Bloomberg Surveillance TV: November 9th, 2026

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1:20Bill Dudley: Bloomberg Audio Studios. Podcasts Radio News.

1:52Liz Thomas: and the Bloomberg Business app.

1:54Bill Dudley: Stocks rising this morning following the S &P 500's worst week in over a year. Liz Thomas of Zofi writing, market fluctuations are likely to recur, but conditions should stabilize over time. Don't panic or try to time the market based on one particularly bad day. Liz joins us now for more, and it was a particularly bad day on Thursday. How do you view something like this new left field kind of issue we're dealing with this morning, which is an affair with the CEO at the top of the second biggest company in the world.

2:23Leland Miller: Yeah, I mean, you said it just a few minutes ago. You can't believe that we're having to talk about this and you don't want to. I don't want to either. We're melding personal lives with business, but here we are. And unfortunately, it's happening with one of the most important companies in this buildout and unfortunately happening at a time when things were already under pressure. And I also think it's important for investors to remember that even coming into the midterm elections, semiconductors had been under pressure And investors were getting a lot more choosy about which companies they wanted to pay up for, what their true expectations for 2027 were.

2:55Leland Miller: So we're in this period of time now where there are a lot of different things going on. And as an investor, your focus has to be on where is the most attractive risk reward? And I think one of the things that has come into the forefront is the bond market. And it's been a really much more attractive risk reward than it has been through this entire cycle. So we're getting this choice, too, as investors of, OK, if we're going to take money out of equities because we're concerned about the buildout, because we're concerned about earnings and capex, which I think are all valid concerns into 2027 and 2028, then where does the money go?

3:31Leland Miller: And reality says it's going into treasuries.

3:34Bill Dudley: So does it go into treasuries because there is a belief that the buildout won't happen as quickly, won't create as much competition for capital as would otherwise might have happened? or is it simply that you can forget about the fiscal risks, you can forget about this, because this looks worse right now. We're not sure where this is going. Is it just that the

3:49Leland Miller: market can only focus on one thing at once? I think it's more complicated than that. And I don't think that this completely puts the buildout under threat. I think there's a re-rating going on and I think there's maybe a coming back down to earth going on, where for a long time we were just sort of hand over fist piling money into a lot of the stocks that were levered up to the AI infrastructure build out. And I don't think that that's necessarily a bad thing still. I still think that that theme lives on. AI absolutely lives on. But there's a difference between the theme itself of innovation and what happens in the market and where we are in that market cycle.

4:26Leland Miller: So I think right now that market cycle, especially for the AI build out, is looking like it's under threat and maybe we got a little ahead of our skis. Now, there have been some things that happened. And obviously last week, the huge down day on Thursday brought valuations down again. Their yes was a recovery on Friday. It's looking like things are going to be a little bit green today. But those recoveries were not all that impressive, right? We still had an advanced decline on the S &P. That was negative on Friday. Today, yes up, but nothing to really write home about. So I don't think that there's a bounce back up to all-time highs.

4:59Leland Miller: I think that we have to level out somewhere, and we will. But this adds another layer of complexity. And the CapEx numbers in 2027 are perhaps some of the ones that are now in question the most.

5:13Bill Dudley: The Jensen-Wang crisis, do you think it's idiosyncratic to NVIDIA? Or do you think this is broader for the AI trade, given how much of a champion he's been? I mean, he's been lobbying this White House for policies that help the entire ecosystem.

5:27Leland Miller: I mean, I certainly hope that we don't hear about more similar types of personal crises that come out of it. I think what will likely start to heat up, and it already has today, the chatter around regulations, the fact that we had a blue sweep in Congress last week, and the likelihood of regulations picking up in 2027, I think this probably only fuels that fire further. So idiosyncratic to NVIDIA today, this story, obviously, I hope it stays that way. But the entire complex is going to deal with the idea of possibly more regulations and this investigation being what I'll call a wet sock on the whole thing.

6:08Bill Dudley: Uphill battle. There's going to be a ton of noise coming out of Washington, D.C. regarding him and other tech executives. Is this a moment where investors, you think, will want to step in and buy the dip? or potentially is this just a falling knife that's going to keep falling?

6:21Leland Miller: I think we're already seeing some by-the-dip behavior. And as I mentioned earlier, I think the AI theme is still well intact. And in the innovation cycle, we're probably still pretty early in the innovation cycle. So the by-the-dip mentality I don't think is quite there without discernment. And I don't think that it comes in and takes us back up to where we were. But I do think that investors are going to use this as somewhat of an opportunity. But this is really only the first trading day after this news came out over the weekend. Usually it takes a few days for the market to really figure out what it thinks about the entire thing.

6:55Leland Miller: So I would be waiting a few days to let some of the dust settle and see how semis shake out for the rest of this week.

7:02Bill Dudley: You said bonds are starting to look good again. And yet we got a hotter than expected labor market report on Friday. CPI is expected to come in below where we got it. in September at the same time, still above, running above the 2 % target. What's the argument here? Is it that the economy is going to slow or just that people are seeing another alternative in a way that they hadn't before?

7:26Leland Miller: I think it's more the latter. And when I started thinking about this, the first time the Treasury, the 10-year Treasury hit 5 % is when I started to really think about it as, you know what, that looks like an attractive opportunity. And if our job in markets is to help people make money, generate income perhaps depending on what your goals are. It started to look like an opportunity and I was honestly having trouble finding a reason not to buy it. So there's this long-term thread about the deficit and the debt and everybody is concerned about that which I totally understand that remains a large problem without an easy solution.

7:59Leland Miller: But in the near term a 10-year treasury above 5 % was going to give you pretty good yield and I couldn't imagine a world where the Fed or the Treasury was going to let it stay at 525 or even get up to six for a very long time, right? It could still crawl back in that direction, but I couldn't imagine a world where the market left it there for a long time. So that alone, it was a good trade-off, as we talked about before. The other thing is, if you want hedging against some sort of outside shock that could happen and really take stocks down, take market sentiment down pretty far if we had some cracks that started to show up in the economy.

8:37Leland Miller: Getting a 10-year and even a two-year treasury at those high yields when if the Fed, if there's a risk that the Fed actually has to turn dovish at some point in the next six months, those were good entry points. So that was my thesis. And again, I was having trouble finding a reason not to buy them at the time. And that's turned out to be a good decision.

8:54Liz Thomas: Stay with us. More Bloomberg Surveillance coming up after this.

9:05Liz Thomas: one-sided views aren't enough. Join me, Brad Rogoff, the Global Head of Research at Barclays, on the Flipside podcast. Each month, I go head-to-head with one of our expert analysts on my global team to debate the economic and market issues that matter most, from inflation and AI to equity and credit trends. Each debate helps you see what headlines might miss. Find the Flipside wherever you get your podcasts.

9:31Bill Dudley: This is the Bloomberg Tech Minute brought to by Chachi PT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software. Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology propose updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital.

10:09Bill Dudley: While door handles have been the most high-profile change, resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake. The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com.

10:38Bill Dudley: Alphabet considering its first Hong Kong and Singapore dollar bond sales as the race to raise capital intensifies, potentially adding to the billions of dollars big tech has already raised in the pursuit of AI. Former New York Fed President Bill Dudley warning, If a bust might lie ahead, we should worry that the current boom may be sowing the seeds for a future financial crisis. Bill joins us now for more. Bill, great to see you. Thank you for being with us. I'm sure when you wrote that, you were not thinking about an affair at the second biggest company in the world. No, I was not. I'm sure that wasn't on necessarily your bingo card.

11:10Bill Dudley: But how much should the Fed be paying attention to turmoil right now in the tech trade?

11:15Liz Thomas: Well, I think they need to be paying attention for a couple of reasons. Number one, obviously, the AI trajectory has big implications for the economic outlook in terms of how strong the economy is. And then also upward pressure on interest rates as AI demand is taking down a lot of credit. But the bigger question, I think, longer term is, is AI going to go from boom to bust? And if it goes to bust, are we going to have a repeat of the great financial crisis where the stress on the financial system caused things to fall apart? I think there I'm a little bit more optimistic because, number one, people are talking about the risk of AI being a bust.

11:48Liz Thomas: They really weren't talking about the great financial crisis occurring as we were going up to it. Housing never declined on a national basis. Subprime lending wasn't risky. There were a lot of beliefs out there that sort of ruled out a great financial crisis. This time people are talking about the AI boom turning into a bust.

12:04Bill Dudley: So what do you think should be done by regulators, by the Federal Reserve, to prevent it from getting to a level that could threaten the financial system?

12:13Liz Thomas: Well, I think there's a couple of things. Number one, we need better insight to what's happening in the non-bank financial sector because a lot of the activity in AI financing is moving from the equity market and from cash flow now to off-balance sheet borrowing. And we really don't really have a good sense of who owes what to whom and under what conditions. So I think greater transparency would be very important. I also think it's important that we have someone responsible for financial stability in the non-bank financial sector. You know, the Securities and Exchange Commission really doesn't have a financial stability mandate.

12:47Liz Thomas: So they either need to give one explicitly to the Fed or to the Financial Stability Oversight Council and say, we need to look into this sector a little bit more to understand where the counterparty risks are. I think one of the good things here is that the financing is mostly from big companies, big established companies. So it's not quite spread out through a lot of mom-and-pop organizations that you saw during the great financial crisis in terms of subprime lending. But I do think this is a big enough boom that it could definitely lead to a bust, especially because of the fact that everyone's trying to get to the finish line first.

13:24Liz Thomas: It's a winner-take-all kind of game. And you have about seven or eight different hyperscalers that all want to win. There's not going to be room for seven or eight winners.

13:31Bill Dudley: Do you think there's anyone at the Fed right now who can currently address some of these issues you just laid out?

13:37Liz Thomas: Well, the Fed does look at financial stability issues semi-annually. That's one of the things that they use for their federal market committee meetings to discuss. But I'm not really sure that they have the information to actually understand all the counterparty risks that is going on. And some of the risk is a little scary because it's wrong way risk. So NVIDIA is guaranteeing the value of their chips. So what happens if the value of their chips goes down? Not only do they have to come up with the money to make good those guarantees, but their earnings are going to suffer because they're going to have lower chip prices.

14:10Liz Thomas: So I think we need to look a little bit more deeply into where the risks are in the sector.

14:14Bill Dudley: If U.S. growth is so tied to AI, where does this leave the Federal Reserve if this starts to slow down in terms of the rate hiking cycle?

14:21Liz Thomas: Well, I think if the AI investment boom turns over, it's definitely negative for growth and definitely going to put downward pressure on interest rates. The question is, when is that going to happen? You know, there's been a lot of speculation that the election outcome is going to lead to a dramatic slowing in AI data center construction. I think that's probably correct, mostly in the medium to longer term. But I'm not sure how fast it's going to happen. A lot of data centers have already been improved. They're already under construction. So 2027, I still expect investment spending to be higher than in 2026.

14:51Liz Thomas: And so that's continuing to add upward pressure to the economy.

14:54Bill Dudley: Bill, do you think that the Fed should refrain from hiking rates because of the turmoil that we've seen in the AI trade, because of the threat to growth that could come on the heels of it?

15:05Liz Thomas: Well, I think that it's important not to overreact to what's a relatively small correction. Obviously, if financing to AI just evaporated and investment spending next year was going to be weaker than this year, then that has big effects both for economic activity in terms of investment but also in terms of the stock market. If it goes far enough, then, of course, the Fed has to take that into consideration. But so far, look, the stock market is still up this year. The stock market is up a lot over the last five years. Financial conditions are still quite accommodative. So people are talking about, oh, the tightening of financial conditions means that the Fed doesn't have to tighten anymore.

15:38Liz Thomas: I don't think that's really borne out by the economic news. I mean, the payroll and plummet report we saw on Friday suggested that the economy is still growing pretty strongly. And there's really very little sense that the level of interest rates is exerting a lot of restraint on economic activity currently.

15:54Bill Dudley: Well, this is exactly where I was going with it. And it's ahead of CPI tomorrow that no one's focusing on because instead they're focusing on an affair of Jensen Huang's. I mean, to me, I just wonder how much the Fed could get sidetracked by watching the volatility and not necessarily target inflation to the degree that some people are seeing and feeling every day.

16:14Liz Thomas: Well, there's always a risk that you say, well, I want to wait to see more information. Therefore, I don't do the tightening that I actually need to do in a timely way. But I think the Fed is less inclined to look at every little wobble in the equity market and think that that has meaningful implications for monetary policy. I remember 1987, we had the stock market crash in 87. Everyone thought that was going to generate a really weak economy. It did not. And one of the reasons it did not was all the stock market crash did in 1987 was unwind the advance earlier in the year. So by the end of the year, we're just back at the starting point for the beginning of 1987.

16:47Liz Thomas: So I think it's important to take a stock market decline of large magnitude. Obviously, it would have consequences for the economy. But it's got to be large relative to what's already happened. And the stock market's gone up a lot in the last few years.

16:59Bill Dudley: What about the fact that we have oil prices seriously declining, Brent under 100, WTI under$90 a barrel?

17:05Liz Thomas: Well, that's good for the inflation outlooks, clearly. But it's also going to actually be positive for growth because people's real incomes can be boosted as energy prices decline. So, again, we don't really know what the outcome is going to be in terms of the Iran war. And so I think from the Fed's perspective, you can't make bets on what could happen. You have to sort of be looking out the window and saying what actually is happening. And I think none of these things are very definitive as of yet. Stay with us. More Bloomberg Surveillance coming up after this.

17:37Bill Dudley: This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touchscreens and flashy software. Now they're going back to design basics, touting the return of buttons and knobs. The reintroduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology propose updated national vehicle standards that specify certain functions, like those that control headlights or change gears, should be physical rather than digital.

18:15Bill Dudley: While door handles have been the most high-profile change, resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or brake. The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com. Running a small business takes everything you've got. But with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers.

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19:44Bill Dudley: Under surveillance this morning, failing to meet. great expectations.

19:49Liz Thomas: You have to hold yourself responsible. You have agency. You're the CEO of the company, for God's sakes. You have to have high standards and expectations. Just as I can be fired, the next CEO has to be hired. I like that we can't be overly complacent about our position inside the company. You're always vulnerable. You're always earning it.

20:09Bill Dudley: Here's the latest. NVIDIA shares falling as the company orders an investigation as its CEO, Jensen Huang, Wang admits to an extramarital affair with a suspected Chinese spy. Wang issuing an apology to his wife and family, adding he supports the investigation and plans to cooperate. China Beige Book CEO Leland Miller now joins us for more. Leland, thank you so much for being with us. I just want to start on what this means about U.S. sales to China in terms of advanced chips and what could potentially already have made it into China, maybe through backdoor measures during this entire episode.

20:44Liz Thomas: I actually think that's exactly what the focus should be in terms of breaking down what's turning into a soap opera. Because there's all the components right now of a huge drama. There's an affair. There's Chinese spies. But I think what people are missing is in the background is one of the most consequential conflicts in U.S.-China policy. It's over export controls and whether we're doing enough in order to ring fence advanced technology from China. mostly based on the assurances of companies like NVIDIA for years. There has been very little plugging of loopholes, even as you've seen diversion, you've seen smuggling, and you've seen now very active attempts to get hold of this advanced technology.

21:28Liz Thomas: What we really need to be doing right now is saying, why are we taking the word of a company or two or three? We should be worried about better enforcement, better compliance, and actually get some of these CEOs under subpoena to tell us what the real story is.

21:41Bill Dudley: How much is going to be, in terms of the Commerce Department, looking even more into Megaspeed, given the fact that they've already been accused of breaking some of these export controls?

21:50Liz Thomas: Well, look, Megaspeed was still connected to NVIDIA days after the scandal broke. So I don't know what the mandate is from the top going down to the Commerce Department. I think there should be an enormous scrutiny of this right now. Because if you just look back at some of the assurances that we've gotten over the past several years, you know, NVIDIA told us no evidence of AI chip diversion. False. The Chinese military won't seek American chips, so no need to worry. False. Customers police themselves because they want continued access to NVIDIA technology. False. Advanced chips set to China will have no impact on U.S.

22:27Liz Thomas: customers. That one's particularly false because what we know is when you're producing these advanced semiconductors, you have limited production capacity to do so. So if you are using fab lines to produce chips that are being sent to China, they're being done at the expense of American firms. So we've got all these assurances. We know for certain now because there's documented evidence that so many of these claims are false. So why were they false? Why were we being told this? I think that Congress needs to look very closely. I think the administration needs to look at this issue as well and say, which of our priors should we be questioning right now, considering this is blown up into a scandal?

23:03Bill Dudley: Leland, when it comes to the upcoming NDAA, do you think some of these export controls, especially regarding China, that they are debating are going to get passed?

23:15Liz Thomas: Well, it's been a dogfight. It's always a dogfight when it comes to Congress battling over export controls. But I think what this is doing is putting a spotlight on the problems with just trusting the system as it stood. You know, you have three major export control bills that are being pushed. They're doing different things. But I think that the idea here is we have not been paying enough attention. And this has been a system of trust. And when we get assurances from the bigger companies that nothing bad is happening, that there isn't smuggling, that there isn't evasion, that there isn't, you know, an effort by the People's Liberation Army to get a hold of these chips.

23:49Liz Thomas: We now know that all of those are false. So I think this will put the spotlight for a lot of congressional members that otherwise weren't tuned into this issue. I think it's going to make it very difficult to simply walk away or close their eyes on this.

24:00Bill Dudley: There's also this issue that on Friday, Treasury Secretary Scott Bessett and Ambassador Greer, Jameson Greer, came out and talked to the key counterpart over in China and said that China was not complying with the Busan agreement that they reached last year. How fraught is this meeting that's going to be in Shenzhen between Xi Jinping and Donald Trump?

24:21Liz Thomas: I'm not sure the November meeting is going to be the fraught one. I think the January 10th is setting up to be a showdown. And the reason I say this is there was a two-month truce from the last meeting. That is a very small amount of time. And it's a very small amount of time specifically because, as Secretary Besson said, as Ambassador Greer said, the Chinese are not adhering to the agreements of Busan. They're not providing the critical minerals and rare earth magnets that they promised, and they're not doing the purchases on the agriculture side, most of the purchases that they promised there.

24:52Liz Thomas: So there is a breakdown of this agreement. I think that the view from Beijing is that they have enough leverage that they can simply just turn a cold shoulder to this and not worry about it. I think what we're saying is there's a lot of angst on the U.S. side, and there's a lot more friction here. I think what the Chinese are doing is very provocative right now.

25:10Bill Dudley: 30 seconds. How many Congress members have contacted you about this?

25:15Liz Thomas: Well, the other hat I wear is as a commissioner on the U.S.-China Economic and Security Review Commission. So my job in that role is to brief Congress on this, Republicans, the Democrats. And we're doing that right now. We've got chip security as part of our recommendations coming up next week we're going to be announcing. And this issue, obviously, as it hit, has meant that just about every member wants to get smart on it. So it's keeping me busy. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6am to 9am Eastern.

25:51Liz Thomas: Subscribe to the podcast on Apple, Spotify, or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App.

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