Trump's 'Stargate' AI Announcement
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Bloomberg Audio Studios. Podcasts, radio, news. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Asian markets are reacting to comments earlier today from President Trump. They happened late Monday when he announced a massive $500 billion investment in AI infrastructure.

He also reiterated his stance on tariffs for Chinese goods. We're talking about a tariff of 10 percent on China based on the fact that they're sending fentanyl to Mexico and Canada. Coming up, we'll hear from Fred Newman. He is the chief Asia economist at HSBC. And a little later, we'll talk fixed income with Joanne Bianco, partner and senior investment strategist at BondBlocks.

But let's begin with artificial intelligence. SoftBank Group is now teaming up with OpenAI and Oracle in a new AI initiative in the U.S. It's being dubbed Stargate. President Trump made the announcement earlier today alongside SoftBank CEO Masayoshi Son, as well as OpenAI's Sam Altman and Oracle Chairman Larry Ellison.

Joining us now for a closer look is Rohini Kosolo, a venture partner at Fusion Fund. She most recently served as deputy assistant to President Biden and domestic policy advisor to Vice President Kamala Harris. Rohini, thank you so much for making time. Can I just begin by getting your reaction to this initiative? Sure.

Well, thanks for having me. This announcement comes today as a number of companies in the AI sector, to no one's surprise, are grappling with how we make sure the United States continues its competitive edge on artificial intelligence. So this is certainly an exciting day for Americans to hear about where we're investing our priorities in terms of AI infrastructure.

What about the regulatory regime that may be required so safety is given its proper ranking in the list of priorities? Well, specifically as it pertains to data centers, which is really the heart of what was being announced today, what we know is that the conversation that's been happening around artificial intelligence in the future for data

training these models that people work with all the time. Just to give some context, the energy capability and the needs for these models can be as much as a small town for a year. So just to train one model, it could be as much as a small town. And when you think about it in the real context about the needs of what America needs to continue at

leading edge, it comes as no surprise that companies are starting to step up in a way to really think through how can we partner together to make sure that we all benefit from all the real needs we have around capabilities, which sources of energy, and also similarly, how do we deal with safety and security

But when we look across America, there's a lot of energy updated needs that need to happen for all of this future to take place. So from what I understand, President Trump rescinded the executive order of his predecessor when it comes to AI. This is after the Biden administration tried to strike a very careful balance here. And from what I understand now, that the Trump administration is going to be a little bit more permissive

safety, transparency requirements for AI developers has been halted. Does that concern you? Well, of course. I mean, I think that it's important to make sure that...

You know, as I wrote about just released today, it's important that we think about this conversation not as so much about a regulatory, deregulatory environment, but truly about what do consumers need in order to move forward and make sure that all Americans are protected, but also empowered by the new technology that we're going to explore.

And putting, whether you're in Washington, D.C., Silicon Valley, New York, or anywhere across America, it's important that the needs of everyday Americans are put first when we have these conversations about what is needed to have a future in artificial intelligence.

You touched on the issue of energy a moment ago, and I know that these AI data centers are very, very energy consuming. I mean, they use vast amounts of electric power. What should the plan be in terms of policy on energy production going forward for these data centers?

Well, I think more conversations in terms of public-private partnerships are excellent. Any initiative that signals economic growth, especially when we look at downstream effects of things like cloud computing, semiconductors, hardware manufacturing, these are things that it really doesn't matter which administration is in charge of what policies. These things just need to happen in order for our economy to grow in a broad-based way.

So many different companies around should be considering, if they're not already, how they position themselves to benefit from the demand that we're going to continue having around the need for AI solutions and supporting technologies. So I think, if anything, we'll see more partnerships in these sectors that are critical to AI infrastructures like what we're seeing today, including chip manufacturing, logistics, supply chain issues. So all of these things are really important. And

they're complementary to each other. What about adoption of more nuclear power? Is that something that is essential, do you think? I definitely think it's important to make sure that that is a very important part of the conversation. I mean, these are huge issues

energy storage needs. And we should be looking across all sorts of energy sources, renewables. The conversation around nuclear comes as no surprise in this space. We also have to think about, just as you talked about different sources of energy, also about how we're skilling and re-skilling our workers to meet this demand, too. So that, I think, will be a critical area moving forward in terms of the

demand for AI-related experience and how we make sure that we're creating jobs for the future. Rohini, before I let you go, one of the things that the Biden administration did effectively was to put export controls on advanced technology, especially advanced semiconductor technology, trying to keep that out of the hands of China. We've not really heard much in the way of that issue being addressed on the part of the Trump administration. What would your advice be on that front?

Well, I think everybody is aligned in America that we have to move forward, making sure that we are continually going to be the leaders in artificial intelligence. I think you will see so many people that have been doing work in the last administration move forward with their work in this administration. Just in terms of companies moving forward, the need is so great in terms of what we do.

have to get done on artificial intelligence and how fast things are moving. Even the data centers that we talk about right now, you know, in the future, they'll have to be able to be adaptable to the changing nature of the very conversation we're having. And so as much as flexibility as people can build in moving forward, knowing that we are in a very rapid technological cycle, and it's exciting for everyone to be a part of.

But should AI technology be used as a negotiating strategy in dealing with Beijing, or are you of a different view? Well, I'll leave the negotiations in terms of the, leave it to others in terms of, you know, the different carrots and sticks approaches to our relationships with our other partners and allies, adversaries, and people, countries all in between. But what I think is important is

Announcements like today where government comes forward and is working hand in hand with the private sector, as we saw in the last administration, companies stepping forward. These are all good things in the nature of making sure that AI is moving forward. But like I said, also ensuring at the same time that we have a balanced

It's workers being able to be the center of this and making sure that, again, as I alluded to earlier, that really everyday Americans are at the heart of what we're doing moving forward will help us define a much better future for America.

Rohini, thank you so much for making time to chat with us here on the subject of artificial intelligence. She's Rohini Kosolo, venture partner at Fusion Fund, most recently serving as deputy assistant to President Biden and domestic policy advisor to Vice President Kamala Harris. Rohini joining us here on the Daybreak Asia podcast.

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Welcome back to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. And in a moment, we'll be looking at fixed income with Joanne Bianco of BondBlocks. Asian equity markets are following their U.S. peers higher on the bet for fewer restrictions for business under the Trump administration. We heard earlier from Fred Newman. He is the chief Asia economist at HSBC. He spoke with our Paul Allen in Sydney.

In terms of what we've just seen this morning, Fred, the year of the snake is meant to be the year where we embrace uncertainty. We didn't get tariffs yesterday. It looks like we've got them today. What's your reading on how the US-China relationship evolves from here? And how do you see China countering any potential impact from trade policy?

Well, there's, of course, plenty of relief right now that we don't have the imposition immediately of terrorists by the U.S. on the imports of goods from China. And there is a bit of a hope here that we could get the two sides talking in the coming months. Maybe, maybe kind of there might be a

AN OPENING HERE TO BLUNT SOME OF THE BIGGEST TARIFF INCREASES IF INDEED A DEAL CAN BE STRUCK. BUT THE RISK IS NOT OFF THE TABLE. AND JUST AS WE HEARD JUST A SHORT MOMENT AGO, A 10% TARIFF MIGHT STILL COME BECAUSE OF FENTANYL, FOR EXAMPLE.

Even though we haven't seen immediate position of tariffs, they're certainly not off the table for the year of the snake. And so China will still need to brace for potential tariffs, and that's going to slow down exports this year. It comes at a very difficult time for the Chinese economy. And there's not much really that China can do apart from trying to negotiate to kind of avert that particular trajectory that we have currently underway.

Yeah, well, we did also hear from the Chinese vice premier saying that China will expand imports to promote balanced trade. So there seems to be certainly a willingness to work this out on both sides. But China's got domestic problems as well, obviously around the property market consumption and deflation also. Do you see 2025 as being the year that China emerges from deflation?

IT'S STILL A LONG WAY TO GET OUT OF DEFLATION. MAYBE TOWARDS THE SECOND HALF OF THE YEAR WE SEE SOME INDICATORS TURNING MORE POSITIVE AGAIN. BUT IT WILL REQUIRE QUITE A BIT OF STIMULUS. WE NEED TO GET THE CONSUMER SPENDING AGAIN IN CHINA. THAT REQUIRES STABILIZATION OF THE PROPERTY MARKET. IT WOULD REQUIRE MORE FISCAL SPENDING.

A long road to go. The other thing that was interesting with the comments by Vice Premier Ding this morning is that he's also trying to reach out to other countries in terms of trade, saying that maybe least developed countries may not face tariffs when exporting to China, trying to work with other economies. So the strategy here is negotiate with the U.S., trying to keep other trading partners on board,

and try to do as much as you can domestically to revive growth. But on all fronts, I think China has its work cut out for itself, at least in the next several quarters. Well, you've been attending a series of staff and client meetings this month to kick off the year. What's the sentiment around not just China, but Asia's other major economies in 2025?

Everybody's looking across the Pacific and seeing what signals we get out of Washington. Tariffs is only one thing. The other thing is still worries persist around how much inflation is there in the U.S., how quickly can the Federal Reserve lower interest rates, what does this mean for the dollar and therefore Asian currencies and Asian central banks.

So the beginning of the year, the square focus is on the U.S. and not just on the trade policy, but domestic policy as well. Beyond that, I think there is some slight optimism coming in here that maybe we have kind of averted the most acute

imposition of tariffs, that there's still room for negotiation. That's certainly reflected in how markets have traded in the last few days. And there's a bit of a hope that maybe in China we will get more stimulus come through. But it's the U.S. at the moment that sets the tone for global macroeconomic policy, and that will likely stay the case for the next few months.

The Trump inauguration has seized a lot of the headlines this week, but we do have a major central bank meeting coming up on Friday. It is, of course, Japan. And we've got traders seeing 90 percent chance, or it may even be higher than that now, of more tightening this Friday. Now, what's your view of the path ahead for policy normalization in Japan?

Well, most indicators suggest that monetary policy should or can be normalized further. Inflation is on the right trajectory. The labor market is on the right trajectory. Growth is expected to be rebound this year, partly because consumers are coming back. So it's a question of tactical timing for the BOJ, not whether they will hike, but when they will hike.

And so this Friday seems as good day as any to hike after the volatility that we've seen at the start of the year. Maybe hiking now will provide a bit of support for the Japanese yen as we head into potentially more volatility into the coming months. So this Friday seems like, to us at least, that it's a likely hike. And we know that the BOJ, after last summer's surprise, maybe doesn't want to –

catch the market too much off guard and so we get a bit of a hint here from officials that really a rate hike is on the table so friday is a go for us um but of course uh what happens in the next 24 hours may well push the decision one way or the other that was fred newman chief asia economist at hsbc in conversation with bloomberg's paul allen i

I'm joined now by Joanne Bianco, partner and senior investment strategist at BondBlocks. Joanne, joining us from Chicago here on the Daybreak Asia podcast. Thanks for making time to chat with us. Can we begin with what the market had been expecting prior to Trump's inauguration when the conversation around his economic policies seemed to suggest a little bit of concern about inflationary pressures building? Is that a concern for you at all?

It doesn't concern us necessarily, but it is just something that you have to factor into your outlook for financial markets and fixed income markets in particular. We're seeing yields move lower today in the U.S. session right across the Treasury curve. It's kind of been interesting over the last couple of days to see this big move lower in yields. What do you think the market is indicating at this point with those lower yields?

I think it really stemmed from the main news last week.

that US CPI rose by less than forecast in December. And so that was welcome news for the financial markets, both fixed income and equity. And you saw rates rally sharply across the curve. It probably doesn't end up changing what the Fed does in and of itself.

just one lower CPI print, it looks to us that they're going to continue to be on hold for further rate cuts right now. So the amount of further reductions in yield is something that remains to be seen. So when do you think we'll get the first cut? Sometime after mid-year? Yeah.

I'm just not projecting that right now because I think our view is that, you know, there's there in the face of the data that we're seeing is that there's not really a reason to cut rates.

from the 100 basis points that they've already cut. I know it's a minority view, but there are some on the street talking about the next move being a hike. That's if these inflationary pressures not only prove to be stubborn, but in fact, maybe accelerate just a bit. Is that something that concerns you at all?

Again, you know, not really a concern. It would just that would just be a real change. That would be a departure from what we think is going to happen. I think that our view is that, you know, rates remain higher for longer, not necessarily that there will be rate hikes again. So you mentioned the CPI data, obviously measuring the retail inflation. How do you understand the strength or the health of the American consumer? Yeah.

Consumer's been very resilient and has really helped this economy stay strong and it's in turn helped corporations do well. So it's just been a very resilient consumer that continue to surprise people, but it is what it is. Where are you seeing opportunity right now in the fixed income space?

Well, we really think that fixed income offers a wide variety of opportunities right now. But the environment that we see right now is really just supports what our main investment thesis is to buy credit. So U.S. high yield, investment grade corporates, particularly triple Bs, but stay short in duration just because there's going to continue to be pretty

high volatility, especially in the long end of the Treasury curve. And then finally, to just be tax aware in your investing. It's not necessarily about only investing in municipals, but looking at the whole set of opportunities that are available to investors and figuring out what is the best after-tax.

So opportunity when you're looking at high yield, I'm curious about the industries right now that represent value. Is it the energy space or maybe something else where companies are taking a great deal more risk and you're not at all concerned about the risk of default?

Well, I can't say that we're not at all concerned about the risk of default. There's always going to be some defaults in high yield. But what we're expecting is that the default rate would will be lower than the long term average once again in 2025 and certainly supportive of the current level of spreads and the current level of valuations for many of the companies. You know, so when we

wouldn't our main view right now is that you're you're being paid to take the risk in high yield even down to the triple C rating category because of the strength that we see in fundamentals for high yield corporations. Is there a theme here, an industry group that you're particularly attracted to at the moment?

I mean, we're not shying away from consumer cyclical. We just feel like we're not expecting that the US is headed into a recession. You think that you're probably being paid

more for some of the higher risk sectors. And right now, that's the TMT sector is the area that has the highest yield among major industry sectors. There's definitely some risk there. But overall, when you look at that sector, there seems to be opportunity as well.

Joanne Bianco, she is partner, also senior investment strategist at Bond Blocks in Chicago, joining us here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg. ♪

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