Black Friday Special

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. On this Friday after Thanksgiving, Jeff Chang joins us. He's the president of Vest Financial. You know, it's great, Jeff, to have you here. I'm looking at the S &P 500 year to date up 15 percent. I've got the Nasdaq up 20 percent. Boy, that is solid performance. I don't care where you are, who you are. What do you do for 2026, do you think?

1:45Yeah, great to be here. You know, I still think the biggest driver of growth is going to be AI. It's also, what's interesting enough, it's also going to be the greatest source of volatility. I mean, you can even see today with the CME and data centers, like, this is really going to be what's going to be driving the market overall into the next year. I think also, you know, on a larger basis, you're kind of weighing between kind of the macro factors, cooling inflation, AI, but also, you know, earnings catching up to valuations, what we've seen today, you know, with multiples being on the higher end of the spectrum.

2:21Yeah. So this AI trade, I mean, it's definitely changing. There's rotation involved, right? I mean, do you still stick with the NVIDIAs or do you start looking at some of the other companies like the Alphabets now that are very involved with their TPUs? Yeah, I think there's definitely growing competition. But I think when you look at NVIDIA, it's still the bellwether for AI hardware. You know, from there, because when you look at AI and the foundational parts of it, you're looking at, you know, compute data centers, networking, and cloud, and cooling is in that as well. But I think when you look at NVIDIA, it sits very kind of right in the center as far as foundational parts of AI, given that, you know, one thing is that they've also, if you look at the numbers and forward guidance, has been pretty strong.

3:07I do think where you start to see a little bit of volatility is the idea that competition is coming in. And so if you start to look at, you know, like some Microsoft really planting the flag in cloud, and then, like you said, Google and Alphabet coming in into the AI chip space as well. So we can see some volatility there, but mostly the dominance of NVIDIA, we'll see, is going to be pretty strong in the 2026. Vani, I think I'm 0 for a lifetime trying to call the top of a bubble. You know, I just never. Why would you possibly want to even try doing that ball? I was selling stock. Boy, cranking out IPOs March of 2000 with a vengeance and no idea.

3:44And then like five minutes later, it was over. So how do you and how do investors in general, Jeff, do you think, how do you think about a bubble? And are we in a bubble? Are we at the top of the bubble? How do you think about that? I don't think as far as like you've probably seen recently in the news of SoftBank and the likes of Peter Thiel selling their positions in NVIDIA. I actually don't think that's an indication of people getting out due to a bubble. I think, sure, are the are the AI stocks and hyperscalers expensive? Yeah, you can make an argument for that. But when you're thinking about AI and the idea that it might be a bubble, this is very different than something like, you know, if you were to look at crypto.

4:24So I would say that this is a structural shift. Now, selectivity matters where you're actually going to be in AI. But I think what we're seeing is a generational shift as far as, you know, because AI is going to diffuse into Main Street as far as anywhere from logistics to enterprise software. You know, health care, defense is going to go everywhere there. I think where you're seeing a lot of people misunderstanding is, and we've seen this story play out before, is the idea that, OK, we've seen a huge amount of investment into AI, you know, in hundreds of billions of dollars, whereas in the actual earnings, you're talking to 20, you know, 25, 30 billion in actual earnings.

5:06But this is where you start to, if you pull back the curtain a little bit, keep in mind, earnings is based off of accounting depreciation, which tends to front load your expenses. And it doesn't account for the earnings potential over the long term. We've seen this play out before. If you look at going back, like fiber optics, there were billions of dollars on front end investment. But we hadn't seen the trillions of dollars of earnings potential that came out in many years afterwards. So, you know, like they always say, you know, history doesn't repeat itself, but it does rhyme. I think what you're seeing here is kind of a fiber optic Internet type situation.

5:41We're really fundamentally changing, you know, how we do business going forward. So you say the foundation of long term AI is sound, but where do the revenues come from? What are you projecting out in terms of revenue for these companies that are spending a fortune on AI? Yeah, so it like I said, like selectivity matters. So if you're talking about, you know, the Microsoft Metas, the Googles and the NVIDIAs of the world, those, they are going to touch every part of AI, whether or not the earnings are going to be generated from industrials, whether, you know, industrial automation, whether it's going to be generated from healthcare.

6:18They're going to be at the center, given that the core foundation being cloud, compute, data centers and networking. So that's really where, if you're looking as a long-term investor, where the earnings are more sustainably and more higher probability of actually realization is being at kind of that center. I think where you start to get a little bit dicey is trading on the hike, going for these types of moonshot type trades where you're looking at small cap stocks and maybe in small robotics or so on and so forth. That's where you start to get a little bit of dicey as far as will we see that earnings realization to justify the valuations?

6:58You know, Vani, I remember the beginning of this whole AI discussion maybe three years ago. Gene Munster from Deepwater Asset Management, who to me is one of the best technology analysts on Wall Street. He said, hey, think about a continuum of what's important. Let's put electricity like from zero to 100. Electricity, he puts at 95. The Internet, he puts at 70. AI, he put it like 90 right there. I mean, so every time I think about, geez, maybe we're kind of in a bubble. You should have listened to him, Paul. I know. He was so right. So, Jeff, where do we go from here? What's the next way to play it?

7:33If I've played out my NVIDIA trade, maybe I've played out my Microsoft trade on AI. What's the next leg, do you think, for this whole investment thesis? Yeah, so this is very similar to, let's say, in 1999 and 2000 in the tech boom, that a lot of these publicly traded companies, people were taking kind of bets here and there. I actually believe if you then really kind of fast forward the tape, you'll notice that the real winners, the companies that really won kind of the Internet boom, the Facebooks of the world, the Netflixes of the world, the Airbnbs of the world, they weren't around. They were in startup mode.

8:08So I think a lot of folks that are trying to play the AI trade, a lot of the Facebooks in AI of tomorrow are going to be in venture. They're going to be in early stage or middle stage startups that are really being able to innovate, move fast, kind of break things kind of mentality. I think, like I said, the next wave, it's not publicly traded, especially in the AI space. I think, like I said, the foundational parts, like, you know, the hyperscalers and the NVIDIAs of the world are publicly traded. But I think a lot of the next wave of software and usage cases across all industries are actually in private markets right now.

8:47All right. Well, Jeff, we have to leave it there. But thank you so much for joining us today. And I know you're in Las Vegas. So if you're putting anything, put it on black today. That is Vest Financial President and co-founder Jeff Chang. Stay with us. More from Bloomberg Intelligence coming up after this. This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. About to start consensual telephone call with Dr. Daiwa Zhang. China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

9:47I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. and that's a unicorn. This is a story of the inner workings of the MSS and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

10:26You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. So let's bring in our next guest to talk a little shopping. We have Julie Bornstein. She is the CEO of Daydream, which is an AI agent for fashion retail in particular. Julie, thank you so much for joining. First, just explain a little bit what a fashion agent for retail can do for me when I go online. Yes. Well, ultimately, the goal is to be a personal stylist in your pocket.

11:01Today, what we do is we allow you to let us know what you're looking for using whatever you want to say. You have a Christmas party with your office in a bar in New York City, and we can help you find what you're looking for. We make it easier to shop, and we also allow you to post a picture, and then we can help you find something that looks like that. So I don't know where to go here, Julie, but 42 percent of shoppers say they're using AI tools for holiday shopping. That's according to a Harris poll for MasterCard. Are retailers, are they ready for that? Are they trying to take advantage of that?

11:40How are they performing here? It's early days for the retailers, but they are starting to learn how to both appear through some of these different chat surfaces. and they are also trying to figure out how to use AI to make the customer experience better on their sites. Some of them are doing interesting things, Gap, H &M. They're also participating with us, Daydream. So because we're sort of the first AI shopping platform, they can partner with us and they show up as customers are explaining what it is that they're looking for in a whole new way. Julie, we always hear when it comes to AI that it's all about the prompt, right?

12:17So what are customers doing and how should we prompt better? It's a great question. I mean, we see prompts that are everything from I'm going to a wedding and I want to wear a pink dress, but not look like a cupcake. To I'm going to a wedding and I want to wear a revenge dress in the vices of salt burn. So we have lots of different kinds of things. I want to see what the hallucinations are for those answers. Yeah, exactly. What the cupcake dress looks like. People are very creative. And the truth is that consumers are just learning how to prompt. And so part of what we do is also give them ideas so that if they're starting to look and then once they get used to it, people will write very long things with very descriptive details of what they're looking for.

12:58I've seen some technology, some apps on the iPhone, take a screenshot of something, and then it brings you right into a shopping environment. Talk to us about where that is right now and where that's going. Yeah, that's going to just get better and better. I think the idea of being able to screenshot something on the new iOS allows you to instantly, you don't even have to open an app, bring up results from any of the apps that you have already downloaded. So if you have Daydream downloaded on your phone and you screenshot anything from Instagram or as you're walking around and you see someone wearing something you like, you have the ability instantly to pull up the results that are closest to that product.

13:40And if that product still exists, you can get that exact product. So it's pretty cool. and it's a pretty quick way. And what we're seeing is younger generation, Gen Z is very higher use case for that. They're just used to being able to snap anything and then be able to find what they're looking for. So if I screenshot something, it sends a whole load of information into the background of my phone. Is that right? That sounds a little dangerous to me. It means I should probably stop screenshotting things. No, it's really if you choose to then use the search mechanism for it. So in general, screenshots are not, you know, you're not nothing's happening with them until you decide to do something with that screenshot.

14:20So, you know, if you're looking for a product, it's pretty safe. So, all right. How about this? Warm, but not bulky coat under three hundred dollars. Where is the AI thingamajig going to take me? Well, on Daydream, it's going to take you to a set of results that match that kind of query. and then you'll see lots of results from around the web. And we will, once you find what you're looking for, you link out to the brand or the retailer that sells that product. So similar to the way Google works, we're basically sort of a search and discovery platform that then helps you find the retailer to buy from.

14:58All right, well, in the world of search, it's search optimization type thing. Is there a similar type of thing here in the world of AI? So it can depend on what the business model is. In our case, we are totally focused on finding you the best product for you that matches both the query and your personal preferences as we learn about you. And so it's not an issue of whatever, you know, whoever pays the most gets the way to show you what their product is. But in some cases, you know, there's an ad based model. Ours is not. Julie, OpenAI and Amazon both made headlines this week with shopping launches.

15:35How are their products different to yours? Are they compatible to use together? Or how are you dealing with that competition? We're really excited about it. I think in general, shopping, you know, this is the first season where AI is really going to improve the shopping experience and it's only going to get better. I think the fact that they're both doing this is very validating to us. They're separate, but ours is totally focused on fashion. And so if you go to either of those platforms, you'll find that they were kind of generally across all categories, but a little bit less focused on a single category.

16:07And so shopping and fashion is so nuanced that, you know, daydream is better for that. So, Julie, what are your clients telling you here about this holiday shopping season? What's the level of optimism? Because there are a lot of economic cross currents out there. Yeah, there really are. I think that this year is going to be bigger than last year, but probably not by a huge amount. What we're seeing is that a lot of there's a lot of excitement for all of the sales that are going on this week for cyber week and so what we have is a daydream broadcast on it's a broadcast channel on instagram where you can actually see all the brands and all of the offers that they're giving you what we know is that a lot of people are saving the things that they want to buy and coming back today to go see if they're on sale you have a lot of experience raising money and bringing companies to market and so on.

16:58You sold your previous company to Pinterest, actually, and you've been on the boards of, you know, Sweetgreen, Redfin, Weight Watchers, so much experience. What is the environment like now for consumer companies and raising money? It's interesting. It's a very strange environment because the role of AI has kind of thrown everything off. And so I think everybody who has an interesting angle with AI is definitely able to get conversations going. I think that if you're not doing something with AI right now, it needs to be a very unique proposition. It is a very AI-focused fundraising environment.

17:36Doesn't mean that there aren't other ideas that are great and out there. But certainly, the fact is that AI can help pretty much every aspect of building a business right now. And so you want to be able to show how you have an advantage leveraging AI that other people don't have. So you have to figure out what your moat is. Julie, is partially the reason it's such an AI type of fundraising environment because all these, you know, dollar donors are invested in AI themselves? No, I think it's more because everyone believes it's going to shape the future. And it's still early, so it's hard to know exactly how.

18:13But if you're not actually taking advantage of it, it seems like a really missed opportunity because it will change the way everyone does work from the way employees work to the way products are made, to the way supply chains run, to the way consumers experience AI. So what's the next step here for AI, do you think, Julie? Is there another natural progression? I think that there will be a lot of evolutions in the models. I also think we'll start to see over the next year or two a lot more consumer experiences changing. So we haven't seen a lot of that yet other than going directly to some of these new chatbots.

18:49But if you think about all the things you do in your day-to-day life, things will get a little bit smoother and smarter as a result of AI. And there will be new businesses that come along like Daydream that just make shopping, for example, easier, smoother, and more personal. All right. Great stuff. Thank you so much. We really appreciate it, Julie. Julie Bornstein, she's the founder and CEO at Daydream. And stay with us. More from Bloomberg Intelligence coming up after this.

19:18You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Now, for more on the state of the consumer on this Black Friday is Andrea Varnardo, a seasoned business leader and board director in consumer brands and retail. Andrea, thanks so much for joining us here. What's the mood of of retailers here going into this holiday shopping season? There certainly are a lot of economic crosswinds out there. The retailer is actually quite optimistic, especially compared to where they were last year.

19:59At the beginning of this year, we thought tariffs and tax cuts would drive consumer behavior. And while tariffs still remain a big concern, consumers are also absorbing something much more subtle, the ripple effects of a shutdown, fewer government services, a cold housing market, and large company layoffs. So frankly, the economy feels contradictory, but spending is holding. As we've just seen in Q3 earnings reports, they are holding. households are more cautious, but customers are still spending in a really selective way. What are they buying, Andrea? Deloitte is seeing a lower average spend for the Black Friday, Cyber Monday.

20:37But these statistics sometimes can be misleading in the sense that people will continue to spend or they've already started spending. That's such a great question, because when we talk about the contradiction of seeing spending, but customers being more selective, I like to define it as the customer isn't stepping back. They're really reprioritizing and they're doing a purposeful reallocation. So when you think about what they're spending on, there are kind of three big shifts that are happening. One, customers are moving towards intelligent value. They're looking for things that have function, meaning, utility, longevity, so they can feel like they're really getting a return on their investment.

21:15Two, they're consolidating purchases. And so one of the interesting things we've seen as some in some of these QV earnings reports is where some of the values are going down we are seeing higher ticket prices and higher order values on top of lower order numbers and so this means customers are consolidating purchases they're sticking with fewer retailers they're leaning heavily into loyalty programs and also convenience and then finally customers are shopping to reduce stress they're choosing products and services that save save time, that's simplify life and add comfort. How about availability inventory?

21:51If I'm going to go out and get my kid the GI Joe with the Kung Fu grip, is it going to be in the stores? It will be. That's one of the really interesting things that happened this year. With tariffs, a lot of companies pulled their inventory forward. So where they were planning on a shorter cycle as usual, they actually said, let's pull inventory for the next year so we can get goods into stores and online. So yes, hopefully your kid's toy will be there in store. And if not, I can tell you with the improvement in AI and technology, they are surely going to offer you something that they think is just as compatible.

22:27I was speaking to the CEO of a toy company just on Wednesday, I guess, and he was saying that a toy that was maybe$20 before the pandemic is now$40 for various reasons. So there was the pandemic, right, the supply chain snafus and then inflation, thanks to that, and then inflation from, you know, fiscal spending and so on. And now we're right up to almost double what it was before. Are we seeing that? Are we seeing that kind of inflation across the board? Yes, we are. And it's happening in more categories than others. So you're mentioning toys, disposables, groceries. We are seeing that inflation across the board.

23:02And to your point, it has to do with general inflation. It has to do with tariffs, because while companies have absorbed some of the tariff costs, many of them have actually passed it right on to consumers. And so this is why consumers are being much more selective about where they purchase. And related to that, they're starting to trade down or explore alternative options. If it's a commodity item, they might actually say, let me go explore this other brand that might be a little bit cheaper or buy the generic version of that to help capture some of that value back. What's the promotional environment out there these days, Andrea?

23:36Am I going to get deals when I go to the store, assuming I actually do go shopping? You will get deals. They will be very selective deals. So as retailers and businesses are looking at their inventory, they want to be much more precise about what they're promoting. So they're going to be focused on where do they have a lot of inventory? What can they replace fast? What's going discontinued? Where are you going to get that value? And even in some areas, they are going to price promote on items where they know you will add on. So you won't find full deals across the board. You won't see 50 % off site-wide as much as you used to.

24:12But what you will see is on specific categories, they are certainly discounting. But at the same time, they will be promoting those discounts because they know this is the holiday season. They know customers are focused on value. So they're still going to put those select deals right in front of you so it feels like the same velocity as it did in previous years. What's popular when it comes to fashion and retail and department store retail in that sense? Kohl's, for example, reporting the other day and their strategy under the previous CEO who was ousted was to focus on fragrances and petites.

24:44And that strategy seems to be working even for the incoming CEO who's now been made permanent. But it struck me as odd that suddenly fragrances are very popular. They are. And fragrances have to do with that longevity and value. Customers want something that they know they can use over time. And so what you'll see is right now you'll see purchases in what I call functional tech. So if you need a new laptop, if you need a TV, things that you need that will have a long-term value to you. Also, fragrances and wellness, something where you feel like you'll get your return. It will last over a period of time as well as you will feel good about yourself.