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Bloomberg Audio Studios. Podcasts, Radio News.

The Studios. Podcasts, Radio News. This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa

Bramowitz and Anne-Marie Hordern. Join us each day for insight from the best in markets,

economics and geopolitics. From our global headquarters in New York City, we are live on

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Business app. We begin this out with stocks and crude rising as Wall Street searches for stability,

Peter Chair of Academy writing, many of the inflection points have demonstrated a clear direction to which way they are headed. But with everything going on, expect more downside for markets. Pete, join us now for more. Pete, good morning. Morning. What's the source of that downside risk for you this morning? You know, I think it's rethinking of what's going on with the AI spend. That's a big part of it, right? Our company is going to continue to spend. Will we see any signs of slowdown? At the same time, you know, we kind of talk about these moments out of China. I'm wondering if what we're starting to see is just a flood of cheap compute, right? Is China going to flood our markets like they did with trinkets back in the early 2000s. Have they built up enough compute?

It's not as good as ours.

I don't think, and they distill it from our models, probably,

which helps on their cost. But the reality is they have the electricity grid, they have enough chips, and they seem to be able to flood their market. I would not be using Chinese compute, but a lot of people might. So that to me could, I hadn't really thought about that until in the last couple of weeks,

and it's coming more and more in conversations.

That's my concern is real cheap competition from China, circle what we saw back in the 2000s, where they just flood our market and it slows down our build. There's a whole body of literature on the so-called China shock from that time. If we have another China shock, what would it mean for the backdrop, for the economy, and for markets? I think it would be awful. Just, my best comparison right now is probably look at BYD automobile in Europe. I was in Europe last week. I had to go check out one of the showrooms. They're interesting cars. They are now dominating sales in Germany, right? So they are eating away at stuff. Does that come to us? I don't think it should. And the other problem didn't really mention is, you know, I think the concept of not in my backyard does not exist in China. I don't think anyone would say, oh, you can't build that here, like with any expectation that wouldn't happen. And you're seeing that really grow in the U.S. I thought it might be a 2028 issue. It's coming quickly. You said that the risk is that it would slow the build of compute in the U.S., which is kind of

exactly opposite of what some people are expecting from earnings. They're expecting the market

to potentially reward companies for reducing their CAPEX spend on building out compute.

Do you see it differently? I think the companies that may reduce their spend and get rewarded, you know, the debt diet sort of companies, they might do well, but what's that can do for the picks and shovels, right? All the companies that were supplying into this. And again, I think it's very dangerous for the economy as a whole. For the last year, so we've been looking at this kind of as a two-part economy, the non-AIA part and the AI spend part. So if you get any slowing down on that, the construction that goes with that, all those things I think would really hurt the economy. Right now, a lot of different analysts are trying to split up the Mag 7. They're saying the Mag 7's dead. There isn't such a thing anymore that tech is being segmented into different segments and you're seeing rotations through them. Is that a positive? Is that a negative? Is that a bear sign? Is that just a natural evolution where everything is AI? I think it's a natural evolution. Look at Apple, for example, right? Apple did not invest a ton in AI, right? They kind of let the market develop. Their stock's doing high. I believe

they're just off all-time high. So the market's trying to figure out who's winning, who's losing, what's priced in. Again, I was really excited about earnings about two weeks ago into what we've seen, and I go back to Micron. Awesome earnings, right? Great guidance. Two, three years of, you know, chips, sales, all those things were right.

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