Markets Wrap: Predictions Meet AI Skepticism

0:01This is the Bloomberg Tech Minute brought to you by ChachiPT. I'm Carol Masser. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence.

0:39A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, must be willing to work extended hours and weekends as needed. One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time.

1:16That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com. For big business, AI opened up a world of promise, but that world of promise turned into a world of pain. Cost spiraling, data trapped, security and governance risks multiplying, and ROI out of reach. That's why enterprises turned to Boomi to connect data, apps, and AI, helping them operate securely, efficiently, and at scale. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you. Head to boomi.com. That's B-O-O-M-I dot com. Bloomberg Audio Studios. Podcasts. Radio. News.

2:14Welcome to the Maren Talks Money Market Wrap, where we talk about the biggest moves in the markets this week and what is driving them. I'm Meryn Somerset-Webb, UK Money Editor at Lodge. And I'm John Stevick, Senior Reporter at Bloomberg and Author of the Money Distilled Newsletter. John, exciting times. We are not in London. Where are we? We're in Edinburgh, the Athens of the north, except for the weather. I was just saying, Meryn saw me in a jumper. Readers, I usually live in the southeast of England and it has been scorching for about six months. And this is the coldest I've been, I think, in the whole of 2026.

2:46and for us it's kind of warm it's a bit muggy out there to my mind i see john he's wearing a jumper and a jacket i'm like it must be boiling but poor man is shivering i'm a wimp i used to be a scott yeah this is why i get exiled now it's terrible anyway we are not just in edinburgh we are at panmure house the last home of adam smith where we are recording this markets wrap for you quite quickly because we're about to go in and do our friend show yes yes looking forward to it and And it's a very special year this year, in case people didn't know. What's special about this year, John? 250th anniversary of the publication of The Wealth of Nations.

3:24And we're going to talk about a lot of this kind of stuff today. Actually, we don't want to talk about it too much now, but it is interesting. I was thinking about this on the way over. I was walking, you see, quite slowly, because I felt it was very warm outside, and Edinburgh is quite hilly. And thinking to myself that, you know, when Wealth of Nations was published, that was the same year, and we'll talk about this in the show, same year that James Watt unveiled his steam engine. Ah, it's annoying. So I know. So Adam Smith was at, you know, he wrote this book and published this book at the beginning of the last great industrial revolution.

3:53And here we are right here, right now on the cusp of the next great industrial revolution, which brings us in, by the way, to an awful lot of interesting things from his other book, Moral Sentiments on the Nature of Humanity, which I'm not going to bore people who want to hear about markets on, but I am definitely going to bore everybody about when we start our show in 45 minutes. Right, onwards, markets. John, what's going on? What is going on? Well, this week, I mean, the big news this week was playing the video, reporting its sales, and it just keeps going. I mean, I think you'll have heard quite a bit of AI scepticism on this show, and for which we make no apologies whatsoever.

4:31But they said they threatened their sales next fiscal year will be up 70%, which is an awful lot more than analysts had thought, and analysts had said 45%, which is still a lot. So, I mean, there does still seem to be this unstoppable appetite for building out AI infrastructure, at least. I get that, but I was surprised. I remember the share price did go up. Well, 7%, but I think that was after the market. It's not that much for that kind of news. To be told, we're going to sell double, triple, quadruple, we said we were going to do it, probably going to be this, that, this. It's not that much.

5:06And when you look at the Ford P for NVIDIA, it's like 18, 19 times or something, which for this incredibly fast-growing company or what we think is this incredibly fast-growing company just isn't that much but slightly suggests that maybe that AI skepticism is getting a little hold on the market or things have been, there's so much perfection priced in in people's heads that it's just got to keep beating and beating and beating to even stand still. I think it's better both. I mean, I think that people are definitely used to Nvidia beating. So, you know, I think that probably does reflect that.

5:38And also, I mean, I do, I think it's fair to say there is, I don't think being an AI sceptic is a remotely contrarian position, put it that way. I mean, most people, I think, would agree that it's basically a bubble. Although, actually, I want to be clear that we're not an AI sceptic in terms of AI not being brilliant. It's brilliant. LLMs are brilliant. Not as brilliant as some people think, but brilliant. And there's a lot more great stuff to come after that. So the technology is fantastic. We're talking here about the financing, the circular financing problem, to the extent you can call it a problem.

6:08and the prices yeah and also just the other thing is stuff changes and i think that that's the other thing we sometimes don't talk about i mean like one of our colleagues palmy olson was writing a piece this week pointing out that one of the reasons china is able to do everything so cheaply is because basically as far as i could understand that they've got better software because they had restrictions on the they couldn't get the best chips so they sat down and they worked out how to program the stuff that sends the data around the chips in a more effective way. And actually, if you get rid of the kind of traffic jam element on a chip, that enables you to get more out of it, you know, just by, and more cheaply.

6:48And she was kind of saying that, well, you know, our stocks are going to have to do this because NVIDIA keeps on, the American companies are going to have to do this because NVIDIA keeps jacking up the price. And so if they want to compete, they're going to have to get more efficiently using the chips. Yeah, and the prices are going up. Yeah, yeah. Nvidia has announced price rises and we're beginning to see that come through in pretty much all technological products rising prices, which of course will feed through into inflation, feed through into bond yields, feed through into the price of financing for everything.

7:15It's all so circular. Well, yeah, and all the private stuff. I mean, there's so much. And again, this is all starting to come out. So, I mean, there was a big kind of diagram. I've seen a few of these now. But you kind of get an iceberg, which is the balance sheet debt, the big hyperscalers, you know, like Alphabet, etc. And then there's just this colossal bit underneath, which is either setting off balance sheets or it's sort of implied because it's all rents that they're going to have to pay at some point. So no, I mean, I think there's a lot going on. So I can see why people are taking it with a pinch of salt.

7:48Yeah, although the CEO of NVIDIA, when he was talking about the circular financing, you may call it circular financing. I just call it financing the greatest technology in the history of mankind. None of that matters. Yeah. Focus on the end goal. and I mean there's an element of Mandy Rice Davis there you know he would say that wouldn't he but equally if you've got to keep over promising and over delivering so this is where I think that most CEOs should take a leaf out of the guy that runs next Simon Wolfson because every year he comes out and says oh we've beaten what we expected our estimates to be but we won't do it next year because everything's terrible and then the next year he comes out and says oh we actually beat those estimates but we definitely won't do it next year.

8:31And the market falls for it at the time. So he's setting up this idea that in a terrible environment he can outperform every year and that really works. And it's remarkably consistent but, as I say, the market always falls for it. So I think more CEOs could do with that. Interesting, but it does feel, doesn't it, as though there is this rotation in the market that we've been talking about for ages is probably underway. You know, the Mag 7 kind of struggle, the video sticking on a forward PE of 18, 18, 19-ish times, etc. things are spreading out a little other markets are doing better commodity super cycle looks like it's beginning to get a little traction look at agricultural prices for example i wish i'd bought some of those grain etfs a while back you know so all these things are beginning to get a bit of traction see the copper price yeah and i'm i'm watching very carefully and i'm sure you are as well the um all these new mining companies starting up in in the uk when i say oh there's a couple you know there's quite a lot of money down there there's a bit of tungsten going on Devon, etc.

9:26We used to say, joking. Do you remember how we used to joke? We used to say, if you really cared about the energy transition and you really cared about rare earths, you would dig up Bodmin Moor and then we'd laugh ourselves silly. Now what are they doing? Digging up Bodmin Moor. Yeah, exactly. They listen, John. They listen. Exactly. They came to their senses, finally. No, I mean, but you're right. And it's also interesting, I guess, well, again, they kind of, as we talked about last week, the whole debasement trade is kind of taking off again as well. So gold's going up again. Sell was going up again.

9:57Bitcoin's going up again. But, you know, listen to that podcast we put out earlier in the week about QDay and Bitcoin. And we talked about that. And I mean, not everyone agrees that QDay, the day when quantum computing starts to work and encryption becomes a non-existent thing because quantum can get rid of your encryption in a second. And I asked our guest about it. And he was like, well, yes, I wouldn't buy Bitcoin because I get it. That is a risk. But if you were the owner of a quantum computer, or if you had access to a quantum computer, Bitcoin, this is a small fish. You have got much, much bigger fish to fry.

10:33But you might not go after people's Bitcoin wallets because you couldn't be bothered. But you could. But you could. And the very fact that you could surely makes Bitcoin of less value than previously. We must get Charlie Morrison to talk about that because we're biased. Biased against Bitcoin. Of course you are very bust because you don't have any bank What do they call them again? I'm a bit of a no-coiner You're a no-coiner If only I wasn't Right, listen, is there anything else that we should tell people about markets this week? I don't think so Just watch the bond markets French bond yields particularly are a bit sticky looking this week and that's just because they've got a big election next year and whoever wins them up Yeah, and people are worried about US debt.

11:21Yeah. And that's all quite interesting. So we're going to keep an eye on that. I tell you what, let's talk about that in more detail next week. Yeah, yeah. Something for everyone to look forward next week on Merrin Talks Money or Merrin Talks Money Market Wrap. A deep dive into US bond deals. Unmissable. Right, we're off to do our show. All good, John? Excellent.

11:45Thanks for listening to this week's Merrin Talks Money Markets Wrap. If you like our show, rate, review and subscribe wherever you listen to your podcast. Also be sure to follow me and John on X or Twitter. I'm at Merrin SW and John is John underscore Stepik. This episode was produced by Sam Asadi and Moses Andam. Questions and comments on this show and all our shows are always welcome. Our show email is merrimoney at bloomberg.net.

12:13If you're a business owner, you need a card that can keep up. With the Delta SkyMiles Reserve Business American Express card, everyday purchases transform into miles you can use towards future travel. So business as usual can lead to a well-deserved getaway. And for a limited time, card members can earn 200 ,000 bonus miles, the highest miles offered this year. Whether you're traveling for business or planning your next adventure, now's a great time to make every purchase go further. Apply today at www.delta.com slash podcast. Offer ends November 4th. Minimum spending requirements and terms apply.

12:49Most meeting note takers get the easy words right and the important ones wrong. The client's name, the acronym, Whisperflow NoteTaker is built to get the hard words right. It takes notes on any meeting platform, Zoom, Google Meet, Teams, even WhatsApp calls, keeps every meeting searchable, and connects to Claude or Chat GPT so you can ask, what did we agree to last Tuesday? Free to try on Mac and Windows at whisperflow.ai. That's W-I-S-P-R flow dot A-I. This message comes from Edward Jones, where they believe rich is about more than saving and investing. It's also taking care of what gives your life meaning.

13:28That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Edward Jones, member SIPC.