Bloomberg Audio Studios, podcasts, radio news, and Android auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

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Let's get to the bond market here. So we had CPI came in better than expected, yet you have yields lower by two basis points in the front end head scratcher for me Ira Jersey, Bloomberg Intelligence Senior US Interest Rates strategist. So in my one plus one equals two, you get inflation less of a problem. Therefore the Fed won't have to cut. Why are my yield lower here?

Let's get to the bond market here. So we had CPI came in better than expected, yet you have yields lower by two basis points in the front end head scratcher for me Ira Jersey, Bloomberg Intelligence Senior US Interest Rates strategist. So in my one plus one equals two, you get inflation less of a problem. Therefore the Fed won't have to cut. Why are my yield lower here?

Well that's well, it's not only that the Fed won't have to cut, but that the Fed can maybe cut a little bit, right we take Yeah, So you know, lower inflation and inflation below target or at their target is a necessary condition for the Federal Reserve to cut.

Well that's well, it's not only that the Fed won't have to cut, but that the Fed can maybe cut a little bit, right we take Yeah, So you know, lower inflation and inflation below target or at their target is a necessary condition for the Federal Reserve to cut.

So so the.

So so the.

Fact that you only had a zero point two percent month on month on inflation not a massive surprise. Quite frankly, it wasn't a huge miss really when you look at a lot of the details. But it was also a good sign because people are worried that tariffs are gonna have an effect. But remember the tariff's only went into effect last month, so we're not going to see that on shelf prices until this month and next month. So I think the market in general like this relatively muted reaction from the market is something that we're gonna have to look through, at least on the inflation front for the next until we get the prints from the next couple of months.

Fact that you only had a zero point two percent month on month on inflation not a massive surprise. Quite frankly, it wasn't a huge miss really when you look at a lot of the details. But it was also a good sign because people are worried that tariffs are gonna have an effect. But remember the tariff's only went into effect last month, so we're not going to see that on shelf prices until this month and next month. So I think the market in general like this relatively muted reaction from the market is something that we're gonna have to look through, at least on the inflation front for the next until we get the prints from the next couple of months.

What's the FED looking at IIRO these days? Is it focusing more on inflation or more on growth? Because I think a lot of folks are probably concerned that whatever inflation levels we get, it's going to kind of hurt growth more.

What's the FED looking at IIRO these days? Is it focusing more on inflation or more on growth? Because I think a lot of folks are probably concerned that whatever inflation levels we get, it's going to kind of hurt growth more.

So what do you think the Fed's looking at?

So what do you think the Fed's looking at?

Yeah, well, this is certainly the conundrum that the Federal Reserve is going to have going forward, particularly if we get an increase in inflation and then we see a significant downshift in growth and certainly the job market. Right, Remember that growth itself is not what the Federal Reserves mandate is.

Yeah, well, this is certainly the conundrum that the Federal Reserve is going to have going forward, particularly if we get an increase in inflation and then we see a significant downshift in growth and certainly the job market. Right, Remember that growth itself is not what the Federal Reserves mandate is.

It's really the job market.

It's really the job market.

So you can have slow growth or no growth with a job market that's okay but not great, And I think that that's the that's the potential, you know, big issues that the FED might go to. So Ja Powell last week was pretty clear in saying that, look, we're going to basically focus on whichever of the two parts of our dual mandate is farther from where we want it to be. So if inflation jumps to five percent and unemployment is still kind of, you know, four and a half percent and not climbing quickly, then they're going to focus on inflation. But if inflation kind of hovers two and a half three percent, but it looks like we're going to have negative job prints and we're going to have five plus percent unemployment rate, then the Fed will key on that and cut interest rates and maybe give up a little bit on its inflation fighting mode for at least some temporary period of time.

So you can have slow growth or no growth with a job market that's okay but not great, And I think that that's the that's the potential, you know, big issues that the FED might go to. So Ja Powell last week was pretty clear in saying that, look, we're going to basically focus on whichever of the two parts of our dual mandate is farther from where we want it to be. So if inflation jumps to five percent and unemployment is still kind of, you know, four and a half percent and not climbing quickly, then they're going to focus on inflation. But if inflation kind of hovers two and a half three percent, but it looks like we're going to have negative job prints and we're going to have five plus percent unemployment rate, then the Fed will key on that and cut interest rates and maybe give up a little bit on its inflation fighting mode for at least some temporary period of time.

But you know, we're still far away from that.

But you know, we're still far away from that.

I mean, our view had been going into this year, and I think I mentioned it to you guys last week, is that we always thought that that the market was priced for the Fed to cut too early. Cutting in June or July we never thought was a realistic possibility because of this, you know, dueling economic scenarios that you just laid out, Paul. So so now we're probably pricing for something a bit more realistic. You know, fourth quarter only two cuts this year, you know, you know, that's kind of where we think the market's going to kind of find a steady state.

I mean, our view had been going into this year, and I think I mentioned it to you guys last week, is that we always thought that that the market was priced for the Fed to cut too early. Cutting in June or July we never thought was a realistic possibility because of this, you know, dueling economic scenarios that you just laid out, Paul. So so now we're probably pricing for something a bit more realistic. You know, fourth quarter only two cuts this year, you know, you know, that's kind of where we think the market's going to kind of find a steady state.

So does that mean that around four percent is the top for the two year?

So does that mean that around four percent is the top for the two year?

Yeah, I think it is unless we wind up getting some pretty some better economic data, so you know, we had an upside surprise on next month's employment and we wind up having decent retail sales data, all of those things. I don't think that anything above four to twenty probably on the two year makes sense. Like there's no reason right now for the two year to be trading above the federal fund rate, right So why would you sell off fifty basis points in the two year unless you really thought the Fed was going to hike, which I think is not really it's much more likely that they stay They stay steady for the next two years, and it is at the increase rates at any time over the next two years. That being said, just the financial fair value right now on the two year note we have at three point eight percent, So maybe the market's gone just a little bit too far being very close to four percent right now.

Yeah, I think it is unless we wind up getting some pretty some better economic data, so you know, we had an upside surprise on next month's employment and we wind up having decent retail sales data, all of those things. I don't think that anything above four to twenty probably on the two year makes sense. Like there's no reason right now for the two year to be trading above the federal fund rate, right So why would you sell off fifty basis points in the two year unless you really thought the Fed was going to hike, which I think is not really it's much more likely that they stay They stay steady for the next two years, and it is at the increase rates at any time over the next two years. That being said, just the financial fair value right now on the two year note we have at three point eight percent, So maybe the market's gone just a little bit too far being very close to four percent right now.

Are international investors still buying US treasures?

Are international investors still buying US treasures?

Are they still mad at US.

Are they still mad at US.

Now they are, And in fact, if you look at the recent treasury auctions, they have been purchasing just the same amount that they had been over the past couple of years. Actually around ten percent of the recent treasury auctions went to foreign investors, and that's pretty much in line some of the investors that I've been speaking to say, well, look, it's an economic decision that we're making. If our choice is to buy our local government debt or by treasuries and then hedge some of our currency risk or all of our currency risk, and we can still pick up yields compared to our home currency, to our home bond market, then we're going to keep doing that trade. And so until that economics changes, or there's real fear that the US is going to default on its debt or something like that, I think private foreign investors, in particular, are you just going to keep buying?

Now they are, And in fact, if you look at the recent treasury auctions, they have been purchasing just the same amount that they had been over the past couple of years. Actually around ten percent of the recent treasury auctions went to foreign investors, and that's pretty much in line some of the investors that I've been speaking to say, well, look, it's an economic decision that we're making. If our choice is to buy our local government debt or by treasuries and then hedge some of our currency risk or all of our currency risk, and we can still pick up yields compared to our home currency, to our home bond market, then we're going to keep doing that trade. And so until that economics changes, or there's real fear that the US is going to default on its debt or something like that, I think private foreign investors, in particular, are you just going to keep buying?

Hey?

Hey?

I are always good to catch up. I are a Jersey Bloomberg Intelligence senior US Interest Rate a strategist at joining us there.

I are always good to catch up. I are a Jersey Bloomberg Intelligence senior US Interest Rate a strategist at joining us there.

So you're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Applecarcklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

So you're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Applecarcklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Pretty solid day after a big, big, big move yesterday in the equity indices.

Pretty solid day after a big, big, big move yesterday in the equity indices.

Let's see what the professionals are doing.

Let's see what the professionals are doing.

Sarah Ponzik joins US first vice president of Wealth Management UBS Private Wealth Management.

Sarah Ponzik joins US first vice president of Wealth Management UBS Private Wealth Management.

She's down there in Boca Raton, Florida. If you care, eighty two.

She's down there in Boca Raton, Florida. If you care, eighty two.

And mostly Sonny in Boca today. I mean, if if that's your gig, fine, enjoy it. I don't know.

And mostly Sonny in Boca today. I mean, if if that's your gig, fine, enjoy it. I don't know.

We go for the change of seasons here, which Sarah does not much. Jealous, Sarah, this is all that.

We go for the change of seasons here, which Sarah does not much. Jealous, Sarah, this is all that.

Sarah, You're jealous. No, if I make you feel any better. We had a really bad storm yesterday. I have palm fronds all over the house.

Sarah, You're jealous. No, if I make you feel any better. We had a really bad storm yesterday. I have palm fronds all over the house.

So it happens.

So it happens.

Today's sunny and warm and humid. But we are starting to get some good brain.

Today's sunny and warm and humid. But we are starting to get some good brain.

Good for our good friends in South Florida. There.

Good for our good friends in South Florida. There.

Hey, Sarah, what do you tell your clients? I mean, boy, you've had a market that just a few weeks ago was down twenty percent from its peak. Now just year today, we're back to flat. Are slightly up here, I mean the volatility has been amazing. What do you tell your clients these days?

Hey, Sarah, what do you tell your clients? I mean, boy, you've had a market that just a few weeks ago was down twenty percent from its peak. Now just year today, we're back to flat. Are slightly up here, I mean the volatility has been amazing. What do you tell your clients these days?

It's been a whirlwind these past six weeks or so. However long it's been, it feels like it's been a lot longer than that, I think, I think for all of us. But the message throughout April, which was really the month in which we saw the brunch of the volatility, was that you need to stick with your plan, and you certainly don't want to be selling out of stocks at the lows. If anything, if you were someone who had had a liquidity event, if you had been sitting on cash for a long time, that was the time you wanted to start phasing into markets and start deploying your capital and taking advantage of the volatility. Because, yes, Liberation Day was certainly a day, I'm sure we all remember, a very volatile one at that. But the expectation was that was peak uncertainty, that was peak pessimism, and the hope was that there would be negotiations, that we would see come to the forefront between the United States and other countries, particularly China, and that we would see these tariff rates come down. Now, thankfully, that is what's happened, and we've seen markets react very favorably to that at this point in time, you Alex, you know, you just ran through the numbers. Really, it says if markets have made up all of those losses. It's pretty amazing to think about, considering the sp at a time was almost down twenty percent at its low, and now we're just about flat. So sure, at this point the risk reward doesn't look quite as favorable as it looked when the market was down ten, fifteen, eighteen percent, But the outlook is still pretty positive from here, especially with the expectation that you know, hopefully trade negotiations will continue, and you know growth is slowing a bit, Inflation you know, is under control, as we saw this morning. So there's other reasons fundamentally to continue to think that, you know, twelve months from now, the market's going to be higher than where we are today.

It's been a whirlwind these past six weeks or so. However long it's been, it feels like it's been a lot longer than that, I think, I think for all of us. But the message throughout April, which was really the month in which we saw the brunch of the volatility, was that you need to stick with your plan, and you certainly don't want to be selling out of stocks at the lows. If anything, if you were someone who had had a liquidity event, if you had been sitting on cash for a long time, that was the time you wanted to start phasing into markets and start deploying your capital and taking advantage of the volatility. Because, yes, Liberation Day was certainly a day, I'm sure we all remember, a very volatile one at that. But the expectation was that was peak uncertainty, that was peak pessimism, and the hope was that there would be negotiations, that we would see come to the forefront between the United States and other countries, particularly China, and that we would see these tariff rates come down. Now, thankfully, that is what's happened, and we've seen markets react very favorably to that at this point in time, you Alex, you know, you just ran through the numbers. Really, it says if markets have made up all of those losses. It's pretty amazing to think about, considering the sp at a time was almost down twenty percent at its low, and now we're just about flat. So sure, at this point the risk reward doesn't look quite as favorable as it looked when the market was down ten, fifteen, eighteen percent, But the outlook is still pretty positive from here, especially with the expectation that you know, hopefully trade negotiations will continue, and you know growth is slowing a bit, Inflation you know, is under control, as we saw this morning. So there's other reasons fundamentally to continue to think that, you know, twelve months from now, the market's going to be higher than where we are today.

So if the calls you were getting a month ago were what do I do? What's changing? I'm kind of freaking out. What are the calls you're getting now today?

So if the calls you were getting a month ago were what do I do? What's changing? I'm kind of freaking out. What are the calls you're getting now today?

Well, people certainly feel better. It's really interesting. You know, typically investors, we all know that you want to be fearful when people are greedy, and greedy when people are fearful, but in actuality, you know, people don't don't always act that way.

Well, people certainly feel better. It's really interesting. You know, typically investors, we all know that you want to be fearful when people are greedy, and greedy when people are fearful, but in actuality, you know, people don't don't always act that way.

You know.

You know.

It's interesting that, you know, the calls that we were getting at the April lows, when markets were down between fifteen and twenty percent, were more panicky, asking do we need to change our strategy? What should we be doing here? Should we be selling stocks, buying bonds, buying gold? And we did meet some tweaks, but certainly weren't selling stocks at those levels. It was more so talking about adding at those levels. Now people feel better, you know, people, It's interesting you would think that when markets are at the highs, people are saying, should I take chips off the table? But that's not necessarily the case. People feel better, people feel more optimistic now that we're seeing, you know, countries come to the table and discuss and these teriff rights come down. With that said, I mean, I'm actually about to have a conversation with a client who has a big home purchase coming up over the next couple of months. That's someone given that we've seen a rally, that you might want to consider taking chips off the table if you have a big near term purchase coming up and you need liquidity. You need cash. Okay, you probably feel pretty great now you're not selling with stocks down fifteen percent, you're selling with them flat now on the year roughly, so that you're someone who has something like that coming up that changes the parameters. But we typically like to say, you know, to clients who have near term events where they need cash on hand, or if you're someone who is retired and you're spending down your portfolio, we typically recommend that you have a liquidity buffer in your portfolio, say you know, for whatever that project is, or say you know, even two to three years of expenses, because that way, when the market does fall and it's going to happen, and it's natural, you know, we're all going to witness many more of these in our lifetimes most likely, you know. That way, you're not freaking out because you know you have the cash on hand to meet the expense needs that you need in the near term.

It's interesting that, you know, the calls that we were getting at the April lows, when markets were down between fifteen and twenty percent, were more panicky, asking do we need to change our strategy? What should we be doing here? Should we be selling stocks, buying bonds, buying gold? And we did meet some tweaks, but certainly weren't selling stocks at those levels. It was more so talking about adding at those levels. Now people feel better, you know, people, It's interesting you would think that when markets are at the highs, people are saying, should I take chips off the table? But that's not necessarily the case. People feel better, people feel more optimistic now that we're seeing, you know, countries come to the table and discuss and these teriff rights come down. With that said, I mean, I'm actually about to have a conversation with a client who has a big home purchase coming up over the next couple of months. That's someone given that we've seen a rally, that you might want to consider taking chips off the table if you have a big near term purchase coming up and you need liquidity. You need cash. Okay, you probably feel pretty great now you're not selling with stocks down fifteen percent, you're selling with them flat now on the year roughly, so that you're someone who has something like that coming up that changes the parameters. But we typically like to say, you know, to clients who have near term events where they need cash on hand, or if you're someone who is retired and you're spending down your portfolio, we typically recommend that you have a liquidity buffer in your portfolio, say you know, for whatever that project is, or say you know, even two to three years of expenses, because that way, when the market does fall and it's going to happen, and it's natural, you know, we're all going to witness many more of these in our lifetimes most likely, you know. That way, you're not freaking out because you know you have the cash on hand to meet the expense needs that you need in the near term.

Sarah, thank you so much for joining us. Always appreciate getting a few minutes of your time.

Sarah, thank you so much for joining us. Always appreciate getting a few minutes of your time.

Sarah Ponzek, first vice president of wealth management at UBS Private Wealth Management.

Sarah Ponzek, first vice president of wealth management at UBS Private Wealth Management.

Down there and book time, Florida.

Down there and book time, Florida.

You're listening to the Bloomberg Intelligence podcast Catch US Live weekdays at ten am Eastern on Apple Coarclay, and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch US live on YouTube.

You're listening to the Bloomberg Intelligence podcast Catch US Live weekdays at ten am Eastern on Apple Coarclay, and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch US live on YouTube.

All right, well, let's get to one of the most underperforming stocks within the market today, dragging on the Dow Jones Industrial Average. Now, I know many people don't look at it, but nonetheless it's a pretty chunky move, so it's worth discussing. And that's United Health. Glenn lessev Is, Bloomberg Intelligence Senior equity analyst joins us. Now, So suspending the twenty twenty five outlook, naming a new CEO, what was the biggest surprise here?

All right, well, let's get to one of the most underperforming stocks within the market today, dragging on the Dow Jones Industrial Average. Now, I know many people don't look at it, but nonetheless it's a pretty chunky move, so it's worth discussing. And that's United Health. Glenn lessev Is, Bloomberg Intelligence Senior equity analyst joins us. Now, So suspending the twenty twenty five outlook, naming a new CEO, what was the biggest surprise here?

So the biggest surprise was suspending the twenty twenty five guidance. And this comes after the company lowered twenty twenty five out cloak just about three weeks ago when the company reported first quarter results.

So the biggest surprise was suspending the twenty twenty five guidance. And this comes after the company lowered twenty twenty five out cloak just about three weeks ago when the company reported first quarter results.

So what's the problem with this business?

So what's the problem with this business?

I thought the healthcare insurance business just just rips it.

I thought the healthcare insurance business just just rips it.

Well, it all goes in cycles, right, It is surprising that United is having these problems basically that began in at the start of twenty twenty four.

Well, it all goes in cycles, right, It is surprising that United is having these problems basically that began in at the start of twenty twenty four.

If you remember there was a.

If you remember there was a.

Change healthcare attack, and after that, it just seems that United management was trying to fix things while other things fell apart and has been on the back foot. And that's probably one of the reasons that the CEO that led the company see in twenty twenty one, I believe, left the company and the chairman and former CEO is taking the reins to sort of reposition United for you know, next phase growth.

Change healthcare attack, and after that, it just seems that United management was trying to fix things while other things fell apart and has been on the back foot. And that's probably one of the reasons that the CEO that led the company see in twenty twenty one, I believe, left the company and the chairman and former CEO is taking the reins to sort of reposition United for you know, next phase growth.

So, right, well, where is that it's going to come from? Because there are higher than expected medical costs, right and some reimbursement struggles. Can you walk us through we learned about.

So, right, well, where is that it's going to come from? Because there are higher than expected medical costs, right and some reimbursement struggles. Can you walk us through we learned about.

That, yes, basically.

That, yes, basically.

So basically, the company cited that the medical cost trend among new members in the unit's medicare portfolio is accelerating relative to the first quarter trends, which was higher than expected already. Basically, if it continues, the company can always sort of try to get more premium per member from the government as it deals with Medicare, to sort of to reset the margin expectations or normalize the margins. That being said, you know, if the medical costs continue to accelerate, and specifically with the sort of with everything that's going on in Washington, with the sort of funding overhanging all that, it may become a problem over the longer term. But at the same time, you know, managed care companies can always exit under performing markets. It just may take a little bit longer than sort of investors would like to see.

So basically, the company cited that the medical cost trend among new members in the unit's medicare portfolio is accelerating relative to the first quarter trends, which was higher than expected already. Basically, if it continues, the company can always sort of try to get more premium per member from the government as it deals with Medicare, to sort of to reset the margin expectations or normalize the margins. That being said, you know, if the medical costs continue to accelerate, and specifically with the sort of with everything that's going on in Washington, with the sort of funding overhanging all that, it may become a problem over the longer term. But at the same time, you know, managed care companies can always exit under performing markets. It just may take a little bit longer than sort of investors would like to see.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Another stock in the news Microsoft, So this is cutting three percent of its employees to reduce management layers.

Another stock in the news Microsoft, So this is cutting three percent of its employees to reduce management layers.

I'm looking at the stock here. It's pretty much unchanged on the day. It's up six percent year to date.

I'm looking at the stock here. It's pretty much unchanged on the day. It's up six percent year to date.

But anytime Microsoft does anything, we want to get to the bottom of it. On a rag rana he does that. Force's Bloomberg Intelligence Senior Technology channelst onnurags.

But anytime Microsoft does anything, we want to get to the bottom of it. On a rag rana he does that. Force's Bloomberg Intelligence Senior Technology channelst onnurags.

It's just kind of annual culling of the ranks.

It's just kind of annual culling of the ranks.

Or is this saying something about Microsoft and maybe where it sees its future.

Or is this saying something about Microsoft and maybe where it sees its future.

I think it's a little bit of both, because you know, and the numbers three percent does not say much. But at the same time, Microsoft is not hiring at the same pace that it used to. And I think one of the areas where it is deploying AI is coding or you know, R and D. That's an area where we anticipate productivity to improve because of the tools we have, and not anticipating headcount to grow up. Second thing, Microsoft is investing very heavily in AI right now. The capex is going to be extremely high, you know, as north those eighty billion dollars for the next twelve months, and you know that they have to offset some of that pressure on gross margins with cuts on the operating expense side so that the net operating margin doesn't get impacted.

I think it's a little bit of both, because you know, and the numbers three percent does not say much. But at the same time, Microsoft is not hiring at the same pace that it used to. And I think one of the areas where it is deploying AI is coding or you know, R and D. That's an area where we anticipate productivity to improve because of the tools we have, and not anticipating headcount to grow up. Second thing, Microsoft is investing very heavily in AI right now. The capex is going to be extremely high, you know, as north those eighty billion dollars for the next twelve months, and you know that they have to offset some of that pressure on gross margins with cuts on the operating expense side so that the net operating margin doesn't get impacted.

So I think I think it's a little bit of all the above.

So I think I think it's a little bit of all the above.

Was this a surprise, Not really.

Was this a surprise, Not really.

I mean three percent to me does not come as a surprise.

I mean three percent to me does not come as a surprise.

Three percent is you know, in an environment like right now where companies are not anticipating the real attrition rate, so on a normalized basis of a company is seeing attrition employee attrition between ten to fifteen percent. We're not seeing that right now, so the company has to do something in order to get back to the normal range of their financial planning. So it is I said this doesn't sound too much to me, but they could be a little bit more based on you know, who they are trying to get rid of. If it's higher on the paychecks, then I think it has to do with, you know, protecting your margins.

Three percent is you know, in an environment like right now where companies are not anticipating the real attrition rate, so on a normalized basis of a company is seeing attrition employee attrition between ten to fifteen percent. We're not seeing that right now, so the company has to do something in order to get back to the normal range of their financial planning. So it is I said this doesn't sound too much to me, but they could be a little bit more based on you know, who they are trying to get rid of. If it's higher on the paychecks, then I think it has to do with, you know, protecting your margins.

An Rob talk to us about just what the investment thesis is regarding Microsoft right now. Given some of the tariff uncertainty, given some of the geopolitics uncertainty, what's the call on Microsoft these days?

An Rob talk to us about just what the investment thesis is regarding Microsoft right now. Given some of the tariff uncertainty, given some of the geopolitics uncertainty, what's the call on Microsoft these days?

You know, for the last few years we have been saying this is probably one of the cleanest stories in AI and software land because it doesn't get impacted with tariffs. There is some marginal secondary impact because of you know, if we do get into an economic slowdown. But the real benefit for them is they are hosting chat GPT, the most favorite app of consumers right now, and they get the benefit of that. So if you have let's say, you know, your user base goes from two hundred million users to three hundred to four hundred now we are close to about five hundred million users, it really helps Microsoft because they are hosting that app, and as those users use chappid JAGGPT for a longer period of time, they get to make more money.

You know, for the last few years we have been saying this is probably one of the cleanest stories in AI and software land because it doesn't get impacted with tariffs. There is some marginal secondary impact because of you know, if we do get into an economic slowdown. But the real benefit for them is they are hosting chat GPT, the most favorite app of consumers right now, and they get the benefit of that. So if you have let's say, you know, your user base goes from two hundred million users to three hundred to four hundred now we are close to about five hundred million users, it really helps Microsoft because they are hosting that app, and as those users use chappid JAGGPT for a longer period of time, they get to make more money.

So I think that's really one of the bigger.

So I think that's really one of the bigger.

Benefits where they are offsetting the risk that we are seeing that other software vendors are seeing because of the lack of headcount growth across the tech landscape.

Benefits where they are offsetting the risk that we are seeing that other software vendors are seeing because of the lack of headcount growth across the tech landscape.

So based on that, do we think that we're going to see other tech companies follow suit in this particular way. Like if Microsoft is a creme de la creme, as you see it, who's next?

So based on that, do we think that we're going to see other tech companies follow suit in this particular way. Like if Microsoft is a creme de la creme, as you see it, who's next?

So Alex, when you look at it, as I said, three percent does not scare me as much. But if over the next six months we start companies come out and say, well, I'm laying off like sevent to ten percent of my workforce, that is concerning because that's concerning for two reasons.

So Alex, when you look at it, as I said, three percent does not scare me as much. But if over the next six months we start companies come out and say, well, I'm laying off like sevent to ten percent of my workforce, that is concerning because that's concerning for two reasons.

One, these companies.

One, these companies.

Do buy software from other companies such as a Workday or a sales force, because these two companies are seeing some pressure on their seat growth because their end customers are not hiding as much. So lack of hiding is concerned not just for the companies or the industry themselves, but for the software landscape as well, because primarily this is a seat based monetization.

Do buy software from other companies such as a Workday or a sales force, because these two companies are seeing some pressure on their seat growth because their end customers are not hiding as much. So lack of hiding is concerned not just for the companies or the industry themselves, but for the software landscape as well, because primarily this is a seat based monetization.

Model anark before we got all enmeshed in terrors over the last few months, we seemingly talk to.

Model anark before we got all enmeshed in terrors over the last few months, we seemingly talk to.

You every day about the AI story.

You every day about the AI story.

That's kind of follow the radar screen a little bit here for I think Global Wall Street, not for you guys.

That's kind of follow the radar screen a little bit here for I think Global Wall Street, not for you guys.

What is the AI story today?

What is the AI story today?

What's the feeling in the marketplace about AI as a growth story for tech?

What's the feeling in the marketplace about AI as a growth story for tech?

Yeah.

Yeah.

One of the things Code one of the things that deep Seat did for the entire space was divided the space in two different buckets. One was the AI infrastructure play and the other one is more on the application side of it, and Microsoft i think guided them a little bit towards that framework because when you look at it, Microsoft is really focused on the inferencing side of it, which is hosting the applications. Things that are more on the infrastructure side, whether it's the chip building from Nvidia or a recent type like code viv, they have not done as well as some of the other vendors because people are wondering, why do I need to play the infrastructure game because it's CAPEX heavy and we do not know how things are going to shape up in the next two to three years. One thing is sort of certain that even after three years, the number of use cases on AI is going to rise. So you're going to be on the application or the inference side of things rather than the infrastructure side of things.

One of the things Code one of the things that deep Seat did for the entire space was divided the space in two different buckets. One was the AI infrastructure play and the other one is more on the application side of it, and Microsoft i think guided them a little bit towards that framework because when you look at it, Microsoft is really focused on the inferencing side of it, which is hosting the applications. Things that are more on the infrastructure side, whether it's the chip building from Nvidia or a recent type like code viv, they have not done as well as some of the other vendors because people are wondering, why do I need to play the infrastructure game because it's CAPEX heavy and we do not know how things are going to shape up in the next two to three years. One thing is sort of certain that even after three years, the number of use cases on AI is going to rise. So you're going to be on the application or the inference side of things rather than the infrastructure side of things.

Right, And that's going to be a lot more profitable going forward, but it also requires something very different at the end of the day. Right, You're going to have basically locations that are closer to the actual use point, right, so closer to where I am and where you are, versus out in the middle of nowhere. But you have a huge heavy load. How does that change either investment or power usage, et cetera.

Right, And that's going to be a lot more profitable going forward, but it also requires something very different at the end of the day. Right, You're going to have basically locations that are closer to the actual use point, right, so closer to where I am and where you are, versus out in the middle of nowhere. But you have a huge heavy load. How does that change either investment or power usage, et cetera.

That's probably one of the most important questions out there right now. Like a Microsoft is saying, for my training needs, I will go to those data centers that are out in the boondogs in middle of nowhere, and that could be my data center or I could lease it from somebody like a Corvive. But for the application side, I'm going to create or lease smaller data centers that are well connected where I'm going to do the inferencing or from the user point of view.

That's probably one of the most important questions out there right now. Like a Microsoft is saying, for my training needs, I will go to those data centers that are out in the boondogs in middle of nowhere, and that could be my data center or I could lease it from somebody like a Corvive. But for the application side, I'm going to create or lease smaller data centers that are well connected where I'm going to do the inferencing or from the user point of view.

All right, Don Ragrana, thank you so much. We appreciate that.

All right, Don Ragrana, thank you so much. We appreciate that.

On a rogron it covers all the technology stuff for Bloomberg Intelligence, getting the latest on Microsoft.

On a rogron it covers all the technology stuff for Bloomberg Intelligence, getting the latest on Microsoft.

I thank all three percent of their workforce.

I thank all three percent of their workforce.

This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal