead. Our next guest is helping those hyperscalers scale up when it comes to AI.

25:54With us in studio is Adair Fox-Martin, president and CEO of Equinix, the nearly$76 billion market cap data center. Rita trades under their ticker EQIX, down so far this year about 18%. Adair, welcome. Good to see you. Thank you so much. Thank you for having me. Nice to have you. So how's business? Business is very good. Like the best you've seen it? Like we're in the middle of a very strong cyclical demand cycle for, you know, the products and services that we offer. When you say we're in the middle, help us understand how long that means of a runway there is to go here. Sure. You know, at Equinix, we see a very significant trend from the training of models in the AI economy that you refer to in your opening there with the hyperscalers to the deployment of those models in enterprise systems.

26:40and that deployment is called inference. And we see that opportunity as potentially double the size of the training opportunity. And at our company, we feel we're built for this moment.

26:51Carol Massar:Has that happened faster than everybody anticipated? Because I do feel like the conversation, although we've been talking about AI of now, what, almost two and a half years, well, or well into two and a half years, but we are now increasingly talking about all of this stuff starting to be put to work. Right. You can certainly see organizations. We have 10 ,000 customers across the world moving from proof of concepts into production systems and applications of the technology. One of the things I think we're curious about is, as you know, the news flow is fast and furious from the White House and out of Washington.

27:22Carol Massar:And there have been some announcements out of the Trump administration about AI infrastructure initiatives specifically. So I'm curious, Adair, have you seen any impact of that on your existing properties leasing effort? And I'm curious how you compete with, how does that kind of compete their program with your own development program? Look, we very much welcome the focus that the current administration has on data centers and the importance and the recognition of data centers and their important role in the infrastructure of any economy. And we certainly are looking at, you know, some of the properties that have been, you know, identified as potential for RFPs.

27:59And we would choose based on locations that would be accretive to our business because we're very focused in cities, in metro areas, close to where humans are who will use this technology.

28:11Carol Massar:Are you getting pushback from cities and humans who don't necessarily want those data centers to use them? Not hugely. I mean, we're very conscious of the role that we play and the role that we play with communities where we have data centers. And we're very considered about our approach there. What makes a good location for a data center? Because it doesn't actually, apart from the construction, it doesn't actually involve that many people to keep it up and running relative to the amount of money that's spent on it and what actually happens in there. Yeah, it's really interesting because I think, you know, when you think about the operations of a data center, you tend in your mind to go immediately to technicians and technology.

28:50But actually, there's a whole series of unsung heroes in the operation of a data center, which are the craftsmen and the tradesmen and women, you know, the plumbers, the electricians, the engineers who basically keep the internet up and running, through this data center infrastructure.

29:04Carol Massar:So difficulties in finding those workers? We've done some reporting about that, that there's, okay, yay, great, the spend and the build, but there's not enough workers to do it. So I think the constraints that the industry are facing are around energy and power, around skilled workforce, and then into the supply chain for the equipment that's part and parcel of a data center infrastructure. But is that slowing the build that you guys are trying to do and meet that demand? It is something that you have to actively manage as you are looking to build. You know, for example, in our case, around some of our supply chain portfolio, we've pre-purchased in order to ensure that we can have the delivery dates that we need to bring capacity online.

29:43We talked about the$344 billion that some of the world's largest tech companies are planning to spend when it comes to CapEx. It's like the thing we look for now quarterly when a company reports results. How much of Hyperscaler's CapEx budgets actually flow through your company? We have a very significant approach on a part of the data center industry that we call co-location, because not all data centers are the same. And so co-location is where enterprise customers, businesses, 60 % of the Fortune 500, for instance, would locate their workloads or their machinery with us in a shared facility.

30:21We have a JV structure that works with the hyperscalers to build to suit for the hyperscalers. scalers. And so that's how we service the hyperscaler opportunity and maintain that very important partnership that we have with them.

30:35Carol Massar:I mean, I guess we're trying to figure out your exposure. I think your top 10 customers represent about 16 % of monthly recurring revenue. So your exposure to the hyperscalers is pretty big, right? Is it manageable? It's manageable. You know, the hyperscalers, for example, when they operate in our retail facilities, they do so because of the connectivity of Equinix. So that's going to be a requirement, you know, for inferencing and for the actual activation of these AI workloads. So it is for us about connectivity. Connectivity is the secret sauce of Equinix as a data center provider. What do you mean specifically by that?

31:10Carol Massar:Because I think we can use the word connectivity to mean a lot of different things, certainly in the business world. What does it mean specifically for us? Yeah. So in our world, it essentially means we're located in 273 data centers right across the planet. Inside those data centers, we have ecosystems of customers, customers whose value chains are connected to each other, and we physically connect them, you know, literally interconnect those customers one to the other. That's the first part of interconnection. So that allows for low latency transactions to happen, say, for example, on a trading floor.

31:43That allows for that to happen in real time. Yeah, we're speaking right now with Adair Fox Martin, president and CEO of Equinix, joining us here in the Bloomberg Businessweek studio. You mentioned the difference between training and inference. Thank you. When you think about this, like a company like CoreWeave, for example, where does that fit into this? Well, CoreWeave is a NeoCloud. They're a company that provides GPU capability to companies who want to train their models. So they fit into the ecosystem in the same way for us as other cloud providers. Like a GPU as a service? Correct. Okay, so what are the average lease terms for an agreement with a GPU as a service organization?

32:25It would depend. You know, they can be relatively short. For us, our leasing in our wholesale side is 10 years plus. Okay.

32:34Carol Massar:Now, one of the things I think is interesting is I think we're all trying to figure out the boom and bust of all this. And today on Bloomberg, there was an investor, Jack Selby. He is AZ VC founder and managing partner. He's longtime managing director of billionaire entrepreneurs, Peter Thiel's family office. And he said the euphoria around AI may have led to the biggest bubble yet in private technology investing. And so sounding warning bells that a correction started valuations is in the cards. Now, we understand when you throw AI, there's a lot of different players. But behind it all is the data center spend.

33:07Carol Massar:And we have had a lot of conversations about the hyperscalers making, you know, multiple duplicate arrangements with power providers that they're not going to use all of them, but they just want to make sure they've got the power where they need it. Is there any signs to you that there's exuberance, that the spend is slowing down, starting to, will start to slow down maybe next year? You're seeing it. You've got a front row seat. Yeah, I guess we believe in the enduring nature of the transformation that AI and the technology associated with it can bring and can bring to businesses. I mean, as I said, we support manifold workloads of our customers, you know, not just AI workloads, but, you know, standard business process workloads.

33:52And we really are about that being that connectivity engine. So, you know, I think in many ways, our business model is, you know, somewhat protected from any potential. Before we let you go, as I mentioned, some headlines on TikTok crossing from the Wall Street Journal. The deal would create a new U.S. entity, Oracle, Andreessen Horowitz, Silver Lake. Are you involved in this at all? Well, we partner very closely with Oracle. So it would be through that partnership that we would be supporting. So you think you will support an independent TikTok? Potentially. With Oracle. With Oracle.

34:25Carol Massar:Yes, a very key partner. One last question. Your stock's down. Why? If it's so, I mean, I know there's also an incredible spend in what you are doing. You've got to spend in order to meet the demand, you know, and so maybe that is why there isn't some reward from some of your investors. Is it kind of a conflict? Well, we're very focused on long-term value creation for our shareholders. And, you know, we announced that we are going to bring on as much capacity in the next five years as we have done in the previous 27 years of our operations. And so we're very focused on executing against our strategy.

35:03We believe in the opportunity that we see in the market and hope to deliver proof points to that to our investor community very soon.

35:09Carol Massar:We have to leave it there. We apologize. There's been a lot going on today. So we hope you will come back and give us updates. Thank you very much for having me. We appreciate it. Adair Fox Martin, president and CEO of Equinix, joining us right here in studio. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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39:09You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Wall Street traders gearing up for the Fed decision, and refraining from making big bets as they await clues on the path of rates that will shape the outlook for markets over the next few months. On The Outlook, back with us is Allie McCartney, Managing Director, Wealth Management, and Private Wealth Advisor with Alignment Partners at UBS. It manages just over a billion dollars.

39:40Allie joins us here in the Bloomberg Interactive Brokers Studio. I want to get to your outlook, everything that you're watching, but when you walked into our studio, you made the point that today's the anniversary, or yesterday, depending on how you look at it, of the great financial crisis. And you were there. You were part of it. It was. I was on an over-the-counter equity and hedge fund derivative desk. So it was... At Lehman? At Lehman. Yeah. Sorry. I should have said that. I sort of thought that was implied. It was a crazy, crazy time. And it's interesting because a lot of the conversations now are, are we in a bubble?

40:16What do we do in the market? Is that, you know, depending on what you look at, The S &P right now is trading at 22.3 times forward earnings. You take out the mag seven. The broad based 493 is at 20.2 times. So people are anxious. Right. I think the big difference we have right now has a lot to do with the Fed. There have been four other times in history since 1950 that markets have been this highly valued. And in two of those cases, the markets have outperformed over the next 12 months. And in two of those cases, the markets have corrected. And the difference is very, very clear. The markets have outperformed in decreasing Fed interest rate environments where earnings are growing or stable.

41:06They have tanked when the Fed is tightening and earnings are slowing. So I think we have a little bit of a recipe for we still think the bull market continues, but you have to be cautious. We have to look at volatility. And tomorrow is going to be really meaningful in terms of the summary of economic projections, the dot plot, the descents, as your former guest said, and just in general, the tone.

41:32Carol Massar:How much juice do you think the economy really, really needs right now? Because, you know, we got a read on retail sales and consumers are still spending. And I know there's it feels like there's a mixed bunch of data points, Ali. So how much do you think that the Fed needs to do? There are a lot of just for tomorrow. Yeah, no, it's the right question. What does this whole tightening cycle and what does the neutral rate look like? So the question is back to what we were talking about initially is, is this insurance or is this against a growth scare? The numbers that we have seen have been very mixed.

42:09The effect on consumers in terms of tariffs, in terms of dwindling savings, in terms of high interest rates have not really appeared to create issues yet. I don't think it derails a bull market, a Fed tightening cycle and increasing earnings really as a tailwind with AI and increased efficiency. But it's not going to be easy. Right. We increasingly have a world that is the haves and the have nots. And the have nots are in a really, really tough place. And so I think that some of these interest rate cuts are going to be stimulating the housing market, stimulating Main Street, allowing people to borrow and making economic opportunity more uniform.

42:55But I think we go ahead.

42:57Carol Massar:Well, yes, because Tim and I talk about so much like with Peter Atwater over at William and Mary of the K-shaped economy, right? The haves and the have-nots. And I get it. I get why rate cuts will help folks that are having a tougher time right now. But can we do that without those folks who are doing just fine, not leveraging up and doing crazy things? We're going to see the answer is probably not, right? And think back to the times in the economy where we have had very low interest rates and ultimately what has happened, because what does it do when you lower interest rates, you push people into risk assets.

43:31So what I'm looking to see tomorrow is exactly that. Are we getting a dovish Fed, right? Are they saying this is the beginning of three to five more cuts over the next 12 months, in which case I think markets and risk takers will go all in? Or are we getting a hawkish cut, which is sort of the standard Powell response, which is we're still going to be data dependent. We still know there's a lot of risks out there, but I'm looking at the labor market. I just can't imagine Fed Chair Powell making a commitment that far in advance. Somebody who has made such a point of emphasizing how data dependent he is and how data dependent the Fed is.

44:08I can't imagine it's going to be the former. I think it's going to be the latter. Agreed. But that's why I think the concept of dissents and understanding who the dots on the dot plots are, because remember, his dot's going away very soon. The other dots and And the ones that are going to be the future dots are probably going to be much more politically and partisan aligned. So I think that's really what one needs to focus on in terms of deciding if we're going further north or if it's time to sell and take your gains. Does that concern you, though, if the dots are politically aligned rather than aligned with what these individuals think or what economists think the rate should be?

44:47Personally and professionally, it concerns me a lot. I think a politically aligned or said another way, a non-independent Fed is a really challenging place to be. Does it make you think differently about deploying assets in the United States? I think that long term implications. Yes. But I think that at this point in time, and when I say short term, I even mean throughout this this presidency, currency. No one's going away from the dollar. They may be going more into gold, which is also dollar denominated. They're buying a little less treasuries overseas, but not much. So I think that we have 60 plus percent of the equity capital markets of the world.

45:31The AI trend is one that is internationally recognized as a mega cap five, as a U.S. Silicon Valley based phenomenon, both from the current hyperscalers and from the fact that they have so much cash on hand that they're going to buy and build everything that's next. So does this create or is this another warning sign along with the deficit, along with other polarities of things that might put a chink in the U.S.'s armor? Yes. But do I think it's in the next three to five years? probably not.

46:09Carol Massar:Would that have happened without this current administration? At the end of the day, one of the things that as a trained economist I always look at is the demographics, right? So the demographics of this country are in trouble, right? We have more people retiring than any of the first workforce. That was before we stopped immigration. The birth rate's gone down. So when you look at us and you look at us relative to, let's say, India or China, it's a problem. But again, when does that catch up with us? And what is the rule of law and the rule of capital in those other places? And they are not as capital or law friendly as we are in terms of attracting monetary dollars or resources.

46:53Carol Massar:What is your expertise in kind of understanding some really dark moments in U.S. financial history? Yeah. And maybe the world looking at us like, oh my God, I can't believe what you did, right? But then understanding, because I think some would say that it feels a little dark right now in trying to understand how policies are going to impact the US longer term, but showing that we can have dark, difficult moments and then rise again. Are global investors willing to kind of look at the US and say, okay, this is a moment in time. And that doesn't mean that the investment environment or the political environment or the global environment in the U.S.

47:31Carol Massar:role and it won't change again? I think that this is a very shocking and emotional time for many people in and outside the U.S. I think that this is more serious than a lot of other points in time in how much we changed about our role as an ally, as the police of the world, as the financier of the world. But again, Russia can't take our place. The European Union can't take our place. India can't take our place. Africa's developing. China has issues and their demographics are challenging as well. So I think it's one of those things where a lot of people and investors have hurt feelings, But at the end of the day, one thing I tell my clients is regardless of how you feel about the policies and politics of this country, you need to lean into that greed and then decide what to do with your spoils to make the change you want to make.

48:35I think that's how other countries look at it.

48:37Carol Massar:You have to be quick. Ten seconds. But if we don't have an independent Fed, it changes. I think it changes because I think that, especially let's go back to the financial crisis, you need independence and balance to get yourself out of tough situations and have discipline. Allie McCartney. Thank you. Thank you. Managing Director, Wealth Management and Private Wealth Advisor with Alignment Partners at UBS. This is Bloomberg Business Week Daily. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m.

49:11Eastern on Bloomberg.com. the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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