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BlackRock Nears $40 Billion Data Center Deal in Bet on AI · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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  Speaker 1: Listen on demand wherever you get your podcasts, or watch
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  Speaker 1: us live on YouTube.
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  Speaker 2: All right, we've been touting his presence all week.
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  Speaker 3: Ed Ludlow, Bloomberg Tech co host, is here in New
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  Speaker 3: York for the week. He's about to take off, but
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  Speaker 3: he did agree to speak with us before he does
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  Speaker 3: so to talk about the stampede into data centers. Black
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  Speaker 3: Rocks Global Infrastructure Partners the latest to move in that direction.
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  Speaker 4: This is a really important piece of reporting because it
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  Speaker 4: will help a lot of investors and readers understand all
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  Speaker 4: the other stuff that's going into this movement outside of
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  Speaker 4: just the chips and the compute. Black Rocks GP Partners, Geek,
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  Speaker 4: glow winstorpus big player. So what we're reporting, citing sources,
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  Speaker 4: is that they would acquire Aligned, which is basically a
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  Speaker 4: company that builds data centers the actual buildings, you know,
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  Speaker 4: the metal, the concrete, the sand, the water, the cooling,
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  Speaker 4: and then decides on their locations and manages basically a
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  Speaker 4: portfolio of them. What's interesting is you see a familiar name, MGX,
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  Speaker 4: the investment vehicle backed by the UAE.
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  Speaker 5: And its other sovereign wealth funds.
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  Speaker 4: So the idea here is that Black Rocks GIP acquires
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  Speaker 4: it and in parallel a separate equity investment from MGX.
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  Speaker 4: And what is this signal? It's this idea that we
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  Speaker 4: know about the compute demand. So we're basically thinking that
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  Speaker 4: there's going to be four trillion dollars worth of demand
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  Speaker 4: for the chips and the server designs. But if you
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  Speaker 4: start to think about the concrete, labor, building materials, energy
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  Speaker 4: supply utilities, water cooling systems, you can expand that number
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  Speaker 4: out to seven trillion. And this is some really big
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  Speaker 4: names making moves to make sure they have the name
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  Speaker 4: that can build the actual things and then manage them,
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  Speaker 4: you know, as a piece of real estate and as
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  Speaker 4: as an asset class.
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  Speaker 5: I suppose you know, I'm looking for tops in this
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  Speaker 5: in this whole AI story, where's the top? And I'm
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  Speaker 5: always like, man, when private equity gets.
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  Speaker 2: In, that was a big side part.
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  Speaker 5: Yeah, I don't know, I mean forty billion dollars for
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  Speaker 5: real estate company? Is that what we're talking about.
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  Speaker 4: You know, I also want to be honest with you
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  Speaker 4: guys in the audience, like, like real estate is I'm
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  Speaker 4: not so o fay with real estate. It's not a
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  Speaker 4: world that I cover because we've been talking about San Francisco, right, yes,
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  Speaker 4: So let me let me make a sort of weird
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  Speaker 4: parallel example the open Aie story we did this week
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  Speaker 4: on the five hundred billion dollar valuation on in San Francisco.
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  Speaker 4: Right now, everyone's like, this is going to is going
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  Speaker 4: to create a huge bubble in the housing market. Why
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  Speaker 4: because you have about several hundred newly minted millionaires from
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  Speaker 4: that transaction.
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  Speaker 5: Seriously, wow, So like there's a not.
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  Speaker 4: Fun the capital flow to individuals and companies. Did you
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  Speaker 4: guys see the story that's also about this morning about
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  Speaker 4: Jeff Bezos of all people saying that the AI spending
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  Speaker 4: boom is a bubble.
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  Speaker 5: Is oh, really interesting and his company is one of
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  Speaker 5: the major spenders. Thank you.
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  Speaker 2: He says it's a bubble that will pay off.
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  Speaker 4: The bubble that will pay off is so like right now,
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  Speaker 4: the equation for public market investors and debt market investors,
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  Speaker 4: and I think the debt part's really important, is they
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  Speaker 4: do want to see the evidence that top line growth
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  Speaker 4: is materializing, particularly in software companies. If you're a bench capitalist,
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  Speaker 4: you don't care, like that's not how that works. Growth
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  Speaker 4: at all costs is okay. And so when we think
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  Speaker 4: about opening ianthropic perplexity, all these names that we love
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  Speaker 4: to talk about, you know, it's the money plowing in.
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  Speaker 4: There's less focus on the money coming in out the
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  Speaker 4: other side.
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  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: today's at ten am Eastern on Applecarplay and Android Auto
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  Speaker 1: get your podcasts, or watch us live on YouTube through Boeing.
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  Speaker 5: Back in the news and after a string of some
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  Speaker 5: real positive news items over the past six to twelve months,
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  Speaker 5: got a little bit of step back here on a
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  Speaker 5: triple seven plan here, So let's check and with Sid Phillip,
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  Speaker 5: Deputy team leader for Global Aviation at Bloomberg News, said,
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  Speaker 5: what's going on with Boeing and the seven seven seven aircraft?
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  Speaker 6: Good morning, So the seven seven seven aircraft has been
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  Speaker 6: long delayed. So the aircraft was meant to enter service
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  Speaker 6: in twenty twenty and the latest we heard from Boeing
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  Speaker 6: was entering into service in twenty twenty six. Now we
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  Speaker 6: understand that's going to go to twenty twenty seven, and
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  Speaker 6: that sort of means that for Boeing, it's a massive
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  Speaker 6: impact on cash because this aircraft has been years in
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  Speaker 6: development and Boeing is looking to sort of convert all
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  Speaker 6: those orders into cash flow, and so that just postpones it.
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  Speaker 6: And we understand that Boy's and be having to take
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  Speaker 6: a multi billion dollar charge on this program at the
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  Speaker 6: next earnings because of the delay and essentially the fact
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  Speaker 6: that they can't get cash in through the door for
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  Speaker 6: those aircraft.
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  Speaker 3: So this is essentially a profit warning from Boeing before
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  Speaker 3: its latest results. Which companies, which airliners are most affected
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  Speaker 3: by the delay of this Triple seven.
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  Speaker 6: So the Triple seven X is a brand new aircraft
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  Speaker 6: that's meant to replace the older A three eighty and
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  Speaker 6: the seven four seven is the biggest aircraft that Boeing
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  Speaker 6: has worked on, and essentially this would replace those aircraft.
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  Speaker 6: And so the airlines like Lufthansa, we've seen Emirates place
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  Speaker 6: the biggest customer for this cut. Our airways as ordered
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  Speaker 6: some and so essentially the airlines that do long hold
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  Speaker 6: services carrying lots lots of people, those are the ones
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  Speaker 6: that are really affected. And essentially that delays the retirements
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  Speaker 6: of older aircraft and the introduction of more sort of
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  Speaker 6: fuel efficient, brand new aircraft.
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  Speaker 5: I guess just just once more revives kind of the
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  Speaker 5: concern about the engineering and production capabilities of Boring that
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  Speaker 5: were highlighted over the last several years. Adam, is that fair,
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  Speaker 5: do you think? Or were they kind of put a
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  Speaker 5: lot of that behind them here.
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  Speaker 6: They have put a lot behind them, and the indication
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  Speaker 6: from Boeing I mean the CEO Kerry Otberg sort of
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  Speaker 6: flagged these issues and he sort of said that this
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  Speaker 6: was more a paperwork issue rather than an engineering setback issue.
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  Speaker 6: But at the same time, this aircraft has been long delayed.
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  Speaker 6: I mean, it was slated to enter into service in
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  Speaker 6: twenty twenty, and so it's already five years late and
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  Speaker 6: now it's possibly going to be seven years late. And
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  Speaker 6: so it does sort of talk about the certification delays
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  Speaker 6: that Boy's got to get through, including on the seven
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  Speaker 6: three seven Max where the Max seven and the Max ten,
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  Speaker 6: which are the smallest and the largest variants of the
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  Speaker 6: MAX have still to be certified, and that is again
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  Speaker 6: a very important sort of source of ash for Boeing,
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  Speaker 6: and so it is one of the challenges that Kelly
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  Speaker 6: Otberg has to get through as Boeing sort of goes
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  Speaker 6: into the next phase of growth and essentially turns the
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  Speaker 6: corner on its various challenges it's had in the last
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  Speaker 6: couple of years.
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  Speaker 3: So put this into context for us, where does Airbus
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  Speaker 3: stand with the release of its latest versions.
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  Speaker 2: Of its airliners.
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  Speaker 3: If Airbus is also being held up by different reasons,
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  Speaker 3: then maybe this isn't so bad for Boeing.
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  Speaker 6: Yeah, so Airbus has a different problem. They have issues
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  Speaker 6: with production and so they're unable to produce enough planes.
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  Speaker 6: And so while Airbus doesn't have any aircraft currently in certification,
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  Speaker 6: I mean the latest aircraft that triples the eight through
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  Speaker 6: twenty one XLR has entered into service, they have a
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  Speaker 6: different issue. They have issues with supply of parts and
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  Speaker 6: they can't make those planes fast enough to get them
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  Speaker 6: to customers. So the customer is really sort of struggling
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  Speaker 6: on both ends, because on one end, if you've got
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  Speaker 6: an ebbs audobook, you're waiting on delayed aircraft. If you're
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  Speaker 6: a Boeing customer, you're waiting on aircraft that are still
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  Speaker 6: to be certified. In both cases, you can't have those
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  Speaker 6: planes in your fleet and flying around for you and
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  Speaker 6: making money for you. So for the airline, regardless of
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  Speaker 6: whether it's a certification delay or whether it's a production delay,
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  Speaker 6: it is a delay.
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  Speaker 2: It is a delay.
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  Speaker 3: And we keep talking about this duopoly between Boeing and Airbus,
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  Speaker 3: but is there any other aircraft manufacturer that could kind of.
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  Speaker 2: Fill the hole in the meantime for these airliners.
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  Speaker 6: Unfortunately not, I mean, the diopol is here to stay
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  Speaker 6: for the conceivable future. And Comac, the Chinese aircraft manufacturer,
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  Speaker 6: is talking about building. I mean they are building the
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  Speaker 6: competitor to the seven three seven and the eight three twenty,
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  Speaker 6: but they're building in very small numbers and it's going
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  Speaker 6: to be a very long term before they're able to
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  Speaker 6: scale up and match the production cadence that Boeing and airbusill.
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  Speaker 6: And they don't have a white body aircraft. And similarly,
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  Speaker 6: Brazil's Embryer builds smaller regional jets and so they aren't
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  Speaker 6: really a competitor. So at the moment, the only options
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  Speaker 6: for airlines if they want an aircraft, either buying or
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  Speaker 6: ebbus and the boat struggling with all the books sold
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  Speaker 6: out until the end of the decade, and essentially it's
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  Speaker 6: going to be a tough struggle for them.
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  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
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  Speaker 3: Carnival Cruise Line, the stock is up sixteen percent so
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  Speaker 3: far this year, just a bit of the ahead of
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  Speaker 3: the S and P five hundred. But if you look
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  Speaker 3: at other measures, there might be some concern and so
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  Speaker 3: let's do that right now with Jody Lori. She has
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  Speaker 3: Bloomberg Intelligence credit analysts on the outlook for this industry.
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  Speaker 3: And Jody, you're looking at some alternative data, and the
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  Speaker 3: alternative data suggests maybe there's a bit of moderation coming
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  Speaker 3: for Carnival and its competitors.
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  Speaker 7: Yes, Scarlett al d go and we look at the
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  Speaker 7: cruise lines and one of the things we like to
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  Speaker 7: focus on is new versus returning cruisers, and that data
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  Speaker 7: is sort of indicative of how much adoptability there is
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  Speaker 7: in the sector.
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  Speaker 8: Now, if you remember, cruise lines are only two to three.
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  Speaker 7: Percent of the total leisure sector, and so it's still
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  Speaker 7: a relatively small percentage. But as you noted in the introduction,
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  Speaker 7: people book out way earlier, so you get insight into
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  Speaker 7: the psyche of the consumer going into next year in
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  Speaker 7: the following year based on how they're booking. We are
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  Speaker 7: seeing that returning cruisers are still booking pretty strong. We're
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  Speaker 7: seeing that pre cruise onboard spending is still strong. But
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  Speaker 7: I kind of question what that actual onboard spend is
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  Speaker 7: going to look like in twenty six as the consumer
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  Speaker 7: feels they're wallet a little bit more strained, as inflation
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  Speaker 7: sort of really dips into not just the lowest income consumer,
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  Speaker 7: but more of the middle market consumer.
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  Speaker 9: Jody, as a credit analyst, would you rather see one
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  Speaker 9: of your cruise companies build a new ship, put a
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  Speaker 9: new ship in the water, or pay back debt?
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  Speaker 8: What I rather see?
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  Speaker 7: So I don't think that that's a one or the
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  Speaker 7: other situation. You know, obviously, while they were working through
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  Speaker 7: all of their balance sheet upheaval over the past few years,
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  Speaker 7: paying down debt was definitely more favorable. But I think
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  Speaker 7: that the companies can kind of do both because what
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  Speaker 7: new ships do is they provide additional cash in the
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  Speaker 7: door through onboard or through through bookings advanced bookings, and
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  Speaker 7: so what that means is that they don't necessarily have
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  Speaker 7: to rely on the debt markets to fill those cash
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  Speaker 7: gaps the same way that they do when say they're
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  Speaker 7: not able to cruise. Now, something to note about Carnival
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  Speaker 7: and you know the cruise lines in general, is from
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  Speaker 7: a capital structure standpoint and from a credit perspective, they've
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  Speaker 7: actually done pretty well. And Carnival actually just finally got
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  Speaker 7: upgraded to investment grade this week by Fitch. So it's
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  Speaker 7: actually been a pretty strong tailwind for the company.
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  Speaker 8: From the credit perspective.
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  Speaker 7: That will likely feed into the relative value of the bonds.
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  Speaker 7: But in terms of that growth story, that large momentum,
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  Speaker 7: that might be stalling a little bit.
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  Speaker 3: So cruise operators want to get a Paul Sweeney or
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  Speaker 3: Lisa Matail to become a cruiser, and not just a
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  Speaker 3: cruiser for the first time, but to become returning cruisers.
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  Speaker 3: How expensive is it for them to acquire these kinds
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  Speaker 3: of customers.
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  Speaker 7: How expensive is it for them to acquire these customers.
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  Speaker 7: I think it really depends. It depends on the cruise
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  Speaker 7: line itself. And I think what's so interesting is that
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  Speaker 7: we are seeing much of a differentiation in terms of
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  Speaker 7: the different brands, to the point that we're now seeing
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  Speaker 7: Four Seasons and Rich Carlton come into the space in
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  Speaker 7: the form of really high end luxury yachts. We're seeing
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  Speaker 7: Viking continue their position as very hid unfriendly, mostly just
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  Speaker 7: older couples wanting to go on ships and having everything included.
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  Speaker 7: And Royal Cribbean is finally entering into that space. So
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  Speaker 7: when that happens, I'm a little curious to see who
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  Speaker 7: decides to go to celebrity over Viking and if that
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  Speaker 7: creates some sort of cannibalism in the sector. It's more
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  Speaker 7: what's interesting is when you think about it in comparison
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  Speaker 7: to Vegas, where you see that slow down in Vegas,
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  Speaker 7: and the fact that a lot of the cruise lines
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  Speaker 7: have been structuring their new island locations as this alternative
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  Speaker 7: to Vegas. It has a very Vegas vibe, to the
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  Speaker 7: swim up bar, to all the sort of activities you
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  Speaker 7: can do all this sort of a la carte situations. Yeah,
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  Speaker 7: I mean that's that's really where a lot of the
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  Speaker 7: cruise lines are spending their money. And whether customers are
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  Speaker 7: going to see that as a better alternative to Vegas
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  Speaker 7: remains to be seen.
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  Speaker 5: All right. Last month, I don't know if I told
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  Speaker 5: you this jury Judia, I was.
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  Speaker 9: Cruising the Amafi coast and I did no, I was
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  Speaker 9: just we took a okay, but what I did see
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  Speaker 9: is the ritz yacht and intrigued too. It was amazing.
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  Speaker 9: So Jody talked us about that where you go and make,
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  Speaker 9: you know, hell company go into the cruise business because
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  Speaker 9: that look pretty.
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  Speaker 5: Cool that boat.
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  Speaker 7: Yeah, and they only have a few ships. Were talking
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  Speaker 7: three ships at the moment. And for Marriott, I think
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  Speaker 7: they're sort of dipping their toe in the water. No
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  Speaker 7: pun intended just to kind of see the appetite, because
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  Speaker 7: there is a certain customer if you talk the high
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  Speaker 7: high end customer. They don't want to be on a
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  Speaker 7: big ship. They don't want to be on the gigantic
• 14:25
  Speaker 7: icon class ship. That is not their speed. Even those
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  Speaker 7: smaller ships are still a little bit too much for them.
• 14:31
  Speaker 7: I mean, why should they participate with the Pleaves, but
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  Speaker 7: they don't want to have to own a yacht themselves,
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  Speaker 7: so it's a nice middle ground for them. So I
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  Speaker 7: do think that there is a little bit of an
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  Speaker 7: opportunity there.
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  Speaker 8: I'm not so sure it's going to get super.
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  Speaker 7: Large in terms of the number of ships that they have,
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  Speaker 7: but it definitely creates a different situation.
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  Speaker 2: Yeah, the intimacy, the exclusivity is what.
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  Speaker 3: Makes it appealing, especially to someone like Paul, who was
• 14:56
  Speaker 3: nodding along as you were describing all that you talked
• 14:58
  Speaker 3: earlier about on vard word spending. Talk to us about
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  Speaker 3: the economics of having everything included, so you pay one
• 15:05
  Speaker 3: price and like all your needs are met, versus a
• 15:07
  Speaker 3: la carte pricing where they're really trying to get you
• 15:09
  Speaker 3: to spend more and splurge for different things, whether it's
• 15:13
  Speaker 3: extra drinks or excursions that you tack onto the crews itself.
• 15:18
  Speaker 7: And that Scarlett dips into a lot of the data
• 15:20
  Speaker 7: that we looked at through al D and by that
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  Speaker 7: I mean is that we looked at ticket versus on
• 15:24
  Speaker 7: board spending data and what we're seeing is for the
• 15:28
  Speaker 7: brand name ships, so meaning the Royal Caribbean, the Carnival,
• 15:33
  Speaker 7: the Norwegian, the brands, those in particular might be reducing
• 15:38
  Speaker 7: the amount that they gain in terms of ticket price,
• 15:41
  Speaker 7: meaning the amount that they generate in revenue so that
• 15:43
  Speaker 7: they can get people on the ship and then charge
• 15:46
  Speaker 7: them and on board spending and on board spending they
• 15:49
  Speaker 7: actually they benefit a little bit from in terms of
• 15:52
  Speaker 7: cash flows. From a margin perspective, it's pretty attractive and
• 15:55
  Speaker 7: anytime you can get somebody to open their wallet and
• 15:57
  Speaker 7: spend money as attractive.
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  Speaker 8: Now the big sur risk of that is.
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  Speaker 7: If you, you know, if you appeal to a customer
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  Speaker 7: that might feel a little bit more strained, They'll be
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  Speaker 7: fine spending the ticket price, but they might not want
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  Speaker 7: to spend as much on every single excursion that comes
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  Speaker 7: their way. They might go for the sort of base
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  Speaker 7: ship opportunity that's becoming less and less attractive. The companies
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  Speaker 7: are making it so that that main dining hall experience
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  Speaker 7: isn't what you want to do, and so we might
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  Speaker 7: be at a little bit of an impasse when you
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  Speaker 7: have customers getting on the ship saying I don't want
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  Speaker 7: to spend so much, but the cruise line's saying, well,
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  Speaker 7: if you really want the good experience, you have to spend.
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  Speaker 8: More, so we'll see how that plays out into twenty six.
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  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
• 16:44
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 16:51
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 16:58
  Speaker 5: This we're getting right smack into it, getting into the
• 17:02
  Speaker 5: holiday shopping season. I know it's only the beginning of October,
• 17:05
  Speaker 5: but we're starting to see it and the question is
• 17:08
  Speaker 5: what's it going to be like in there, particularly for
• 17:10
  Speaker 5: the toy part of the market. Lindsay Dutch Joints Is.
• 17:13
  Speaker 10: She's Bloomberg Intelligence Consumer Hardlines Senior analyst, and here we go.
• 17:18
  Speaker 10: Toy makers face demand, uncertainty and risk ahead of holiday buying. Lindsay,
• 17:24
  Speaker 10: talk to us about kind of the toy business as
• 17:27
  Speaker 10: we go into this all important holiday shopping season.
• 17:31
  Speaker 2: Hip, Well, thanks for having me.
• 17:33
  Speaker 11: I think the outlook for toys is really interesting, and
• 17:37
  Speaker 11: I'm really excited to hear more from management teams when
• 17:40
  Speaker 11: we get the third quarter earnings in late October. The
• 17:44
  Speaker 11: demand picture looks very uncertain You know, this was supposed
• 17:47
  Speaker 11: to be an up year for toys, but you know,
• 17:50
  Speaker 11: tariffs and just broader economic uncertainty has really weighed on
• 17:55
  Speaker 11: the sector. But I think the bigger issue in particular
• 17:59
  Speaker 11: this year is, you know, because of the tiff announcements
• 18:02
  Speaker 11: in April and lots of uncertainty, big retailers you're talking Walmart, Target,
• 18:09
  Speaker 11: basically held back on placing their orders which they would
• 18:12
  Speaker 11: normally place for holiday in the second quarter.
• 18:16
  Speaker 2: Where there did.
• 18:17
  Speaker 11: Place the orders, they're receiving them in the third quarter.
• 18:21
  Speaker 2: So we did, you know, get that back.
• 18:24
  Speaker 11: But because of that delay and because these retailers are
• 18:27
  Speaker 11: really looking to sell through their inventory, I think that
• 18:31
  Speaker 11: the opportunity for reorders for some of those like hot
• 18:34
  Speaker 11: holiday toy items is limited and that's really going to
• 18:38
  Speaker 11: weigh this year on those toy makers.
• 18:41
  Speaker 3: Is there going to be a shortage of toys that
• 18:43
  Speaker 3: people want to buy? Is that going to be a
• 18:46
  Speaker 3: problem in twenty twenty five.
• 18:48
  Speaker 11: I mean that could be a possibility if something is
• 18:51
  Speaker 11: like really really hot, we could go back to those
• 18:54
  Speaker 11: days where you're like standing at the store or early
• 18:57
  Speaker 11: on a black Friday morning to get the you know,
• 19:00
  Speaker 11: one of twenty that Walmart has. There's a possibility for
• 19:03
  Speaker 11: that because I don't really think that there's going to
• 19:07
  Speaker 11: be a lot of reordering. I do think the toymakers
• 19:10
  Speaker 11: are trying to prepare, they are taking on inventory because
• 19:14
  Speaker 11: the other thing that Walmart and Target did is because
• 19:17
  Speaker 11: of the tariffs, they would have typically imported, you know,
• 19:22
  Speaker 11: in their contract with Mattel or Hasbro or they would
• 19:24
  Speaker 11: have imported the product like direct to their own warehouse,
• 19:28
  Speaker 11: but they kind of switched their plan a little bit,
• 19:30
  Speaker 11: and it's really the toymakers that are importing it to
• 19:33
  Speaker 11: the US and sort of replenishing the Walmart or Target
• 19:37
  Speaker 11: warehouse from like domestically. So there's also a shift in
• 19:41
  Speaker 11: sort of how the order is being placed, and so
• 19:43
  Speaker 11: it just is creating a really uncertain environment in the
• 19:46
  Speaker 11: back half.
• 19:47
  Speaker 3: Lindsay, what about the closing of the deminimous exemption. You know,
• 19:51
  Speaker 3: before this, a lot of Americans were buying directly from
• 19:56
  Speaker 3: websites overseas and just getting stuff shipped to them from China,
• 19:59
  Speaker 3: from the from other parts.
• 20:00
  Speaker 2: Of the world.
• 20:01
  Speaker 3: And now that the consumers will be taxed on it,
• 20:04
  Speaker 3: they face a tariff that avenue might have been closed
• 20:08
  Speaker 3: off so that leaves them going to the traditional distributors
• 20:11
  Speaker 3: as a result.
• 20:11
  Speaker 2: How do you see that playing out?
• 20:14
  Speaker 11: Yeah, I think that could have an effect. I mean
• 20:16
  Speaker 11: when you think about these big toy makers, has Bro, Mattel,
• 20:20
  Speaker 11: even Spinmaster, which is a little bit on the smaller side,
• 20:23
  Speaker 11: you know, a lot of their product is flowing through
• 20:27
  Speaker 11: big box national retailers, so it might not have a
• 20:30
  Speaker 11: huge impact on them specifically. We could see the consumer,
• 20:36
  Speaker 11: you know, switch avenues a little bit, but Walmart, Target
• 20:40
  Speaker 11: are still and those big national retailers are still huge.
• 20:44
  Speaker 11: And where people do go to shop for toys. I
• 20:47
  Speaker 11: mean we still also have Toys r Us trying to
• 20:49
  Speaker 11: make a comeback, and Macy's stores and Kohl's also being
• 20:53
  Speaker 11: a bigger push into toys. So you could see a
• 20:56
  Speaker 11: little bit of shift in I guess where the consumer shops.
• 21:00
  Speaker 11: But we don't see that having a major impact on
• 21:02
  Speaker 11: these companies.
• 21:04
  Speaker 9: And are the toy makers viewing tariffs as a one
• 21:07
  Speaker 9: time thing they have to deal with or are they
• 21:09
  Speaker 9: thinking that it might be something longer term.
• 21:14
  Speaker 11: They have been working to diversify supply chains for some
• 21:18
  Speaker 11: time now. It's kind of wild to think about, but
• 21:22
  Speaker 11: when we came into this year. Hasbro and Mattel we're
• 21:25
  Speaker 11: forty to fifty percent of their toys manufactured in China.
• 21:28
  Speaker 11: That was actually almost half of the broader industry average.
• 21:33
  Speaker 11: And you know, when you think about toys in general,
• 21:35
  Speaker 11: upwards of eighty to eighty five percent we're made in China.
• 21:39
  Speaker 11: There's been a lot of diversification acceleration of diversification efforts
• 21:43
  Speaker 11: happening this year. You know, re distribution of sourcing, you know,
• 21:49
  Speaker 11: how they're sourcing US sold product. There's also been changes
• 21:53
  Speaker 11: in pricing and you know, are we going to be
• 21:55
  Speaker 11: able to sell this product in the US or not
• 21:58
  Speaker 11: because of tariffs. So there's been a lot of change
• 22:02
  Speaker 11: this year. We don't have disclosure on exact numbers anymore,
• 22:06
  Speaker 11: but I think that, you know, the companies will continue
• 22:10
  Speaker 11: to try to sort of maximize their efforts. But Hasbro
• 22:13
  Speaker 11: and Mattel have said that taroffs will be about one
• 22:16
  Speaker 11: hundred million dollars in twenty five in terms of costs.
• 22:20
  Speaker 11: That's even with price increases going into effect, and that
• 22:24
  Speaker 11: that cost could be about the same or more in
• 22:26
  Speaker 11: at least twenty six.
• 22:28
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