Trump Moves to Have Tech Giants Pay for Surging Power Costs

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. Mandeep Singh is here with us. He's the global tech research head. And, Mandeep, this idea of big tech being called upon to pay for their own rising energy costs. As Bailey pointed out, this is all through a non-binding statement of principles. He pointed out the winners and losers on the utility side. What does this mean for big tech?

1:42I mean, can any of them come out of this ahead with something like this kind of pressure? Well, right now, I think everyone is looking at gigawatt data centers, right? And when you think about what is existing in terms of AI data centers, these are 50 to 100 megawatt data centers. We are already talking about power requirements going 10x to 1 gigawatt. And so how will a 70 to 80-year-old grid supply electricity, which is 10 times more than what these data centers already consume? And so from that perspective, it is a very topical question that needs to be asked. Where are you getting the 10 times power that you need to run your one gigawatt data center?

2:30And I think that's the realization that's coming in now. It's being reflected in the prices that consumers have to pay because prices have gone up for electricity. But I mean, the computing that AI does requires 10 times more power. That's the realization. And I think everything will follow through now. Mandeep, is there a sense that big tech leaders might be open to working with the White House on this to kind of be in Trump's favor here? And what might the impact be on their profit growth? I mean, there's no doubt that AI data centers are a much lower gross margin business for hyperscalers. And these hyperscalers, I mean, Amazon, Microsoft, and Google, the three big ones, have huge footprint when it comes to the traditional CPU data centers.

3:19They were able to get to, you know, 65 to 70 % gross margins on the public cloud businesses they had. Now with AI workloads, we're talking about a sub-50 % gross margin business. No matter what kind of scale you have, just because of the economics involved, these are sub-50 % gross margin businesses. So on-premise software used to be 80 % to 90 % gross margin. With public cloud, we got to 65 % to 70%. With AI, we are sub-50 % gross margin. So from that perspective, I mean, even if you're Microsoft, you don't have a choice, but your margins will have to come down. We're also looking at semiconductor stocks as the best performers in the S &P 500 by two dozen industry groups.

4:03And it feels like that TSMC bullish forecast was very much a tailwind for the industry. Obviously, this is good news in terms of demand, but does anyone lose out here when TSMC can't even meet the demand that is being required of it? Well, lose out, I think, I mean, what we've seen really is Intel really benefiting. So I wouldn't say anybody's losing out, But clearly, everyone is so focused right now on the AI side that I feel suddenly everyone realized, oh, storage is in short supply. We didn't talk about storage up until the beginning of this year. So there will be instances like this where one of the components gets neglected and suddenly everyone finds that to be in short supply when you need it.

4:52So it could happen. I think CPUs. Nobody talked about CPUs in the past 12 months. suddenly CPUs are in short supply. So that's where, you know, the IT infrastructure needs to be upgraded every four or five years. And when the time comes to upgrade the infrastructure, certain components, even if they're not tied to AI, could be in short supply because we have reallocated the resources towards meeting the AI demands. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business.

5:38CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify or wherever you get your podcasts.

6:27You'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. Some earnings that we want to bring your attention to. J.B. Hunt, the truck carrier, reporting quarterly revenue that missed analyst estimates, although some people might say that the bar was kind of high for this company, even as we've seen this continued weakness in freight demand. Lee Clasgow is Bloomberg Intelligence's senior transport logistics and shipping analyst, and he joins us now to give us his take on what we're seeing.

7:05So what is the story with J.B. Hunt and how it's positioned for the current market environment? Yeah, if you take a look at the stock, it's been up a lot over the last couple of months, and some of that has been in anticipation of the trucking spot market to kind of turn more positively, and that would be through more supply coming out of the market. So the stock is off a little bit off today. It was off a lot in the aftermarkets last night, but it's come back a little bit. And that's really being driven, I think, because of that kind of high expectations. But at the end of the day, the company did report a pretty good print.

7:47Their earnings came in above consensus. It was driven by their intermodal, their truckload and their final mile businesses. J.B. Hunt is a kind of an integrated transportation company. They provide a lot of different types of transportation services. Some of the ones that fell maybe short of expectations were the freight brokerage business and dedicated business. And that, you know, the dedicated business is being driven by it takes, you know, their winning business. But it takes a while for some of those businesses to ramp up and to kind of drive the margins that they're expected to because those, you know, those ramp up costs.

8:27You know, what I would say is that I think a lot of people were somewhat surprised by management's tone on the earnings call last night. You know, they noted that the market was fragile and that the supply that we've been seeing coming out of the truckload market, while it's been good, they don't want to get ahead of themselves and call this, you know, we're in full recovery mode because, you know, we've had some false positives in the past. So they were pretty, I guess, cautiously optimistic about the outlook when it comes to the truck spot market. And that's so important because once the truck spot market tightens, rates will go up in that market and that will kind of ripple across.

9:06It's contractual business, it's dedicated business, it's brokerage business, it's intermodal business. So it's kind of like the canary in the coal mine for freight transportation and logistics providers. Lee, J.B. Hunt is, of course, a big macroeconomic bellwether. What is it telling us about the broader economy and the year ahead? Yeah, you know, companies like this will really do well when demand grows. Obviously, you know, they have seen, you know, a somewhat resilient consumer. They did note that, you know, while there wasn't a lot of imports coming into the country for peak season, they benefited from a lot of freight that was already in the country moving across the country.

9:48So it does seem like they did see some peak demand during the fourth quarter, which is obviously positive. But I don't need to tell you guys, it does seem like this economy is a K-shaped economy. And it's really not kind of a widespread economic growth that we're seeing where there's pockets of strength and pockets of weakness. So cost cuts helped limit the downside for J.B. Hunt. Is that the catalyst to get people excited again about J.B. Hunt? to, you know, what kind of cost savings it can realize this year? Maybe it can go further than what it had projected when it comes to reducing expenses?

10:25Yeah, I think there's two things here that people can get excited about. I think there is the prospect of a better pricing environment for J.B. Hunt and the broader transports. That's one. Secondly, you know, they're not just sitting on and resting on their laurels. They are actively trying to take out costs. They took out around $25 million in the fourth quarter. Their run rate was somewhat over$100 million. Management didn't really want to guide too much in what they expect that they can take out in 2026. But I suspect that they're going to continue that trend next year. And they could bring some of their margin targets.

11:01Most of their margins right now are trending below their kind of long-term targets. And through these cost-cutting initiatives, productivity gains, and it's not just cutting to the bone. We're not talking about that. They're trying to get more productive. So whether it's better utilization rates of their trailers, maybe it's better quicker turns for their drayage fleet, all these things will lower the overall cost. And if you put on top of that higher rates, it really could drive margins significantly higher and closer to those longer term targets. Stay with us. More from Bloomberg Intelligence coming up after this.

11:40This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defence, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast.

12:13Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts. 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. Saks Global filed for Chapter 11 bankruptcy protection, a humbling turn for the luxury retailer following a stretch of losses, flagging turnaround efforts and a substantial merger related debt.

13:01There are also hidden costs to luxury consumers and brands. To discuss this with us is Rania Sedholm, managing partner at Sedholm Law Group. Rania, what does this bankruptcy mean also for Saks' shoppers and the brands that work with it? A lot of the brands that worked with it are no longer working with it, which also precipitated its decline. It is sad, as you were saying, and I'm sure it's humbling. So it started, I would say, at least a year and a half ago. I started hearing from smaller brands, some of whose only footprint in the United States is with Saks Fifth Avenue and Neiman Marcus Group, which is owned by the same company.

13:43they were not paying for consigned goods although the goods were selling so this was the start of the end really and if you've tried to go shopping recently in Saks Fifth Avenue you will notice a shift in the products that are available to you and this is one of the reasons for consumers you know it's it's tough to say when there's a bankruptcy estate they do not have to honor any kind of credit or rewards program. But I understand in this instance, they will be honoring it. The issue becomes for you, is there something there that you want to purchase? And how are you feeling about the brand in general?

14:24Something that I think Saks did poorly was communicate. I received my first email from them about the bankruptcy yesterday. Nothing prior to yesterday. So I think there's some room for growth there on the communication end. And, you know, going back to the brands, what's going to happen to them? It's, you know, it's too late, you know, for them to do anything. But on a going forward basis, if you are a brand and you're consigning your goods, there are a few things that you need to look out for. The first thing is your contractual provision. It should state in this agreement that you own your merchandise until it is sold.

15:01That's the very first thing. And then once that provision is there, there's something called a UCC filing. You should file a lien because this will give you an interest in the merchandise and you're no longer an unsecured creditor for purposes of bankruptcy. So you may actually get something. So there's legal recourse for the vendors of Saks, many of which were not getting paid regularly in the last couple of months. How does Saks go about repairing its relationship, not just with customers, but with these brands, the brands that it relies on in order to bring customers through the doors? Yeah, I think, you know, people really discount the efficacy of good communication.

15:42But, you know, as an attorney, I can tell you that is of paramount importance. In fact, usually when there is a breakdown in relationship, it's because of communication. So the first thing that sex needs to do in my mind is tell everyone why this happened and what steps they're taking to remedy it, because we don't want them to be repeat offenders. Five years from now, we don't want to be sitting in the studio talking about the other bankruptcy that they're undergoing. So it's important to figure out the why when it's such a drastic step that you have to take. And tell everyone, tell your vendors what you're doing to and help build trust again.

16:19Rania, when you get this type of bankruptcy filing, what does SACS owe its investors and creditors? Well, I don't know what the numbers are. However, the bankruptcy code ranks people by importance, secured versus unsecured. And, you know, the landlord is certainly a secured creditor to the extent that they owe them money. They they will be paid first any kind of loan. They'll be paid, you know, one amongst one of the first as well. So it's too early. I don't have the list yet. You were talking about some of the M &A debt. And this bankruptcy, of course, comes a year after investors handed Sachs billions of dollars for its acquisition of Neiman Marcus, which was also struggling.

17:01What kind of risk was it putting investors through by acquiring Neiman Marcus? I'm not sure that that marriage was off to a good start from the beginning. You know, we as shoppers, I can speak for women or at least for myself. We shop at a whole host of different places. And you could have one customer shop in multiple stores for different types of items. But in general, it's safe to say that the Neiman Marcus Group shopper is not the same as the South North Avenue shopper, who's not the same as Bloomingdale's or Macy's shopper. So I think that marriage was rocky to begin with. And it was a hefty price that was paid.

17:44I'm hoping as a consumer and for everyone's sake that someone else buys Neiman Marcus Group or perhaps they can buy themselves back. We do see that sometimes where you purchase yourself back from your acquirer. Yeah, I just went across the street to Saks off Fifth thinking that I could get a nice deal on something and they just got rid of everything. What is next for Saks here? Do you think it makes it out of this? I think Saks does make it out of this, but I'm an optimist by nature, just so everyone listening knows that. But I do think they're going to have to contract in order to grow. So this is a time to be extremely self-aware, extremely scrutinous, and determine which stores are going to provide you with the most relevance to your customers and which ones can you stock well and have preeminent customer service and then close the others.

18:41You can always reopen stores. It's not a good idea to just have a huge footprint that's lackluster. Stay with us. More from Bloomberg Intelligence coming up after this. Hello, I'm Michelle Hussain. And for more than 20 years, I was at the BBC. But all the time I was delivering the headlines, I wanted to go further than the news of the day. To spend more time with the people shaping our world. And that's what I'm doing here on this podcast. Speaking to people from Nigel Farage. Russia needs to be taught a lesson. To tech journalist Kara Swisher. The tech industry is running wild. You know, they've gotten what they wanted and they've seen a huge run-up in their stock prices.

19:30This will be a place where every weekend you can count on one essential conversation to help make sense of the world. So please join me, listen and subscribe to The Michelle Hussain Show from Bloomberg Weekend, wherever you get your podcasts. You certainly ask interesting questions.

19:54You'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. John, when was the last time you ate at McDonald's or Taco Bell? It's been a while. Taco Bell, never. McDonald's, maybe like years. Look at me. I can't eat that stuff anyway. It is approaching noontime, so lunch is here. Where are we going? Maybe you'll have to go there for lunch. We'll have to check out Taco Bell. Apparently, those restaurants are going to get a boost from December economic data that is poised to lift U.S.

20:35restaurant same-store sales. That's along with cheaper gas prices and relief from new tax rules. We'll get more into this with Michael Halen, Bloomberg Intelligence Senior Restaurant and Food Services Analyst. Michael, what is your outlook for restaurant sales going into 2026? Yeah, we think sales are set to improve here in 2026, especially in the first half. You know, oil gasoline prices are down, you know, 13-ish percent versus 1Q of last year. We're lapping, you know, bad weather, cold weather, snow, and a really bad flu season from a year ago. And then we have tax relief, which historically really helps restaurant spending.

21:24And, you know, and then we have a couple of things on the upside. I mean, this administration is looking into, you know, potentially credit card reform. And I don't know if they're done with the tax reform. And we could see more interest rate cuts. So all of those things we think are going to feed into better consumer sentiment. And we saw that in some of the economic data last month. And we think it spells, you know, a much better year for restaurant spending. Are we talking about Daniel Blue's restaurants or Mickey D's? Well, you know, we think McDonald's, you know, a lot of the chains we cover are going to benefit.

22:02But we think, you know, McDonald's and Taco Bell in our most recent note were two that we pointed to because low-income consumers are going to benefit from the tax reform. They're the segment of the consumer that have kind of pulled back from restaurants in the last couple of years. And so giving them a boost with tax reform, they're the ones that are most sensitive to gasoline prices. So the cheaper gas is going to help them the most. And like I said, we've seen it in the consumer sentiment data that the improvement in University of Michigan consumer sentiment was due to low income consumers.

22:37So these things are all pointing to better results at fast food chains like McDonald's and Taco Bell. Are there any specific chains that you think will be bigger beneficiaries than others? Well, outside of those two, you know, Kava and Wingstop are a couple of names that we think can have big bounce back years. You know, Kava, you know, in a vacuum, it had a very good year. Right. But they didn't hit lofty targets that they had set and earnings. slowed off of a very strong 2024. And so we think they're set up really nicely to see an acceleration here in same-store sales and kind of the same thing in Wingstop.

23:18Both of them were victims in 2025 of incredible 2024 success. And now that they have much more reasonable same-store sales comps to lap, you know, we think we could see a big boost there. You know, Wingstop, one of the big things that they have going on is a new smart kitchens that are going to massively, massively help the operations, improve speed of service and get people their wings hotter and faster. Oh, okay. What are you talking about? The intersection of AI and chicken wings? Yeah. I mean, you know, restaurant business, listen, the restaurant businessman has been historically under-invested in technology, you know, and they've been quickly trying to catch up.

24:05And a deep fryer. What technology? Yeah, well, listen, when you go and sit down in a restaurant and you have five people ordering five different things, right, you don't start them all at the same time, right? Like your sushi is going to be done a lot, maybe faster or slower than my chicken teriyaki, right? And so technology is being used in the kitchen to let the cooks know when to fire each meal so that everything comes out at the exact same time hot. So there's definitely a lot of uses for artificial intelligence and smart kitchens in this industry. So, Michael, what does that mean? Are we going to go into a McDonald's and see robots making our fries?

24:47What does this mean for jobs at restaurant chains? Well, you know, restaurant chains have been able to reduce labor hours by increasing the amount of automation. Me personally, you know, I don't and I don't think we're going to go into restaurants that don't have humans working in them anytime soon or maybe ever. But you'll continue to see kiosks, right, because that takes away labor at the counter. You'll continue to see upgrades to kitchens and more kitchen automation to help decrease the labor needs in the kitchen. It will continue to be a point of focus as minimum wage continues to increase and labor continues to become hard to find.

25:36So, yeah, it's going to continue to move this direction. Like I said, this business has underinvested in technology for a very long time. And so they have a long way to catch up to, you know, competitors, say, in packaged food where their plants are very automated. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern 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.

26:38Take care.

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