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Markets Wrap: Predictions Meet AI Skepticism · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios. Podcasts. Radio. News.
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  Speaker 2: Welcome to the Merrin Talks Money Market Wrap, where we
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  Speaker 2: talk about the biggest moves in the markets this week
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  Speaker 2: and what is driving them.
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  Speaker 1: I'm Merrin Somerset Webb, UK money editor at Lodge.
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  Speaker 3: And I'm John Stevick, senior reporter at Bloomberg and author
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  Speaker 3: of the Money Distilled Newsletter.
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  Speaker 1: John, exciting times. We are not in London.
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  Speaker 2: Where are we?
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  Speaker 3: We're in Edinburgh, the Athens of the North, except for
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  Speaker 3: the weather. I was just saying, Mern saw me in
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  Speaker 3: a jumper. Readers, I usually live in the southeast of England,
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  Speaker 3: and it has been scorching for about six months. And
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  Speaker 3: this is the coldest I've been, I think, in the
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  Speaker 3: whole of 2026.
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  Speaker 2: And for us, it's kind of warm. It's a bit
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  Speaker 2: muggy out there, to my mind. I see John, he's
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  Speaker 2: wearing a jumper and a jacket.
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  Speaker 1: I'm like, it must be boiling. But poor man is shivering.
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  Speaker 3: I'm a wimp.
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  Speaker 1: He used to be a Scot.
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  Speaker 3: Yeah, this is why I get exiled.
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  Speaker 1: Look at him now.
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  Speaker 3: It's terrible.
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  Speaker 1: Anyway, we are not just in Edinburgh.
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  Speaker 2: We are at Panmure House, the last home of Adam Smith,
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  Speaker 2: where we are recording this Markets Rap for you quite
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  Speaker 2: quickly because we're about to go in and do our
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  Speaker 2: Fringe show.
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  Speaker 3: Yes, yes, looking forward to it. And it's a very
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  Speaker 3: special year this year, in case people didn't know.
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  Speaker 1: What's special about this year, John?
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  Speaker 3: 250th anniversary of the publication of The Wealth of Nations.
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  Speaker 2: Mm-hmm. and we're going to talk about a lot of
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  Speaker 2: this kind of stuff today actually we don't want to
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  Speaker 2: talk about it too much now but it is interesting
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  Speaker 2: I was thinking about this on the way over I
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  Speaker 2: was walking, you see, quite slowly because I felt it
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  Speaker 2: was very warm outside and Edinburgh is quite hilly. And
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  Speaker 2: thinking to myself that, you know, when Wealth of Nations
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  Speaker 2: was published, that was the same year, and we'll talk
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  Speaker 2: about this in the show, same year that James Watt
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  Speaker 2: unveiled his steam engine.
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  Speaker 3: I didn't know.
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  Speaker 1: So I know.
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  Speaker 2: So Adam Smith was at, you know, he wrote this
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  Speaker 2: book and published this book at the.
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  Speaker 1: Beginning of the last great industrial revolution. And here we
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  Speaker 1: are right here, right now on the cusp of the
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  Speaker 1: next great industrial revolution.
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  Speaker 2: Revolution which brings us in by the way to an
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  Speaker 2: awful lot of interesting things from his other book moral
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  Speaker 2: sentiments on the nature of humanity which i'm not going
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  Speaker 2: to bore people who want to hear about markets on
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  Speaker 2: but i am definitely going to bore everybody about when
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  Speaker 2: we start our show in 45 minutes right onwards markets
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  Speaker 2: john what's going.
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  Speaker 3: On what is going on well this week i mean
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  Speaker 3: the big news this week was pointing the video reporting
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  Speaker 3: its sales and and it just keeps it just keeps
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  Speaker 3: going I mean, I think you'll have heard quite a
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  Speaker 3: bit of AI skepticism on this show and for which
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  Speaker 3: we make no apologies whatsoever. But they said they threatened
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  Speaker 3: their sales next fiscal year will be up 70%, which
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  Speaker 3: is an awful lot more than analysts had thought. And
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  Speaker 3: analysts had said 45%, which is still a lot. So,
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  Speaker 3: I mean, there does still seem to be this unstoppable
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  Speaker 3: appetite for building out AI infrastructure, at least.
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  Speaker 1: I get that, but I was surprised. I remember the
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  Speaker 1: share price did go up.
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  Speaker 3: Well, 7%, but I think that was after market.
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  Speaker 2: Yeah, 7%. It's not that much for that kind of news.
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  Speaker 2: To be told we're going to sell double, triple, quadruple
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  Speaker 2: what we said we were going to do.
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  Speaker 1: Probably going to be this, that, this.
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  Speaker 2: It's not that much. And when you look at the
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  Speaker 2: forward P for NVIDIA, it's like 18, 19 times or something,
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  Speaker 2: which for this incredibly fast growing company or what we
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  Speaker 2: think is this incredibly fast growing company, it just isn't
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  Speaker 2: that much. But it slightly suggests that maybe that AI
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  Speaker 2: skepticism is getting a little hold in the market or
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  Speaker 2: things have been. There's so much perfection priced in in
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  Speaker 2: people's heads that it's just got to keep beating and
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  Speaker 2: beating and beating to even stand still.
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  Speaker 3: I think it's a bit of both. I mean, I
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  Speaker 3: think that people have definitely got used to Nvidia beating. So,
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  Speaker 3: you know, I think that probably does reflect that. And also,
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  Speaker 3: I mean, I do, I think it's fair to say
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  Speaker 3: there is, I don't think being an AI skeptic is
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  Speaker 3: a remotely contrarian position, but that way, I mean, most people,
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  Speaker 3: I think, would agree that it's basically... Above all, it's
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  Speaker 3: a label.
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  Speaker 2: Although, actually, I want to be clear that we're not
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  Speaker 2: an AI sceptic in terms of AI not being brilliant.
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  Speaker 1: It's brilliant.
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  Speaker 2: LLMs are brilliant. Not as brilliant as some people think,
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  Speaker 2: but brilliant. And there's a lot more great stuff to
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  Speaker 2: come after that. So the technology is fantastic. We're talking
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  Speaker 2: here about the financing, the circular financing problem, to the
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  Speaker 2: extent you can call it a problem, and the prices.
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  Speaker 3: Yeah, and also just the other thing is stuff changes.
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  Speaker 3: And I think that that's the other thing we sometimes
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  Speaker 3: don't don't talk about. I mean, like one of our colleagues,
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  Speaker 3: Pammy Olson, was writing a piece this week pointing out
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  Speaker 3: that one of the reasons China's able to do everything
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  Speaker 3: so cheaply is because basically, as far as I could
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  Speaker 3: understand it, they've got better software. Because they had restrictions on,
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  Speaker 3: they couldn't get the best chips. So they sat down
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  Speaker 3: and they worked out how to program the stuff that
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  Speaker 3: sends the data around the chips in a more effective way.
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  Speaker 3: And actually, if you get rid of the kind of
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  Speaker 3: traffic jam element on a chip, that enables you to
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  Speaker 3: get more out of it. you know, just by, and
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  Speaker 3: more cheaply. And she was kind of saying that, well,
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  Speaker 3: you know, our stocks are going to have to do
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  Speaker 3: this because Nvidia keeps on, sorry, the American companies are
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  Speaker 3: going to have to do this because Nvidia keeps jacking
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  Speaker 3: up the price. And so, you know, if they want
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  Speaker 3: to compete, they're going to have to get more efficient
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  Speaker 3: at using the chips.
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  Speaker 1: Yeah, and the prices are going up.
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  Speaker 3: Yeah, yeah.
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  Speaker 2: Nvidia has announced price rises and we're beginning to see
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  Speaker 2: that come through in pretty much all technological products, rising prices,
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  Speaker 2: which of course will feed through into inflation, feeds through
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  Speaker 2: into bond yields, feeds through into the price of financing
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  Speaker 2: for everything.
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  Speaker 3: Yeah.
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  Speaker 1: It's all so circular.
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  Speaker 3: Well, yeah, and also all the private stuff. I mean,
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  Speaker 3: there's so much. And again, this is all starting to
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  Speaker 3: come out. So, I mean, there was a big kind
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  Speaker 3: of diagram. I've seen a few of these now where
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  Speaker 3: you kind of get an iceberg, which is the balance
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  Speaker 3: sheet debt, the big hyperscalers, you know, like Alphabet, etc.
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  Speaker 3: And then there's just this colossal bit underneath, which is
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  Speaker 3: either sitting off balance sheets or it's sort of implied
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  Speaker 3: because it's all rents that they're going to have to
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  Speaker 3: pay at some point. So no, I mean, I think
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  Speaker 3: there's a lot going on. So I can see why
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  Speaker 3: people are taking it with a pinch of salt.
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  Speaker 2: Yeah, although the CEO of NVIDIA, when he was talking
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  Speaker 2: about the circular financing, you may call it circular financing.
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  Speaker 2: I just call it financing the greatest technology in the
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  Speaker 2: history of mankind.
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  Speaker 1: None of that matters. Focus on the end goal.
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  Speaker 3: And I mean, there's an element of Mandy Rice Davis there.
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  Speaker 3: He would say that, wouldn't he? But equally, if you've
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  Speaker 3: got to keep over-promising and over-delivering... So this is where
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  Speaker 3: I think that most CEOs should take a leaf out
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  Speaker 3: of the guy that runs next, Simon Wilson. Because every
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  Speaker 3: year he comes in and says, oh, we've beaten what
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  Speaker 3: we expected our estimates to be, but we won't do
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  Speaker 3: it next year because everything's terrible. And then the next
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  Speaker 3: year he comes in and says, oh, we actually beat
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  Speaker 3: those estimates, but we definitely won't do it next year.
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  Speaker 2: So he's setting up this idea that in a terrible
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  Speaker 2: environment he can outperform every year.
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  Speaker 1: And that really works.
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  Speaker 3: And it's remarkably consistent, but As I say, the market
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  Speaker 3: always falls for it. So I think more CEOs could
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  Speaker 3: do with that.
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  Speaker 2: Interesting, but it does feel, doesn't it, as though there
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  Speaker 2: is this rotation in the market that we've been talking
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  Speaker 2: about for ages is probably underway.
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  Speaker 1: You know, the Mag7 kind of struggle.
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  Speaker 2: Yeah. Video sticking on a 4B of 18, 18, 19-ish times, etc.
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  Speaker 2: Things are spreading out a little.
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  Speaker 1: Other markets are doing better. Commodity super cycle.
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  Speaker 2: Looks like it's beginning to get a little traction. Look
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  Speaker 2: at agricultural prices, for example. I wish I'd bought some
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  Speaker 2: of those grain ETFs a while back.
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  Speaker 1: So all these things are beginning to get a bit
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  Speaker 1: of traction. See the copper price.
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  Speaker 2: And I'm watching very carefully, and I'm sure you are
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  Speaker 2: as well, all these new mining companies starting up in
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  Speaker 2: the UK. When I say, oh, there's a couple, you know,
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  Speaker 2: there's quite a few down there.
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  Speaker 3: There's a bit of tungsten.
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  Speaker 1: Going on in Devon, et cetera. We used to say, joking.
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  Speaker 1: Do you remember how we used to joke? We used
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  Speaker 1: to say, if you really.
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  Speaker 2: Cared about the energy transition and you really cared about
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  Speaker 2: rare earths, you would dig up Bodmin more and then
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  Speaker 2: we'd laugh ourselves silly.
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  Speaker 1: Now what are they doing? Digging up Bodmin Moor.
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  Speaker 3: Yeah, exactly.
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  Speaker 1: They listen, John. They listen.
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  Speaker 3: Exactly. They came to their senses, finally. No, I mean,
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  Speaker 3: but you're right. And it's also interesting, I guess, well, again,
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  Speaker 3: as we talked about last week, the whole debasement trade
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  Speaker 3: is kind of taking off again as well. So gold's
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  Speaker 3: going up again. Silver's going up again. Bitcoin is going
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  Speaker 3: up again.
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  Speaker 2: But, you know, listen to that podcast we put out
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  Speaker 2: earlier in the week about Q Day and Bitcoin.
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  Speaker 1: And we talked about that.
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  Speaker 2: And I mean, not everyone, not everyone agrees that Q Day,
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  Speaker 2: the day when quantum computing starts to work and encryption
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  Speaker 2: becomes a non-existent thing because quantum can get rid of your...
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  Speaker 2: your encryption in a second. And I asked our guest
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  Speaker 2: about it and he was like, well, yes, I wouldn't
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  Speaker 2: buy Bitcoin because I get it.
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  Speaker 1: That is a risk.
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  Speaker 2: But if you were the owner of a quantum computer
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  Speaker 2: or if you had access to a quantum computer, Bitcoin,
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  Speaker 2: this is a small fish.
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  Speaker 1: You have got much, much bigger fish to fry.
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  Speaker 2: But you might not go after people's Bitcoin wallets because
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  Speaker 2: you couldn't be bothered.
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  Speaker 1: But you could. But you could.
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  Speaker 2: And the very fact that you could surely makes Bitcoin
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  Speaker 2: of less value than previously. We must get Charlie Morrison
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  Speaker 2: to talk about that because we're biased against Bitcoin. Of course,
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  Speaker 2: you are very biased because you don't have any Bitcoin.
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  Speaker 3: What do they call him again?
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  Speaker 1: I'm a bit of a no-coiner. You're a no-coiner.
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  Speaker 3: If only I wasn't.
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  Speaker 2: Right.
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  Speaker 1: Listen, is there anything else that we should tell people
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  Speaker 1: about markets this week?
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  Speaker 3: I don't think so.
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  Speaker 1: Just watch the bond markets.
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  Speaker 3: Yeah, watch the bond markets. French bond yields particularly are
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  Speaker 3: a bit sticky looking this week. And that's just because
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  Speaker 3: they've got a big election next year.
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  Speaker 1: Big election coming up.
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  Speaker 3: And whoever wins the market is going to win.
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  Speaker 1: Yeah, and people are worried about US debt.
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  Speaker 2: Yeah. And that's all quite interesting. So we're going to
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  Speaker 2: keep an eye on that. I tell you what, let's
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  Speaker 2: talk about that in more detail next week. Yeah, yeah.
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  Speaker 2: Something for everyone to look forward to next week on
• 9:33
  Speaker 2: Merrin Talks Money or Merrin Talks Money Market Wrap. A
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  Speaker 2: deep dive into U.S.
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  Speaker 1: Bond deals. Unmissable.
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  Speaker 3: Right.
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  Speaker 1: We're off to do our show. All good, John?
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  Speaker 2: Excellent. Thanks for listening to this week's Marian Talks Money
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  Speaker 2: Markets Wrap. If you like our show, rate, review and
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  Speaker 2: subscribe wherever you listen to your podcasts. Also be sure
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  Speaker 2: to follow me and John on X or Twitter. I'm
• 9:58
  Speaker 2: at MarianSW and John is John underscore.
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  Speaker 1: Stepak. This episode was produced by Sam Asadi and Moses Andam.
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  Speaker 2: Questions and comments in this show and all our shows
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  Speaker 2: are always welcome. Our show email is MarianMoney at Bloomberg.net.