BlackRock’s GIP Buys Aligned Data Centers in $40 Billion Bet

0:28The news doesn't stop on the weekends. We put the past week's events into context, examining what happened in the markets and the world. Then on Sundays, we speak with journalists, columnists, and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television, listen on Bloomberg Radio, stream the show live on the Bloomberg Business app, or listen to the podcast. That's Bloomberg this weekend, Saturdays and Sundays starting at 7 a.m. Eastern on February 28th. Make us part of your weekend routine on Bloomberg Television, Radio, and wherever you get your podcasts.

1:10Bloomberg 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. It's yet another day of data center deals. I feel like this is a never ending story here and it continues to propel the stock market higher. And that's kind of what's happening here. The Nasdaq up 1.3%, the S &P 500 up 1.1%. So we needed to bring Caroline Hyde, our B-Tech co-anchor in to our New York studios here to kind of walk us through some of the big stories.

1:53And I guess let's start on the one that became official, which is BlackRock's GIP buying aligned data centers. This is a$40 billion AI bet. And to be fair, it's a lot more than BlackRock. You've got BlackRock, but you've got MGX, which is Momodala's AI investment company, part of that sovereign wealth fund focus on AI. But you've got Microsoft in the mix. You've got NVIDIA in the mix. You've got XAI in the mix. Basically anyone who likes financing data centers or needs access to data centers or has some GPUs to put inside data centers, seemingly wanted in on what was a$100 billion get-together pool of capital.

2:28And this is their first chunk of change,$40 billion being committed to Align data centers. It's over in Texas. And this was actually owned by Macquarie, a big Australian infrastructure player. And they are now managing to sell off. It's a huge campus. You're thinking about operating in the U.S. and indeed in South America Align. They've got 50 campuses. They've got 78 data centers. But all of this is as we seem to have insatiable demand for compute and therefore values go skyrocketing. So your tech beat, Caroline, is always front and center for this market. It's even more so, certainly the last two years with AI, it's even worse than the last two weeks with a lot of these circular deals that have been referred to as circular deals, where people are investing in each other's companies and things like that.

3:11And the dollar amounts are so huge. Are your sources, are they saying this feels a little frothy? What are your sources telling you? I think a lot of people are starting to put the word bubble in the context of AI and infrastructure right now. Look, you even had the CFO of Citigroup yesterday talking about his anxiety when it comes to potential frothiness in the AI market. You've had the global manager's survey coming from Bank of America yesterday, more the most we've ever seen in terms of majority thinking that these AI players are too highly valued. So certainly the circularity gives people pause.

3:43We had a great fan manager on just yesterday really saying, look, even though they think Nvidia is a bet, Even though today, HSBC has raised the price target on NVIDIA to maybe putting this at an$8 trillion company in the next 12 months. But people do have pause when they're putting$100 billion in equity investment into OpenAI, basically so that OpenAI can keep buying its own GPUs. You see that happening over in Europe. Another key player that we've got to keep an eye on is Nscale. That is currently a private AI data center builder out. I might add they've never built one single AI data center, but they were a crypto miner that's pivoted.

4:16And now they're committing to doing four data center projects with Microsoft. But Nscale, of course, got the tap, the anointment from Jensen when he went over to London saying, I want to back you in my equity because guess what? 2 ,000 GPUs are going to be offered in those four projects to Microsoft. So it just keeps on being this idea that ultimately, where are we getting the money from? At the moment, build it and they will come is the mentality. We need the infrastructure before you can really get the productivity gains. So NVIDIA is putting its cash to work. Okay, so circular funding and yet another example of that.

4:47So what I'm confused about is how some companies that had indicated things would be kind of rough just a few months ago have now turned around and are seeing a completely different tune. ASML, which is a Dutch semiconductor equipment maker, had warned that the trade war, the tariffs on China was going to be hurtful to its business. Now it's completely like turned around and said, you know what, demand is great. Maybe they'll be able to eke out growth in 2026. I think it's also our expectations for ASML came down some. If you're looking at a quarter on quarter basis, the sales and the bookings fell.

5:22It's because China is so outsized in their revenue stream and China is going to start dialing back in 2026 because of the geopolitical issues and the fact that the U.S. is asking its neighbors and allies to stop allowing such semiconductor equipment into the nation. You just had the House China Committee saying, once again, we're worried about ASML, but also KLA and some of the other US players. So I think that we are seeing, yes, ASML managing to calm anxiety, that they will still see growth from other pockets for these EUV. This is extreme ultraviolet lithography. They're the only people that make this particular sophisticated equipment that is making your leading edge chips that are going to be fueling our AI consumption.

6:05So if they're the only player, well, they've got really a sort of a built-in demand pool. But China is going to be dialing back and the market wanted to hear that others were going to step in. And it seems as though they are going to. Stay with us. More from Bloomberg Intelligence coming up after this. Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're 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.

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7:24You'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. LVM shares are higher right now after a surprise return to sales growth. So maybe that is leading to folks saying perhaps the downturn we saw in luxury is over. Let's get some perspective from Deborah Aitken. She is Bloomberg Intelligence Luxury Goods Analyst. Deb, good to speak with you. What are you thinking when it comes to LVMH's results and what it signals about whether luxury is back?

8:04Hi. Yeah, so really a very big sentiment indicator. The comments from the company late last night out of Paris were more positive than the market anticipated. When we look at the numbers in terms of the organic sales growth, the market expected around minus one. We came in at plus one, but it's about the sequential improvement from Q2 to Q3 and the fact that all five of the business units improved versus Q2. More than that, China is mid to high single digit growth versus a year ago. The U.S. is robust. Europe is doing the same as it did across the board, doing OK, but missing out on tourism. And Asia x Japan is positive.

8:51We know 4Q U.S. will face a bit more of a difficult comp after the spending last year beyond the election and the Trump win. But into the first half of 2026, the market is looking more positive. And it's certainly rallied the whole of the sector this morning and this afternoon. Hey, Deb, what's the correlation between luxury spending and just kind of the broader stock market around the world? Because markets are really performing well. How does that correlate to just luxury spending? You know, the big thing on luxury spend has been that the very high end has done well. So Hermes, Brunella, Cushinelli, where they work with a restricted volume operating model, they've done well in terms of their top line growth.

9:41But when I think about an LVMH, you know, given how big they are, they need a big volume there, even with some pricing. to manage growth in this category. And instead, what we saw last year and the beginning of this year was maybe a little bit of trading down. So, brands like Tapestries Coach, Ralph Lauren, they became really so popular, not only in the US, but more on a globalized basis, too. And so, the view has been that the sentiment around the share prices has very much been opposed and opposite to what's been happening on the stock market. But with the exception of the mid-range, and the mid-range have done better because the view in the investor mindset has been that the luxury buyer will trade down.

10:30They've done that in some brands, but not all brands. In some categories, not all categories. And generally, we expect the biggest and the best to come back first. What about LVMH's wines and spirits division? We've been hearing from Constellation Brands and other spirits companies that there's been this massive shift in consumer tastes away from alcohol, certainly the younger generation. Does that affect a company like LVMH? So a different kind of thing with LVMH, I think at the very high end, we had some U.S. weakness. So they operate in wines, fine wines, high-end champagnes, cognacs and others.

11:12Champagne is doing well and is back to growth in the U.S. Rosé wine is doing very, very well. But some of the spirit side is still struggling a little bit. And I think that's because we've seen some trading down. So we had China very heavily stocked and the U.S. not so solid through the first half of the year, but there are signs of that coming back. If I look at the numbers on the Q3 for wines and spirits, they're at plus one and they were at minus four for Q2 and minus nine for Q1. So it seems as though inventory is leveled out and we're starting to see some selling. Deb, I learned from you long ago when looking at luxury, you have to also pay attention to what's happening in China and the Chinese consumer.

11:57Are the Chinese spending either in China or are they traveling to the London, Paris, New York, Milan type thing? What are you seeing? Yeah, we're still seeing a lot of the spend. We're getting mid-tire single-digit growth in that Q3 from LVMH year-on-year is on localized spending. We are seeing pockets of growth on the tourism side. So, there is a more positive view and mix linked into the commentary from these results. But overall, we are still absolutely missing Asian tourists, Chinese tourists from Europe. And also, in Europe, we're missing the strength of the dollar having swung over last year with US purchases here.

12:42And you are seeing some but not as many in terms of full recovery versus 2019. There's growth year on year, but not versus 2019 into the US either when it comes to the Chinese tourists. We used to say a third of luxury goods just over were from the Chinese cohort, and that would include on land and traveling, right? And we still think there's a way for that to go. But certainly on land and locally, they're doing better than they were. Stay with us. More from Bloomberg Intelligence coming up after this.

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14:39You'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. Paul, it feels very 2007-ish with the deal making taking place, with the banks reporting these incredible numbers. A lot of companies saying they may go private. We're hearing a lot of speculation about that. The latest is Grindr. And in this case, the dating app has confirmed that it received a letter from its largest shareholders interested in exploring a take private transaction.

15:16So let's bring in our Bloomberg Intelligence internet analyst, software and internet analyst with us, Nicole D'Souza, to give us a little bit more here. So, Nicole, Grindr, this dating app that's focused on the LGBT community, does not actually have a proposal to evaluate. It's just telling everyone, hey, this is happening and there's percolations of this happening. Correct. So as of right now, what we know, what's been reported, is there are two investors, Raymond Zage and James Liu, who together control about 60 % of Grindr. They are in talks with Fortress Investment Group to secure debt financing to take the company private.

15:53There has been no direct proposal at this time, but discussions seem to be around a$15 share price, which would value Grindr at around$3 billion. Talk to us about this company. How has it performed as a publicly traded company? So year to date, the shares are down around 29%. That being said, Grindr is one of the few dating apps that is still growing paying users. So we've seen dating apps. So they're still growing users? Yes. Okay. And at this point right now is a little bit rare for dating apps, right? We've seen Tinder lose users. We've seen Bumble lose a lot of users. Grindr, because of their niche user base, has been able to hang on to a good amount of their users and grow users every year.

16:35What is their strategy going forward? because I did read something about how they have this three-year plan where they're targeting some pretty aggressive growth. And the fact that they're growing users is a good sign, but the dating app business doesn't seem to be that great right now. Yes, so they have a couple of different levers that they can pull. The first one is raising prices. They've talked for the first time about raising prices. They haven't raised prices since 2018. So they're looking now at potentially raising prices, introducing a new premium tier. Right now they get around$24 per paying user.

17:06So there is a little bit of room for growth. They only have about 8 % of their total user base of 15 million users who actually pay for the app. So there is room there. They're also growing advertising revenue. Grindr is one of the few dating apps that does have a pretty solid ad platform. They grew ad revenue around 40 % last quarter, which was a big step up. We expect that to continue. They're looking at new ad units. They're looking at better targeting. So we do think there's room for ad revenue to really grow from here. I mean, so you step back to the digital ad story. It's still a very bullish story for digital advertising.

17:41I mean, there's still that big macro call of digital advertising, whether it's the big ones like Facebook or the smaller ones like Grindr taking dollars away from traditional analog media. Is that story still in play? And if so, how long do you think it goes for? I think it is still in play. I mean, we do still see some ad dollars going to more traditional sources. So, you know, obviously digital advertising is much better targeting. You can do things like direct response advertising where users are taken directly to a website to make a purchase. It's a good use of ad dollars for companies. Grindr has a really unique user base.

18:15Their user base is more affluent. They have higher discretionary income. They tend to be higher are educated. So it could be a really great platform for a lot of advertisers who are looking to advertise to that base. And they're also Gen Z heavy as well. So talk a little bit about how that is very appealing to advertisers. Yes. So actually, it's funny because Grindr is one of the only dating apps really who isn't necessarily seeing an issue attracting Gen Z users. They've talked a lot about how the issues that other dating apps are facing, they don't really face because it's such a unique user base and because people come to Grindr not just for romantic connection, but also just to meet people, to make friends, to have a community.

18:55So Grindr has done a great job of attracting these users, of holding on to them. And again, it could be a great place for advertisers to reach Gen Z. 30 seconds left. Then why was the stock down or is down 40 some odd percent this year? So they have missed on a few revenue metrics. They were a little bit light on revenue last quarter, a little bit light on EBITDA. But again, we think the long-term growth perspective for this company is really strong. They have been growing users, which is unique for dating apps. So we're very comfortable with the 20 to 25 % revenue growth through 2027. Stay with us.

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20:49You know, for all the talk of all these companies involved in AI deals, circular deals, where they're teaming up with someone and they're buying something or investing in something and partnering with something to buy their own chips back, one company is noticeably absent from all these announcements, and that is a big one. It's Apple. Yes. Where is it? I don't know. They have a lot of cash. They do. I don't know. I don't know their AI play. That's what I don't know. Well, their AI doesn't work very well on their phone right now. I can tell you that. Anurag Rana is a tech analyst at Bloomberg Intelligence, and he joins us now from Chicago.

21:23So, Anurag, there are some headlines here that Apple is looking to beef up its smart home offerings, lessen its dependence on China. This is something that the president of the United States has been pushing Apple to do, to bring some of its manufacturing back to the U.S. But Apple is not doing that. It is beefing up its manufacturing operations in Vietnam. What's going on with Apple? See, when you look at it, whether it's accessories or, you know, putting together the phones, you really cannot do that in the U.S. We don't have the size factories or automation to do that. So you will have to do that somewhere in Asia.

21:59And as they're diversifying away from China because of the obvious threat between U.S. and China trade wars, Vietnam is a proper location where they can assemble, let's say, some accessories or smaller products where they may cost you$100 or$50, but they have the low-cost area to produce them or, I would say, assemble them. so app so anurag we've spent the last two three four weeks speaking with you speaking with man deep uh speaking with other tech experts about all these deals around the ai ecosystem that we've seen 10 billion dollars here 100 billion dollars there companies ranging from microsoft to amd to nvidia to open ai we have not talked about apple what is and i'm not sure if that's a good or bad thing i don't know if these deals are good or bad i just know they're a lot of them they're coming out of the woodwork.

22:50There's big numbers. And Apple is conspicuous by its absence, it feels like. How do you think about it? Yeah, you know, you could look at it both ways. One way is you criticize that they're not really at the forefront of the next generation model out there. But the other way you can say is, you know, let everybody else fight it out. In the end, it'll go to the one that has the best model and include that in their its own distribution channel, which is basically iOS. We have heard from Mark Gurman, has done some really good work on this particular aspect of it, is the next version of Siri may have technology from some of the third-party providers, whether that's OpenAI, Anthropic, or even Gemini.

23:30Our bet is that we hope that they go with Gemini because they already get a lot of money from Google for the search business. Maybe there is some revenue sharing on that part as well. So we think eventually, we don't know when, They will get it right when it comes to AI infusing in their product, but it's going to come with some third party rather than in-house AI. So, in other words, they're kind of waiting for the dust to settle, waiting for winners to emerge before picking their horse and riding it. Is that something other device makers, handset makers are doing as well? I mean, Alphabet doesn't have to do that because it has its own AI business and it makes handsets.

24:10Yeah, and it's very well integrated because it's the Google Gemini, it's part of Android, and then Samsung is going to license that. So they are all set on that particular aspect of it. But it's possible that Apple may choose to work with Gemini, Google itself again, get their technology, infuse it in their products, and you and I get the same experience we would get on, for example, using ChatGPT or Anthropic. I think from what we have heard from Mark is the research right now is they are running parallel chatbots internally, try to see which one has a better output. And eventually we know with Apple, it's going to go with the one, the highest quality of searches or queries or answers.

24:52And, you know, let's hope that they get it around in the March timeframe that it's a rumor to come out. Earnings for the tech companies are going to be in a couple of weeks here. What should we be focusing on this quarter, Anurag? So we are bifurcating the entire tech space into two buckets. One is area where we are going to see some weakness. That's going to be more on the consulting side, more on your traditional software side. And on the second half of the equation is companies that will see an uplift in their revenue because of AI-related investments. So CoreWeave and Microsoft fall in that bucket.

25:29But on the other side, you're going to see some struggle with, let's say, IBM consulting, although IBM software should do well. And that is the bifurcation that we have. What is going to be most important for Microsoft, for example, is all the headline news that we are hearing about lower capacity or some constraints in data center work, whether that's going to have an impact on Azure guidance or their cloud revenue guidance for next quarter, that is going to be the biggest question going into the quarter for Microsoft. Which of the names have the potential to surprise most to the upside, given what you've seen so far in terms of estimates?

26:07I think CodeWeave has one potential, but at the same time, you know, this stock moves so much on a daily basis with any new announcement that comes out. So it's tough to say whether a lot of that optimism is probably baked into the numbers at this point. So what's the big thing that you guys are working on? I've referred so many people to the Bloomberg Intelligence Technology team's AI report here, which really is definitive, I think, and kind of laying out for people what AI is and, you know, what are all the facets of it here? What's the next level of analysis for you guys in Bloomberg Intelligence Technology?