Latest / Bloomberg Intelligence / CH Robinson to Buy RXO for $5.8 Billion in Bet on AI Model

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CH Robinson to Buy RXO for $5.8 Billion in Bet on AI Model · Bloomberg Intelligence

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  Speaker 6: We do want to pivot over to transportation and the
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  Speaker 6: perfect person to talk about essentially the transport industry would
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  Speaker 6: certainly be Bloomberg Intelligence's Lee Klaskow. He is a senior
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  Speaker 6: transport logistics and shipping analyst. And we've been following this
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  Speaker 6: story essentially of C.H. Robinson buying and purchasing RxO. And
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  Speaker 6: this is a nearly six billion dollar deal. Lee, thanks
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  Speaker 6: so much for joining us. Talk to us about what
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  Speaker 6: you see that's particularly interesting when it comes to this deal.
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  Speaker 7: Yeah, so what you're doing is the number one freight broker, C.H. Robinson,
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  Speaker 7: is buying the number three freight broker here in the
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  Speaker 7: United States, which is RXO. The combined two companies will
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  Speaker 7: have around 20% market share of the U.S.
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  Speaker 4: Market.
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  Speaker 7: You know, what's really interesting to us, and it kind
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  Speaker 7: of dovetailed from the conversation we were having earlier with AI, C.H.
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  Speaker 7: Robinson's really been a leader within the freight transportation market
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  Speaker 7: in terms of investing and creating AI to be a
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  Speaker 7: more profitable freight broker. And they also have implemented over
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  Speaker 7: the last couple of years lean management systems, which have
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  Speaker 7: made their average freight broker much more productive than your
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  Speaker 7: average RxO freight broker. So you bring in those RxO
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  Speaker 7: freight brokers into the CH Robinson's model, and you should
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  Speaker 7: have significant productivity gains, not only from the top line,
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  Speaker 7: but also from a productivity standpoint. So we think it's
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  Speaker 7: a pretty interesting deal and a compelling deal. And it'll
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  Speaker 7: really help accelerate some of the operating benefits that CH
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  Speaker 7: Robinson has been able to get. I mean, their productivity
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  Speaker 7: has increased around 60% over the last couple of years
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  Speaker 7: based on just driving that lean management system and leveraging
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  Speaker 7: not only AI, but other technology productivity tools.
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  Speaker 8: What are some of the other productivity tools other than AI?
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  Speaker 8: I mean, obviously we've heard a lot about that, but
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  Speaker 8: are there other things that you've been watching?
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  Speaker 7: Just like, you know, the large language models, like, you know,
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  Speaker 7: the pre-AI stuff that they leaned into as well. You know,
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  Speaker 7: they've always been kind of, like I said, one of
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  Speaker 7: the forward-leaning players within the freight transportation market when it
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  Speaker 7: comes to AI. And then you add on top of
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  Speaker 7: that the lean management system, They're expected to get around
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  Speaker 7: $ 300 million in cost savings. At the end of the day,
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  Speaker 7: they're not going to need a lot of back office,
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  Speaker 7: as many back office people with the combined company. Speaking
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  Speaker 7: with management on an analyst call earlier, it sounded like
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  Speaker 7: they're not looking to get rid of the brokers. They
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  Speaker 7: want to bring in those RxO brokers and just make
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  Speaker 7: them really more productive and drive earnings power in 2028.
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  Speaker 6: And tell me, why exactly does this deal make sense
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  Speaker 6: right now in particular? Is this about gaining scale in
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  Speaker 6: what's a particularly difficult freight market right now?
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  Speaker 7: Yeah, at the end of the day, scale is extremely
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  Speaker 7: important in transportation. And this definitely gives the combined company
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  Speaker 7: more scale. But it also gives C.H. Robinson maybe more
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  Speaker 7: exposure to some industries that they're not really involved in
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  Speaker 7: as much as they are today. So it's just like
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  Speaker 7: expedited or final mile with where our XO has a
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  Speaker 7: foothold in. So it's not only just building scale, but
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  Speaker 7: also maybe getting more into more services. And also, the
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  Speaker 7: buying power of a larger company is going to be
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  Speaker 7: really important The freight markets, freight brokers, because of a
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  Speaker 7: recent Supreme Court ruling on the Montgomery case, are facing
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  Speaker 7: higher insurance premiums because the case pretty much says that
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  Speaker 7: a freight broker could be liable if a truck gets
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  Speaker 7: into an accident that they hire. And so we're expecting
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  Speaker 7: insurance costs to increase more. And management noted on one
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  Speaker 7: of the calls they had this morning is that they
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  Speaker 7: plan on renegotiating with their insurance providers because of the
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  Speaker 7: size that they have now. So it's definitely going to
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  Speaker 7: help them reduce costs when it comes to some services
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  Speaker 7: that they're purchasing.
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  Speaker 8: We were just talking about high gas prices, high diesel prices,
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  Speaker 8: and how much they're affecting the economy. How is that
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  Speaker 8: impacting freight and that entire industry?
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  Speaker 7: Yeah, so in general, freight transportation providers have fuel surcharges,
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  Speaker 7: which lag actual pricing. So there tends to be somewhat
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  Speaker 7: of a headwind when it comes to you know, those
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  Speaker 7: increases in rates. The freight broker industry is not as
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  Speaker 7: impacted as an asset based carrier like a Werner or
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  Speaker 7: a Knight Swift, you know, but in the trucking market,
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  Speaker 7: the fuel surcharge usually lags about a week. So it's
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  Speaker 7: not a huge headwind. The rail industry, the lag is
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  Speaker 7: a lot longer. It can be up to 60 days,
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  Speaker 7: but it tends to be around 30 days for commodity carloads.
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  Speaker 7: And It is a lot, it's closer to trucking when
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  Speaker 7: it comes to intermodal. So it impacts different industries differently. But,
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  Speaker 7: you know, I would say that, you know, most of
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  Speaker 7: their additional costs, I would say 80 to 90 percent
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  Speaker 7: are covered by these fuel surcharges. Obviously, they don't get paid,
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  Speaker 7: you know, when their trucks are idling or if they're,
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  Speaker 7: you know, if they're stuck in traffic or if they're
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  Speaker 7: just not operating their equipment as efficiently as they should be.
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  Speaker 7: So there are some aspects where they don't get full coverage.
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  Speaker 6: And, you know, I do want to talk specifically back
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  Speaker 6: about the deal. I know that they are targeting about
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  Speaker 6: $ 300 million when it comes to cost savings.
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  Speaker 9: Right.
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  Speaker 1: Does this seem or look achievable to you?
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  Speaker 7: Honestly, you know, we, so C.H. Robinson in the past has,
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  Speaker 7: I guess, underestimated some of the benefits from the technology
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  Speaker 7: implementation and some of the lean management practices. We would probably,
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  Speaker 7: you know, looking back, you know, into from 2028, we
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  Speaker 7: think that 300 million probably could be conservative, assuming that
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  Speaker 7: management's able to execute and there's not too much overlap
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  Speaker 7: with customers. Management has said that there isn't a lot
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  Speaker 7: of overlap with customers. What we saw with the RXO
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  Speaker 7: actually bought a freight broker a couple years ago, Coyote
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  Speaker 7: from UPS, and you saw some customers there was a
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  Speaker 7: lot of overlap. So the benefits weren't probably as great
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  Speaker 7: as they were expecting. So it really comes down to
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  Speaker 7: execution and customer overlap. But assuming there's not a lot
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  Speaker 7: of overlap and they're really good at the execution, which
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  Speaker 7: we think they will be, we think that $ 300 million
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  Speaker 7: could be deemed conservative.
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  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 5: Astrazeneca has just invested $ 2 billion in a U.S.
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  Speaker 1: Biotech called Summit Therapeutics.
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  Speaker 8: And they are collaborating on a really promising new cancer
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  Speaker 8: medicine that could apparently be combined with other treatments that
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  Speaker 8: AstraZeneca offers. Here to talk about this is Sam Fazelli.
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  Speaker 8: He's the director of research, healthcare, defense, industrials, and autos.
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  Speaker 1: Sam, welcome.
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  Speaker 5: Hi.
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  Speaker 2: I see that you've got rid of Paul for the
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  Speaker 2: week off to France.
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  Speaker 1: He's apparently in the Mediterranean. Yes.
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  Speaker 8: Thank you so much for talking with us. I'd love
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  Speaker 8: to ask about this deal between AstraZeneca and Summit Therapeutics.
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  Speaker 8: How big of a deal is this and how excited
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  Speaker 8: are you about this cancer medication?
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  Speaker 2: I mean, Scarlett, companies and Stacey, companies constantly do these
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  Speaker 2: kind of deals. So why are we particularly talking about
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  Speaker 2: this one today? Well, the announcement came today. They signed
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  Speaker 2: $ 2 billion equity investment in Summit Therapeutics. That's one angle
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  Speaker 2: that's a little bit different to the usual partnership deals
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  Speaker 2: that you see. Second angle is that AstraZeneca had stayed
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  Speaker 2: away from this area where Summit is active. It's, let's
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  Speaker 2: do some jargon here, excuse me, buy specific antibody that
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  Speaker 2: targets two different things, et cetera, that a lot of
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  Speaker 2: people had been wringing their hands on until this deal's
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  Speaker 2: happened and some data's come out and it's beginning to
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  Speaker 2: look really interesting. And there is a very divided world
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  Speaker 2: out there on this particular drug. on this particular class
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  Speaker 2: of drugs. And that is some people believe that it's
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  Speaker 2: the biggest thing that's going to happen since Merck brought
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  Speaker 2: this drug to market called Keytruda, now the largest anti-cancer
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  Speaker 2: drug around. And others think, well, we haven't seen enough data,
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  Speaker 2: we don't believe in it. What Astra has done here
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  Speaker 2: is kind of hedged its bet to a degree, is
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  Speaker 2: that it's put this investment in, they're doing trials with
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  Speaker 2: the company, everyone's paying a little bit of a share themselves,
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  Speaker 2: And they own their assets. Astra is not taking the asset.
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  Speaker 2: So is it a harbinger for a future deal or not?
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  Speaker 4: I don't know.
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  Speaker 2: But it's certainly a very interesting way of getting into
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  Speaker 2: that space.
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  Speaker 3: Why do you think it's moving forward with an equity
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  Speaker 3: investment as opposed to a straight out takeover?
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  Speaker 9: Yeah.
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  Speaker 2: So this company is run by a very well-known, I
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  Speaker 2: would say, CEO who has been already in charge of
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  Speaker 2: another company, which went through a very similar kind of story.
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  Speaker 2: where it was called Pharmacyclics. People didn't believe it at first.
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  Speaker 2: Then they brought to the drug. In the end, In
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  Speaker 2: the end, that company, Pharmacyclics, was sold to AbbVie for
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  Speaker 2: something in the region of $ 20- odd billion. So this is
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  Speaker 2: a CEO who really believes and has got the money
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  Speaker 2: to back the company. Maybe today he wasn't interested in selling.
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  Speaker 2: That time might come. And we do know that Astra
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  Speaker 2: supposedly had approached them about a year ago for a
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  Speaker 2: $ 15 billion acquisition that never happened.
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  Speaker 8: What do you think? Scarlett mentioned that the sector overall
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  Speaker 8: has been down, is down slightly this morning. How do
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  Speaker 8: you see the sector overall? It seems like there have
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  Speaker 8: been a lot of breakthroughs. It seems like there have
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  Speaker 8: been a lot of kind of big deals happening. But
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  Speaker 8: what are the trends that you're noticing?
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  Speaker 2: So we have to separate out healthcare into its component parts, obviously.
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  Speaker 2: Some are more sensitive to interest rate cycle, potentially. Biotech
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  Speaker 2: and pharma should not be, logically, although risk appetite is
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  Speaker 2: impacted by it. by interest rate cycle. So I think
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  Speaker 2: what might have happened is that biotech pretty much doubled,
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  Speaker 2: more than doubled, judging by the XBI.
• 11:20
  Speaker 1: ETF that we follow.
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  Speaker 2: There's an index that folks follow, the XBI, which is
• 11:24
  Speaker 2: following the S & P 500 biotech index. And when
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  Speaker 2: you look at that, it's more than doubled over the past,
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  Speaker 2: I would say, year, year and a bit.
• 11:32
  Speaker 1: So there's a lot.
• 11:34
  Speaker 2: Of already momentum in the biotech sector, And the question
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  Speaker 2: now is, of course, what do I need to keep
• 11:40
  Speaker 2: that going? You've got AI competing with it. You've got
• 11:42
  Speaker 2: interest rates competing with it. But the sector is moving
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  Speaker 2: forward in terms of bringing these innovations to market.
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  Speaker 3: Before we let you go, Sam, I was just checking.
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  Speaker 3: There's another deal that happened this morning. Shinogi, which is
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  Speaker 3: a Japanese company buying Intrabio for $ 2 billion. I had
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  Speaker 3: not heard of Shinogi. It's a Japanese drug maker that,
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  Speaker 3: for now, focuses on infectious diseases. Is this kind of
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  Speaker 3: an acquirer that we should keep.
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  Speaker 4: An eye on?
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  Speaker 3: And I would doubt it.
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  Speaker 2: Japanese pharma companies do get involved in M & A
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  Speaker 2: deals just like everybody else does. But I don't think
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  Speaker 2: that Shinogi is going to be a name, famous last words, right?
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  Speaker 2: That is going to be up again in six months
• 12:24
  Speaker 2: or three months time with yet another deal. I think
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  Speaker 2: when these deals happen, they're done for a very, very
• 12:29
  Speaker 2: specific reason, as is the case here today.
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  Speaker 8: Really quickly, is there anything you have your eye on
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  Speaker 8: right now? Any company that you're watching?
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  Speaker 2: Well, yeah, I mean, you know, everybody is keeping an
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  Speaker 2: eye on both the one that we just spoke about,
• 12:43
  Speaker 2: which is Summit Therapeutics, where they have some data coming.
• 12:46
  Speaker 2: But particularly, more importantly, their eyes on Moderna. Remember Moderna
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  Speaker 2: or the cancer vaccine that's going to treat every cancer
• 12:53
  Speaker 2: that there is out there? I mean, you know, I'm
• 12:56
  Speaker 2: being facetious here. But the key data for that is
• 12:59
  Speaker 2: coming at a conference in three weeks' time.
• 13:01
  Speaker 1: And guess what?
• 13:01
  Speaker 2: I'll be there.
• 13:03
  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
• 13:10
  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
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  Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
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  Speaker 5: you get your podcasts or watch us live on YouTube.
• 13:24
  Speaker 8: Obviously, the markets are having a pretty good morning, pretty solid,
• 13:29
  Speaker 8: but there are a lot of questions on the horizon
• 13:31
  Speaker 8: about valuations and about where the risks may lie, be
• 13:34
  Speaker 8: that energy prices or the bond market, obviously. We've got
• 13:39
  Speaker 8: a great person to talk with us. Robert Schiffman is
• 13:41
  Speaker 8: Senior Tech Credit Analyst for Bloomberg Intelligence.
• 13:44
  Speaker 6: Welcome, Robert.
• 13:46
  Speaker 7: Hi, guys.
• 13:47
  Speaker 8: Hey, so talk to us a little bit. Micron is
• 13:49
  Speaker 8: obviously a company that we've all been watching pretty closely.
• 13:52
  Speaker 8: They are not having a great morning, but they've had
• 13:54
  Speaker 8: a pretty great year. What are you seeing with Micron?
• 13:59
  Speaker 4: Micron is crushing it. And I honestly think the rest
• 14:02
  Speaker 4: of the tech space is crushing it. You know, the
• 14:05
  Speaker 4: tone in the media continues to be sort of bubble talk.
• 14:08
  Speaker 4: But the reality on the ground is we're not seeing
• 14:11
  Speaker 4: that at all. Micron is going through a growth period
• 14:14
  Speaker 4: like they've never witnessed. The amount of revenues and cash
• 14:18
  Speaker 4: flow we expect them to generate basically puts them in
• 14:22
  Speaker 4: a position to do whatever they want. Unlike the hyperscalers
• 14:26
  Speaker 4: that are writing the big checks for CapEx, names like
• 14:28
  Speaker 4: Micron and the other semis are benefiting from all that
• 14:32
  Speaker 4: cash flow by providing the equipment. So listen, from an
• 14:35
  Speaker 4: equity perspective, you start getting into multiple evaluation questions. Certainly
• 14:39
  Speaker 4: from a credit perspective, I don't think Micron's ever been
• 14:42
  Speaker 4: better positioned. It's likely they're going to continue to see upgrades.
• 14:45
  Speaker 4: And the real problem that they have is what are
• 14:48
  Speaker 4: they going to do with all their free cash?
• 14:50
  Speaker 1: What are you thinking?
• 14:51
  Speaker 3: How do you consider what they could put that money into?
• 14:57
  Speaker 4: Well, there's a couple of different things. One is it
• 14:59
  Speaker 4: creates this circular financing concern. When names like Micron or Broadcom,
• 15:04
  Speaker 4: for instance, is talking about a $ 60 billion chip deal
• 15:07
  Speaker 4: with Anthropic, it's helping fund payments for the ecosystem. Obviously,
• 15:13
  Speaker 4: there's a tremendous amount of capital that's being spent. The
• 15:16
  Speaker 4: biggest spenders are going into massive negative free cash flow.
• 15:20
  Speaker 4: So they need a lot of different places to borrow it.
• 15:22
  Speaker 4: So I do think having some sort of structured financing,
• 15:26
  Speaker 4: something that Micron, Vidya, Broadcom are going to continue to support.
• 15:31
  Speaker 4: Also direct investments into some of their suppliers or frontier
• 15:38
  Speaker 4: LLMs would certainly be a place. And primarily, I think
• 15:42
  Speaker 4: what you're going to see is shareholders are going to benefit. Now,
• 15:44
  Speaker 4: you're going to see massive buybacks beyond levels that you've
• 15:49
  Speaker 4: ever seen, getting into the ranges sort of of the
• 15:51
  Speaker 4: worlds of the NVIDIAs and the Apples.
• 15:54
  Speaker 8: Now, you mentioned that a lot of these companies are
• 15:57
  Speaker 8: benefiting from the huge amount of money that AI companies
• 16:01
  Speaker 8: are spending in their buildouts. But what happens if that
• 16:05
  Speaker 8: money starts to dry up?
• 16:08
  Speaker 4: Sure. You know, that's been a big concern. You know,
• 16:10
  Speaker 4: the real concerns here is, one, does this technology work?
• 16:14
  Speaker 4: So if you're spending all the money, are you going
• 16:15
  Speaker 4: to eventually be able to monetize it? And then two is,
• 16:18
  Speaker 4: you know, how are you going to afford it? There's,
• 16:21
  Speaker 4: you know, we've estimated $ 9 trillion of hyperscaler, you know,
• 16:26
  Speaker 4: late through 2031. You know, how do you fund it?
• 16:30
  Speaker 4: And the reality is we're seeing more and more ways
• 16:33
  Speaker 4: of funding. It raises more questions, you Plus, there's those
• 16:39
  Speaker 4: that suggest if you have to dig deeper into other areas,
• 16:44
  Speaker 4: there's not enough traditional money around. But quite frankly, the
• 16:46
  Speaker 4: unsecured markets, the private data center markets, the chip securitization markets,
• 16:53
  Speaker 4: the leasing markets, alternative currencies, even equity in size have
• 16:58
  Speaker 4: been able to help fund this build. I think next
• 17:01
  Speaker 4: year alone, the investment grade a hyperscaler market is going
• 17:06
  Speaker 4: to need to exceed $ 400 billion, probably approaching $ 500 billion.
• 17:11
  Speaker 4: But I do think the money is going to be there.
• 17:13
  Speaker 4: And what we're seeing is the biggest borrowers, the ones
• 17:16
  Speaker 4: that need to spend the most money, are the ones
• 17:19
  Speaker 4: that are probably the most yielded. Yields are going up,
• 17:22
  Speaker 4: the cost of capital is going up. But if you're
• 17:25
  Speaker 4: a Microsoft at another 50 or 100 or 150 basis
• 17:33
  Speaker 4: points higher than you did last year is not going
• 17:35
  Speaker 4: to stop them when they think the RLIC on these
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  Speaker 4: AI investments. you know, are double or even triple digits.
• 17:43
  Speaker 4: So I don't see the money drying up. Obviously, if
• 17:45
  Speaker 4: it does, that's going to be a problem. But in fact,
• 17:48
  Speaker 4: we're seeing more money being created now than ever before.
• 17:51
  Speaker 4: Third-party money like NVIDIA and its asset manager or a
• 17:55
  Speaker 4: ton of asset manager friends raising $ 500 billion is probably
• 17:59
  Speaker 4: just the tip of the iceberg. So I think there's
• 18:01
  Speaker 4: tons of capital out there. You're actually seeing it in
• 18:03
  Speaker 4: all these deals that are being priced right now. They're
• 18:05
  Speaker 4: still significant, massive oversubscribed books.
• 18:09
  Speaker 1: Stay with us.
• 18:10
  Speaker 5: More from Bloomberg Intelligence coming up after this. You're listening
• 18:17
  Speaker 5: to the Bloomberg Intelligence podcast. Catch us live weekdays at
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  Speaker 5: the Bloomberg Business app. Listen on demand wherever you get
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  Speaker 5: your podcasts or watch us live on YouTube.
• 18:31
  Speaker 3: So with the stock market surging, with AI showing no
• 18:36
  Speaker 3: signs of slowing down, even though some AI founders, you know,
• 18:39
  Speaker 3: AI lab founders want to kind of pace development, it
• 18:43
  Speaker 3: follows that these tech CEOs and tech startup founders are
• 18:48
  Speaker 3: have done tremendously well for themselves. The world's tech billionaires
• 18:52
  Speaker 3: gained a combined zillion dollars through September 30th.
• 18:56
  Speaker 1: That's not true. It's actually a real number, but it
• 18:58
  Speaker 1: feels like a zillion dollars.
• 18:59
  Speaker 7: Rounding up.
• 19:00
  Speaker 1: Yeah, exactly.
• 19:01
  Speaker 3: Dylan Sloan is a reporter on our Bloomberg Wealth team,
• 19:04
  Speaker 3: and they've been crunching the numbers. And at the end
• 19:07
  Speaker 3: of the day, Dylan, it's all about how the tech
• 19:09
  Speaker 3: billionaires are on their way to the best year ever.
• 19:12
  Speaker 4: Yeah.
• 19:12
  Speaker 1: It is, exactly.
• 19:13
  Speaker 9: Through the first three quarters of the year, we're kind
• 19:14
  Speaker 9: of taking this opportunity, the relaunched Bloomberg Billionaires Index, now
• 19:18
  Speaker 9: available online at Bloomberg.com slash billionaires. So for the first
• 19:21
  Speaker 9: three months of the year, we're really just taking a
• 19:23
  Speaker 9: close look at the dynamics of that wealth, where it's growing,
• 19:26
  Speaker 9: where it's accumulating. And yeah, you really hit it right
• 19:27
  Speaker 9: on the head. It is really a tech story, an
• 19:29
  Speaker 9: equity story, mirroring a lot of the dynamics we've seen
• 19:32
  Speaker 9: in markets across the board. About 100 of the 500
• 19:35
  Speaker 9: wealthiest people in the world owe their fortunes to tech,
• 19:38
  Speaker 9: and they gained about $ 845 billion through the third quarter
• 19:40
  Speaker 9: this year. I don't know how that compares to a zillion,
• 19:43
  Speaker 9: something close to it, I would guess. Everyone else on
• 19:46
  Speaker 9: the other hand lost 62 billion in total over that period.
• 19:49
  Speaker 9: So it really is a story of this bifurcation between
• 19:51
  Speaker 9: tech and everybody else, kind of as we've seen in
• 19:54
  Speaker 9: the market more broadly over the past couple of years,
• 19:55
  Speaker 9: but it continues on and on.
• 19:58
  Speaker 8: I'm afraid I already know the answer to this question,
• 20:00
  Speaker 8: but I'm going to ask anyway. So, I mean, is
• 20:03
  Speaker 8: everybody else also getting wealthier along with the wealthiest people
• 20:09
  Speaker 8: in the world? Because is the rising tides lifting all boats?
• 20:13
  Speaker 9: Yeah. I mean, speaking to the data that we have
• 20:16
  Speaker 9: on the index, yes and no. I mean, and I
• 20:20
  Speaker 9: guess more no than yes, honestly. I think that stat
• 20:22
  Speaker 9: earlier that, you know, there are a few sectors where
• 20:24
  Speaker 9: we have seen gains, the financial sector, was one of
• 20:27
  Speaker 9: the few where we saw people showing an overall increase
• 20:30
  Speaker 9: in net worth, but pretty much everywhere else across the board,
• 20:33
  Speaker 9: it was down, down, down. And it really was these
• 20:35
  Speaker 9: top 10 American tech founders and CEOs who carried the
• 20:39
  Speaker 9: baton in terms of providing most of the gains through
• 20:42
  Speaker 9: the index for most of the year. And it really
• 20:44
  Speaker 9: was an American story as well. We saw last year
• 20:46
  Speaker 9: for the first time, we've been covering this since 2012,
• 20:49
  Speaker 9: so the first time in nearly 15 years that all
• 20:52
  Speaker 9: 10 of the world's wealthiest people were from the United
• 20:53
  Speaker 9: States for the first time, which was definitely an inflection
• 20:57
  Speaker 9: point and the result of everything we've seen in the
• 20:58
  Speaker 9: markets for the past few years.
• 21:00
  Speaker 3: The thing is, and you make this clear in your story,
• 21:01
  Speaker 3: it was not a straight line up. Some of these
• 21:04
  Speaker 3: tech billionaires saw their fortunes rise, but in some instances
• 21:09
  Speaker 3: fall dramatically before kind of coming back up. Larry Ellison
• 21:12
  Speaker 3: being a good example.
• 21:13
  Speaker 1: Exactly.
• 21:14
  Speaker 7: Yeah.
• 21:14
  Speaker 9: I think he's kind of the poster child for that.
• 21:15
  Speaker 9: We saw that last year. He actually briefly became the
• 21:17
  Speaker 9: world's wealthiest man, beating out Elon Musk right around the
• 21:20
  Speaker 9: end of last year as Oracle was really touting their
• 21:22
  Speaker 9: plans for expansion into AI. But As a story that
• 21:26
  Speaker 9: you guys and all of us have been covering here
• 21:27
  Speaker 9: in the newsroom, investors have gotten cold feet about it
• 21:31
  Speaker 9: a little bit as they've plowed so much money into this,
• 21:33
  Speaker 9: financed largely by debt. He's lost nearly $ 200 billion in
• 21:36
  Speaker 9: wealth this year so far. And yeah, we saw the
• 21:39
  Speaker 9: total net worth of the index peaked a few months ago,
• 21:41
  Speaker 9: but it's since pulled back about 6%. So some of
• 21:43
  Speaker 9: those worries about AI, some of what you were talking
• 21:45
  Speaker 9: about earlier, Scarlett, pacing the frontier, that has definitely had
• 21:49
  Speaker 9: an effect here as well. And waiting to see where
• 21:51
  Speaker 9: things go from here.
• 21:52
  Speaker 8: Is this just purely an AI effect? I mean, are
• 21:55
  Speaker 8: there other things at work? Or if there is some
• 21:58
  Speaker 8: change in the fortunes of AI, do you think this,
• 22:02
  Speaker 8: I mean, how much is this going to affect your index?
• 22:05
  Speaker 9: It's easy to see AI in a lot of places,
• 22:07
  Speaker 9: I have to say. On the equity side, also internationally
• 22:09
  Speaker 9: as well. We've had some really fun stories. There are
• 22:11
  Speaker 9: a number of these companies that sort of out of
• 22:13
  Speaker 9: nowhere have emerged as AI plays. There's one that we
• 22:16
  Speaker 9: profiled a few weeks ago. Ling Sun-Chi is the name.
• 22:20
  Speaker 9: Kingslide is a Taiwanese company. They got their start in
• 22:22
  Speaker 9: the furniture business in the 80s, making sliders for drawers
• 22:25
  Speaker 9: and cabinets.
• 22:26
  Speaker 1: Oh, and they're, yeah, making stuff for data centers.
• 22:27
  Speaker 4: Exactly.
• 22:28
  Speaker 9: All of a sudden, these are a huge component for
• 22:29
  Speaker 9: data centers.
• 22:30
  Speaker 5: Oh, interesting.
• 22:30
  Speaker 9: The founder joined the index a couple months ago, worth
• 22:33
  Speaker 9: nearly $ 10 billion. And, you know, it's just, it's, you know,
• 22:36
  Speaker 9: it's like you're seeing these pop out of nowhere all
• 22:38
  Speaker 9: the time.
• 22:38
  Speaker 1: They're like in the picks and shovels business, right? Exactly, exactly.
• 22:41
  Speaker 9: And they've really kind of come out.
• 22:42
  Speaker 2: Of nowhere with this. All right.
• 22:43
  Speaker 3: Ling Tung-Chi, founder of Kingslide, emerged with a $ 9. 5 billion
• 22:48
  Speaker 3: fortune this year, four decades after starting the company. What
• 22:51
  Speaker 3: surprised you the most when you looked at all the numbers,
• 22:53
  Speaker 3: when you were compiling everything? And I mean, I think
• 22:55
  Speaker 3: you come into it knowing that AI drove a lot
• 22:58
  Speaker 3: of this, the wealthiest tech billionaires got even wealthier. But
• 23:02
  Speaker 3: was there something that even as you were looking at it,
• 23:05
  Speaker 3: you said, oh my gosh, I didn't realize that?
• 23:07
  Speaker 9: Yeah, I think the one thing that me and the
• 23:09
  Speaker 9: rest of the global team that's been working on this
• 23:11
  Speaker 9: and continues to work on it every day has been
• 23:12
  Speaker 9: thinking about is just the growth in private wealth as well. Obviously,
• 23:15
  Speaker 9: near the top, so many of these games are from equities,
• 23:17
  Speaker 9: especially in the US. But as we've seen with some
• 23:19
  Speaker 9: of these AI labs, these frontier labs, private companies, the
• 23:22
  Speaker 9: valuations are soaring so much that we are seeing some
• 23:24
  Speaker 9: people with holdings and private companies joining the list. And also,
• 23:28
  Speaker 9: just structurally, that presents some really interesting issues around having
• 23:31
  Speaker 9: your wealth tied up in illiquid private stock that's not
• 23:34
  Speaker 9: publicly traded and As we've seen some of the backlash
• 23:36
  Speaker 9: to this in California next month, there's this wealth tax
• 23:39
  Speaker 9: that's going to be on the ballot. We've seen similar
• 23:40
  Speaker 9: proposals in other states. That creates some complicated questions around
• 23:43
  Speaker 9: for folks like this who have their money tied up
• 23:45
  Speaker 9: in private companies, how are you able to drum up
• 23:47
  Speaker 9: liquidity and monetize that in a way that is playing
• 23:51
  Speaker 9: out from the taxation perspective and then also just in
• 23:53
  Speaker 9: terms of how these people are deploying and utilizing their
• 23:56
  Speaker 9: fortunes more broadly in politics and business across the board.
• 23:59
  Speaker 8: I know that everybody's got their feelings about this, but
• 24:03
  Speaker 8: for the economy, is it a good thing to have
• 24:06
  Speaker 8: wealth so concentrated? Is it a bad thing? Also, people
• 24:09
  Speaker 8: can create a lot of jobs and things like that.
• 24:11
  Speaker 8: How do you see it in terms of the economy,
• 24:13
  Speaker 8: to have to have these people like earning so much money?
• 24:17
  Speaker 9: Yeah, that is a great question and definitely, uh, an
• 24:19
  Speaker 9: ongoing debate for sure. I mean, even from the tax perspective,
• 24:22
  Speaker 9: we had a story out this morning from one of
• 24:24
  Speaker 9: our wealth reporters in the UK, just looking at, um,
• 24:27
  Speaker 9: sort of the mobility angle here, especially in the UK,
• 24:29
  Speaker 9: that's been a really big discussion over the past months
• 24:32
  Speaker 9: and years, um, this, uh, non-dom agreement that they had
• 24:34
  Speaker 9: set up. And just the fact that, you know, for
• 24:36
  Speaker 9: wealthy people, again, like you're saying, who contribute to the
• 24:37
  Speaker 9: tax base, um, These people are very mobile and it's
• 24:40
  Speaker 9: easy to move around the world and that can be
• 24:42
  Speaker 9: pulled away almost as soon as anyone decides to move
• 24:46
  Speaker 9: just like that. So yeah, structurally, there are definitely some
• 24:49
  Speaker 9: challenges in terms of how to, from a governmental perspective,
• 24:53
  Speaker 9: how to leverage that. But it's a debate that's ongoing
• 24:56
  Speaker 9: and strong opinions on all sides.
• 24:58
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