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AI Bosses Risk Clash With Wall Street and Trump Over Safety · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios.
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  Speaker 2: Podcasts. Radio.
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  Speaker 3: News.
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  Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
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• 0:19
  Speaker 4: you get your podcasts or watch us live on YouTube.
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  Speaker 5: What's happening this week is very much a continuation of
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  Speaker 5: this nowadays. debate among AI bosses about whether to rein in,
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  Speaker 5: to check the growth of these cutting-edge AI models so
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  Speaker 5: that everyone can better understand the risks posed by the technology.
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  Speaker 1: There have been a series of security breaches.
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  Speaker 5: Public opinion poll after public opinion poll show Americans are
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  Speaker 5: very weary of AI and what the AI models can do.
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  Speaker 5: Let's bring in Sarah Fryer. She's our managing editor for
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  Speaker 5: technology coverage. And, you know, we hear the CEOs and
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  Speaker 5: founders of Anthropic and OpenAI saying, let's maybe tap the
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  Speaker 5: brakes to slow down development here. This is still very
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  Speaker 5: much an intellectual debate, right? I mean, nothing has been
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  Speaker 5: slowed down yet, has it?
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  Speaker 6: Nothing has been slowed down. In fact, if you read
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  Speaker 6: that 3,800 word manifesto, there's not really a lot of
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  Speaker 6: concrete evidence commitment to stopping pre-training or deciding not to
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  Speaker 6: release certain things or pulling back on data center spending.
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  Speaker 6: That is all very much in the mix still. They
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  Speaker 6: still plan to grow their company. They're going to have
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  Speaker 6: a major IPO in the coming months. So really, this
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  Speaker 6: is about planting a flag and saying we're ready to
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  Speaker 6: do something should somebody Everyone agreed to do it because
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  Speaker 6: if we don't or if we do it without everyone
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  Speaker 6: else doing it, then, you know, it's not going to
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  Speaker 6: have an impact because people could still develop this harmful technology.
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  Speaker 7: Sarah is a graduate of University of North Carolina at
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  Speaker 7: Chapel Hill, and I thought we had a policy on that.
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  Speaker 5: Oh, I know, Paul. Sometimes we have to suspend our policies.
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  Speaker 7: Sarah, I'll tell you, President Trump has come out on
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  Speaker 7: the other side, and Vice President J.D. Fance as well,
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  Speaker 7: just minutes ago, saying don't slow down, for a variety
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  Speaker 7: of reasons, not the least of which is China's not
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  Speaker 7: slowing down.
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  Speaker 6: It is so central to Trump's agenda that they— these
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  Speaker 6: AI companies continue to grow at the pace that they're
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  Speaker 6: growing because that is what he's leaning on. The economy,
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  Speaker 6: the stock market growth, that is what he thinks is
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  Speaker 6: going to propel Republicans to win in the midterms. Now,
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  Speaker 6: if you look at the polling, if you look at
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  Speaker 6: the general sentiment of citizens in the USA, there is
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  Speaker 6: a lot of negative sentiment about data centers, about AI development.
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  Speaker 6: Most of it is about taking jobs, about building data centers.
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  Speaker 6: Not as much connected to the safety conversation, but that does,
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  Speaker 6: as of the last few days, bubble up into the mainstream.
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  Speaker 6: And I think more people are talking about that now
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  Speaker 6: as this existential threat. However, we haven't really seen a
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  Speaker 6: lot of major threats beyond the cybersecurity angle. We've seen
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  Speaker 6: these AI threats. tools escape their protective testing environments and hack.
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  Speaker 6: That is concerning. We have not seen some of the
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  Speaker 6: other things that this existential race of humanity extinction idea
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  Speaker 6: that has bubbled into the consciousness.
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  Speaker 5: But the idea is that that is out there and
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  Speaker 5: it could be something that we need to confront and
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  Speaker 5: that's adding some urgency to all of this. So Congress
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  Speaker 5: has not been super productive, I think it's fair to.
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  Speaker 1: Say, for the last couple of years.
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  Speaker 5: Is anyone in Congress, are lawmakers taking this up, talking
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  Speaker 5: about it, addressing this in any way? Because if we're
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  Speaker 5: going to come up with regulations, they should kind of
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  Speaker 5: play a role.
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  Speaker 6: They should definitely play a role. I think we're seeing
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  Speaker 6: some really prominent voices come out here and there. Steve
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  Speaker 6: Bannon is meeting with Bernie Sanders tomorrow. I mean, some
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  Speaker 6: strange bedfellows are being created. But I think that some
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  Speaker 6: of the issue here is that so far it's OpenAI
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  Speaker 6: and Anthropic, the two market leaders, saying that they want
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  Speaker 6: to lead the way on regulation here. And that has.
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  Speaker 6: Potential antitrust implications, right? If you have these two companies
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  Speaker 6: coordinating on their development of the technology. So there's going
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  Speaker 6: to have to be a little bit of direct communication
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  Speaker 6: with government about what they can do and how do
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  Speaker 6: they do it in a way that doesn't endanger growth
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  Speaker 6: in the rest of the industry or benefit them only.
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  Speaker 1: Stay with us.
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  Speaker 4: More from Bloomberg Intelligence coming up after this. You're listening
• 5:00
  Speaker 4: to the Bloomberg Intelligence Podcast. Catch us live weekdays at
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  Speaker 4: 10 a.m. Eastern on Apple CarPlay and Android Auto with
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  Speaker 4: the Bloomberg Business app. Listen on demand wherever you get
• 5:09
  Speaker 4: your podcasts or watch us live on YouTube.
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  Speaker 1: The AI story twists and turns.
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  Speaker 7: Now the story is interesting. People thinking about, you know,
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  Speaker 7: should some of these developers put their brakes on it
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  Speaker 7: or not?
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  Speaker 1: And a lot of folks were wondering.
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  Speaker 7: Is that going to impact maybe some of the capital
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  Speaker 7: markets activity coming out of the AI space, including some
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  Speaker 7: potentially big IPOs coming? Our next guest has some thoughts
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  Speaker 7: on this, Isabel Friedheim. She is the founder and managing
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  Speaker 7: partner of Athena Capital. Isabel, I'd love to get your
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  Speaker 7: kind of most up-to-date thoughts on kind of how you're
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  Speaker 7: viewing AI here, because I think the story, again, over
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  Speaker 7: the last week or so, It's resulted in some leading
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  Speaker 7: players within the AI space to say, you know what,
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  Speaker 7: maybe we should consider putting the brakes on the development here.
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  Speaker 7: Others don't agree, citing competition with China.
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  Speaker 1: How do you think about that?
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  Speaker 8: Yes. Hi, Paul.
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  Speaker 9: Thank you.
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  Speaker 8: We are particularly interested in AI investments in the private market,
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  Speaker 8: so in the public market.
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  Speaker 9: It's hard to really.
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  Speaker 8: Access value because a lot of the value has been
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  Speaker 8: created and those companies have been repriced in the private market.
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  Speaker 8: So by the time they reach the public market, it's
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  Speaker 8: a different story. It's a different investment thesis. And you're
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  Speaker 8: betting on a pure transformational technology.
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  Speaker 2: Right.
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  Speaker 8: When it comes to private market investments, there is a
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  Speaker 8: vast wealth of opportunities that exist in the middle layer.
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  Speaker 8: So we particularly like the layer that exists between data
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  Speaker 8: centers and LLMs.
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  Speaker 5: So what does it mean if Anthropic CEO says there
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  Speaker 5: should be a slowdown in AI development? What does that
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  Speaker 5: mean in the private industry among these private companies?
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  Speaker 8: Well, that makes it harder to invest in a pure
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  Speaker 8: transformational technology. And we are now investing in, when you
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  Speaker 8: invest in an LLM, you're really underwriting the technology. And
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  Speaker 8: so there's, for a number of reasons, there is a
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  Speaker 8: slowdown in the pace of growth of that technology. So
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  Speaker 8: different reasons that have existed in the past, but it
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  Speaker 8: is there.
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  Speaker 9: So where is the opportunity?
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  Speaker 8: And Because of the risk that exists with underwriting a technology,
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  Speaker 8: the risk isn't just the technology itself. It's the mispricing
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  Speaker 8: of those companies. And the opportunity that we see is
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  Speaker 8: the opportunity that exists in that layer that I mentioned,
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  Speaker 8: where we're not betting on which LLM will win.
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  Speaker 9: We are betting on the picks and shovels.
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  Speaker 8: That expression comes, by the way, from the gold rush,
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  Speaker 8: where those that made money weren't necessarily the big miners.
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  Speaker 8: They were the merchants that sold the picks and shovels.
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  Speaker 8: And this is the opportunity that we underwrite, and that
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  Speaker 8: is that layer of tools that are needed to operate
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  Speaker 8: the technologies.
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  Speaker 7: So do you expect the pace of just AI investment
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  Speaker 7: to continue at the rapid levels we've been seeing over
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  Speaker 7: the last decade?
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  Speaker 1: Call it four years or so?
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  Speaker 8: Probably, again, because there's been a lot of capital deployed
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  Speaker 8: in the LLM layer, but there is an entire industry
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  Speaker 8: that's emerging to facilitate the use of those technologies, whether
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  Speaker 8: it's to lower the cost, for example, or to improve
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  Speaker 8: the performance, to lower the computing costs, lower the electricity cost.
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  Speaker 8: We just invested in a company, Multiverse Computing, that, for example,
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  Speaker 8: will compress the data to make for lower cost of
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  Speaker 8: computing power that is needed and lower electricity. So I think, yes,
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  Speaker 8: the capital will continue flowing into AI. And we are
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  Speaker 8: now in a very different environment that we last saw
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  Speaker 8: in 2021, for example, when investments were being deployed into
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  Speaker 8: tech companies.
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  Speaker 9: Again, very different environments.
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  Speaker 5: In terms of going public for some of these startups that,
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  Speaker 5: you know, where the early investors are looking for an exit,
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  Speaker 5: is now the right time to do so if Anthropic,
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  Speaker 5: you know, perhaps doesn't move forward with its IPO and
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  Speaker 5: OpenAI has already indicated it's not going to do anything
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  Speaker 5: in 2026? How much are these startups, these smaller companies
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  Speaker 5: looking at the schedule for when the big AI labs
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  Speaker 5: go public to determine their own timings?
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  Speaker 8: They are currently looking to go public. There are a
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  Speaker 8: number of them that will explore IPOs. SPACs, maybe direct
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  Speaker 8: listings to really tap into what is a deep pool
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  Speaker 8: of capital that is available to them that does exist
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  Speaker 8: for now in the private market, but not at the
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  Speaker 8: size that they can find in the public market. And
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  Speaker 8: right now, there's no question there is demand for these
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  Speaker 8: types of tech stocks. So I think companies will continue
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  Speaker 8: to explore. Again, we are just recovering from a long
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  Speaker 8: down IPO cycle. It's not unusual to see IPO cycles
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  Speaker 8: that will last four or five years. And inevitably, when
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  Speaker 8: the IPO cycles recover, it's very typical to have larger
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  Speaker 8: companies go public first.
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  Speaker 9: I mean, these were beyond large. There were mega deals.
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  Speaker 8: But there continues to be demand both in the public
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  Speaker 8: market and in the private market.
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  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
• 10:58
  Speaker 4: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 11:02
  Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 11:05
  Speaker 4: Auto with the Bloomberg Business app. Listen on demand wherever
• 11:09
  Speaker 4: you get your podcasts or watch us live on YouTube.
• 11:13
  Speaker 7: Switch gears and go to the theme park business, to
• 11:16
  Speaker 7: the cruise line business, Royal Caribbean.
• 11:18
  Speaker 3: How about this?
• 11:20
  Speaker 7: They're beginning construction on their fifth icon class ship. Those
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  Speaker 7: things are just monsters.
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  Speaker 1: Yeah, those are the big ones that, like, if they
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  Speaker 1: actually show up.
• 11:29
  Speaker 5: In port, they kind of take over everything.
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  Speaker 6: Everything, everything.
• 11:31
  Speaker 1: And they're also going to do their first river ship.
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  Speaker 3: How about that?
• 11:37
  Speaker 1: All right, trying to compete against Viking. Let's talk to
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  Speaker 1: Jodi Laurie. She covers all these.
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  Speaker 7: Consumer-facing, entertainment-type facing companies here from the credit perspective.
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  Speaker 1: So, hey, Jody, thanks so much for joining us here.
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  Speaker 1: So how's Royal Caribbean going to pay for all these
• 11:54
  Speaker 1: new ships?
• 11:56
  Speaker 3: How are they going to pay for the new ships? Well,
• 11:57
  Speaker 3: debt is usually the way to pay for them. But
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  Speaker 3: more than anything, it's the cash flow. And for Royal,
• 12:03
  Speaker 3: we are seeing that despite the hiccups related to the
• 12:08
  Speaker 3: Iran war and sort of hesitancy around that, that bookings
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  Speaker 3: are still extremely strong for them and for a lot
• 12:15
  Speaker 3: of their competitors. I think what's interesting when you talk
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  Speaker 3: about the river portion of it is that what we
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  Speaker 3: saw with Viking was a little bit of a.
• 12:26
  Speaker 3: Cautionary tale related to global warming and unexpected events, meaning we.
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  Speaker 2: Saw that river levels were very, very low.
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  Speaker 3: Now they're improving, and Vikings make comments that it's improved.
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  Speaker 3: But it does raise questions for Royal, and now there's
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  Speaker 3: talks of MSC entering the game. And so everybody's fighting
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  Speaker 3: for these river cruises, but are the river levels high enough?
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  Speaker 2: So that's just a weird global warming effect.
• 12:51
  Speaker 5: Okay, so there's a lot of debt here, and we
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  Speaker 5: know that Rates are elevated and the Federal Reserve is
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  Speaker 5: likely to hike rates later on this week as well.
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  Speaker 1: How does that affect Royal Caribbean?
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  Speaker 3: So, Scarlett, I mean, it definitely affects them in terms
• 13:07
  Speaker 3: of the pricing that they're going to get. It does
• 13:09
  Speaker 3: benefit that they have gotten their investment grade rating and
• 13:12
  Speaker 3: they're solidly investment grade. So we are seeing that despite
• 13:15
  Speaker 3: the fact that rates on an absolute level are higher,
• 13:20
  Speaker 3: their relative pricing is better. So relatively speaking, they are
• 13:24
  Speaker 3: doing better, at least from a cost of capital. But yes, obviously,
• 13:28
  Speaker 3: having these rates rise and inflation affect just the input costs,
• 13:35
  Speaker 3: never mind the way that the interest rate environment is,
• 13:39
  Speaker 3: I think that certainly management is going to be much
• 13:42
  Speaker 3: more proactive in how they think about it and how
• 13:45
  Speaker 3: they sort of consider where they're getting the financing from
• 13:48
  Speaker 3: and how looking at the capital markets versus their export
• 13:54
  Speaker 3: credit facilities like we've seen recently.
• 13:56
  Speaker 7: Let's switch gears, Jody, to the theme park business.
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  Speaker 1: I know you cover Six Flags, United Parks.
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  Speaker 7: Just talk to us about the theme parks business and
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  Speaker 7: how that's looking with this higher inflation out there.
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  Speaker 2: Paul, I mean, the average theme park goer for the
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  Speaker 2: regional theme parks has a lower income than what we
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  Speaker 2: see for the U.S. Census Bureau. And so what does
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  Speaker 2: that mean?
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  Speaker 3: That means that they're definitely feeling the effects a bit
• 14:24
  Speaker 3: more as it relates to gas prices, as it relates
• 14:28
  Speaker 3: to basic goods. And while these companies are benefiting from
• 14:32
  Speaker 3: selling season passes, from doing these promotional components, the attendance
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  Speaker 3: isn't necessarily what I think they're hoping. So once they
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  Speaker 3: get people in the park, people are willing to spend
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  Speaker 3: because they see the value proposition there. But to get
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  Speaker 3: them into the parks might be a little bit more
• 14:50
  Speaker 3: of a struggle than they anticipated. And what we're seeing
• 14:53
  Speaker 3: with our alternative data, if you go to Alt-D Go,
• 14:56
  Speaker 3: you could see alternative data such as foot traffic from
• 14:58
  Speaker 3: Placer AI. And you can see that for 2026, so
• 15:02
  Speaker 3: far this year, it's actually been weaker than 25. And
• 15:05
  Speaker 3: 25 wasn't necessarily a year to write home to mom about.
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  Speaker 5: How much of that is because we've had things like
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  Speaker 5: the World Cup just distract people? And I hear what
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  Speaker 5: you're saying about how these are higher or lower income
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  Speaker 5: consumers than perhaps the census average, but it kept a
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  Speaker 5: lot of people at home watching TV.
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  Speaker 2: Sure, Scarlett.
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  Speaker 3: Yeah, there's definitely a component that there was a competition,
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  Speaker 3: particularly United Parks talked to this, that the World Cup
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  Speaker 3: affected the June-July volumes. But we saw in August that
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  Speaker 3: things didn't get better. So if it was just the
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  Speaker 3: World Cup and you saw that blip that starting the
• 15:41
  Speaker 3: summer season wasn't going to be as strong, but it
• 15:44
  Speaker 3: really is something that has continued into the rest of
• 15:47
  Speaker 3: the summer. And so for the destination parks, you're not
• 15:50
  Speaker 3: necessarily seeing a return of international visitors.
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  Speaker 2: That's a function of the fact that The U.S.
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  Speaker 3: Conversation with ally countries hasn't been so great. So international
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  Speaker 3: visitors into the U.S. has been a little bit not
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  Speaker 3: as strong as what we've seen, particularly Canada, very much expectedly.
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  Speaker 3: And so that is definitely affecting destinations.
• 16:16
  Speaker 1: Stay with us.
• 16:16
  Speaker 4: More from Bloomberg Intelligence coming up after this. You're listening
• 16:24
  Speaker 4: to the Bloomberg Intelligence Podcast. Catch us live weekdays at
• 16:27
  Speaker 4: 10 a.m. Eastern on Apple CarPlay and Android Auto with
• 16:30
  Speaker 4: the Bloomberg Business App. Listen on demand wherever you get
• 16:33
  Speaker 4: your podcasts or watch us live on YouTube.
• 16:38
  Speaker 1: All right, let's switch gears. Let's get to the big
• 16:40
  Speaker 1: take story out there.
• 16:41
  Speaker 7: This whole Mark Walter thing and selling the Lakers and
• 16:45
  Speaker 7: what are you selling?
• 16:46
  Speaker 1: I guess it's FCT.
• 16:47
  Speaker 7: And there's a whole issue there with insurance companies and payments.
• 16:51
  Speaker 1: That is accounting. I don't want to get anywhere near.
• 16:52
  Speaker 1: It's super confusing. And now here's another wrinkle.
• 16:55
  Speaker 7: Magic Johnson is somehow involved in this because I know
• 16:58
  Speaker 7: he was part of all that Los Angeles stuff and
• 17:00
  Speaker 7: he's been very close to Mark Walter. Tom Maloney joins
• 17:02
  Speaker 7: us here. He's a wealth team editor for Bloomberg News. Tom,
• 17:05
  Speaker 7: talk to us about Magic Johnson and his involvement with
• 17:09
  Speaker 7: Mark Walter. Are there any issues that may entangle Magic Johnson?
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  Speaker 1: Yeah, absolutely.
• 17:15
  Speaker 10: I mean, it is a confusing situation and that's actually
• 17:17
  Speaker 10: how I got involved in this story. And the first
• 17:19
  Speaker 10: place is I wanted to kind of do something to
• 17:22
  Speaker 10: show these different threads, this web that's going on. For me,
• 17:26
  Speaker 10: I'd been interested in a long time because a lot
• 17:28
  Speaker 10: of Walter's partners in his sports teams, you know, in
• 17:31
  Speaker 10: the Dodgers and the Lakers, Sparks and so on, Chelsea,
• 17:35
  Speaker 10: they also have their own interests in insurance companies. And
• 17:38
  Speaker 10: those insurance companies have ties between each other. You know,
• 17:41
  Speaker 10: most of them are advised by Guggenheim Partners, the financial
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  Speaker 10: firm that Walter, you know, co-founded, leads. and they have
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  Speaker 10: a lot of, you know, they invest in a lot
• 17:53
  Speaker 10: of the same assets. So as we were doing this,
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  Speaker 10: we looked at a lot of the connections between these insurers.
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  Speaker 10: And so, you know, Magic Johnson, he was, you know,
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  Speaker 10: went in when Walter bought the Dodgers back in 2012.
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  Speaker 10: And a few years after that, he bought Equitrust, which
• 18:09
  Speaker 10: is a big insurer, which was owned by Guggenheim Partners
• 18:12
  Speaker 10: from Guggenheim. This is in 2015, I think that transaction closed.
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  Speaker 10: last year that got sold to another financial group called Amistad.
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  Speaker 10: But Amistad itself seems to have a lot of links
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  Speaker 10: still with Johnson. So he continues to be a big
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  Speaker 10: part of this story.
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  Speaker 5: So they're buying and selling companies to each other, among
• 18:31
  Speaker 5: each other, and they also borrow money from each other
• 18:35
  Speaker 5: as well. And some of that borrowed money is finding
• 18:37
  Speaker 5: its way into these sports teams. I mean, is that
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  Speaker 5: the general gist of it? And regulators are trying to
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  Speaker 5: figure out exactly how this all ties together.
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  Speaker 3: Yeah.
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  Speaker 10: So let's step back a little bit. The issue that's
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  Speaker 10: affecting Walter at the moment is these investments in affiliated
• 18:54
  Speaker 10: companies that appear to have been done using intermediaries. So
• 18:57
  Speaker 10: you know, insurance companies that are owned by somebody can
• 19:01
  Speaker 10: make investments in companies that are related to their owner,
• 19:07
  Speaker 10: but they need to disclose those transactions, and there's sort
• 19:09
  Speaker 10: of a different bar, and it's harder to get them rated.
• 19:12
  Speaker 10: What seems to have occurred here is that Walter's insurers
• 19:16
  Speaker 10: made a lot of those investments without them being disclosed
• 19:19
  Speaker 10: as affiliated, and they used these intermediaries, so kind of
• 19:23
  Speaker 10: an entity that would sit between the insurer and Mark
• 19:26
  Speaker 10: Walter's business, to kind of mask where this money was going.
• 19:30
  Speaker 10: And what turned up in the story that we have
• 19:32
  Speaker 10: today is that some of these insurance companies now owned
• 19:36
  Speaker 10: by Amistad, so that companies that were owned by Magic
• 19:40
  Speaker 10: Johnson and it continues to be involved with, have also
• 19:44
  Speaker 10: invested a lot of money, more than $ 4 billion in
• 19:47
  Speaker 10: these same intermediaries. So there's a lot of kind of
• 19:49
  Speaker 10: interestingly links going on here that we're trying to untangle.
• 19:52
  Speaker 5: The Venn diagram is like one big circle with lots
• 19:56
  Speaker 5: of overlapping circles.
• 19:58
  Speaker 7: Yeah, and this just confirms for me that the insurance
• 20:02
  Speaker 7: business and the accounting for insurance companies is so difficult
• 20:05
  Speaker 7: and so arcane. Is there any suggestion here that Magic
• 20:09
  Speaker 7: Johnson is under any scrutiny or should be under any scrutiny?
• 20:13
  Speaker 1: No, there isn't.
• 20:15
  Speaker 10: But, you know, the Amistad has been linked to this,
• 20:21
  Speaker 10: you know, investigation into Walter as one of these intermediaries.
• 20:24
  Speaker 10: So Walter's insurers have put more than $ 2 billion into
• 20:28
  Speaker 10: Amistad and Amistad related entities. And so it's kind of
• 20:33
  Speaker 10: under scrutiny for potentially being an intermediary and and funneling
• 20:37
  Speaker 10: money basically from Walter's insurers to his own businesses.
• 20:41
  Speaker 5: What is Magic Johnson or his businesses saying in response
• 20:44
  Speaker 5: to our reporting?
• 20:45
  Speaker 2: Not much.
• 20:46
  Speaker 10: They haven't responded to a request for comment on this.
• 20:49
  Speaker 1: So what do you think next steps are? 30 seconds
• 20:51
  Speaker 1: left for Mr. Walter here. What's the next step, do
• 20:53
  Speaker 1: you think?
• 20:54
  Speaker 10: Well, he's obviously selling some of his most high-profile investments.
• 20:59
  Speaker 10: He's agreed to sell the Lakers. He's close to selling
• 21:03
  Speaker 10: his stake in Chelsea and he's going to be, you know,
• 21:08
  Speaker 10: unwinding a lot of these loans between his insurers and
• 21:10
  Speaker 10: his affiliated investments. And then I think we'll see where
• 21:13
  Speaker 10: this investigation goes. I mean, it's unclear at the moment
• 21:17
  Speaker 10: how serious this is going to be for him.
• 21:19
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• 21:37
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