Daybreak Weekend: Job Report, Earnings Season, DeepSeek
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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, a look ahead to the January jobs report here in the U.S., how that may impact Fed policy moving forward. I'm Caroline Hepka here in London, where we're looking ahead to the Bank of England rate decision and what the chancellor's plans for growth might mean for them. I'm Doug Krisner, looking at what lies ahead for China's deep-seek.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. We begin today's program with the January jobs report. We get non-farm payroll numbers this Friday, 8.30 a.m. Wall Street time. And for more, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent. Well, Michael, 2024 ended with a blowout. December jobs report, 256,000 added. Ending the year, 4.1% unemployment, a five-decade low. Did the good times continue into January? Yeah.

Well, that's the question, and we aren't exactly sure. There seems to be a division on Wall Street about how this is all going to work out.

Reversion to the mean is a sort of a well-known phrase in economics, and that's what economists surveyed by Bloomberg see for the private payrolls number itself. 223,000 last month, but for January, they're only at the moment thinking about 130,000, which would fit the pattern we saw before that big December number.

So that would suggest that the economy or the labor market at least is slowing down some, but that 4.1% unemployment rate isn't expected to change.

So, what we have seen sort of in all the ancillary data like jobless claims and things are that people aren't losing their jobs, but they're not getting hired. It's taking longer to find new jobs. Business seems to be putting new employment on hold, but they're not getting rid of people yet. And the idea, I guess, is that this report will ratify that. Now, seasonal holiday jobs, we always see a decrease in January, correct? Correct.

Well, that's the way it used to be. It's a little bit less that way now, and it's a little bit harder to figure out exactly what the seasonal impact is going to be. We know that the seasonal employees were hired later this year. They showed up in December instead of November. Do they stay on a little bit longer? Do they slowly go away? I think one of the reasons we're looking at the 130,000 is that

economists are anticipating those people will have left the jobs, but it's really hard to tell. The other impact is going to be from the Los Angeles fires because they took place during the survey week for the January payrolls.

And we don't know exactly how many businesses were destroyed, but we know a lot from looking at the video. And so there are probably going to be a number of job losses. Some analysts have said as many as 20,000 that would show up in the report. And for the economy, we saw Hollywood suddenly stop some production of TV shows, movies. So it really had an impact, which will lessen over time, of course. I think things are now, weeks later, getting back to normal.

Well, let's talk about the Federal Reserve. The labor market, pretty solid, as you said. We're looking at no change at a 4.1 unemployment rate. Economic growth, we just saw this past week. GDP growth, fourth quarter, you know, a little stronger than expected. But inflation, inflation.

That's always the kind of the butt out there. You don't even have to say anything beyond that. Inflation has sort of stalled out. The PCE numbers that the Fed released on Friday basically show that in December, inflation was unchanged on a year-over-year basis.

And that's not what they want to see. But it does suggest that as long as that continues, the Fed's going to remain on hold. It was the reason that Jay Powell cited for not moving at last week's meeting. So I think at this point, we're watching to see any indications of whether inflation comes down. And all of a sudden, we'll be looking at things like home prices and rents even more closely, because that's really where...

the stickiness is. The Fed needs that to happen. But also, we're looking at our average hourly earnings in the employment report because the Fed says right now the labor market is not inflationary. So they don't want to see any changes there either. Well, let's talk about the rate. 2.8%. Is this almost a new normal? It really hasn't changed much in months, right? Yeah.

That's the key question. Can the Fed get it down to the 2% target? Or is the economy growing at a faster pace than it had been? Is potential growth higher, which would mean inflation would be higher? It could support the 2.8%. Does that mean that we need higher interest rates on a regular basis? Not necessarily raise them from here, but don't cut them.

That's the debate within the Fed, and that's the thing that they have to figure out between now and their next meeting on March 19th. And that should be relatively easy except for Donald Trump and his tariffs and everything else that's going to happen between now and then. Well, speaking of those tariffs, how do you think the Fed has prepared for the threat of those 25 percent tariffs? I mean, Canada, Mexico buy more American products than anybody else. So we know this is, you know, it could be.

challenging. How's that? Challenging indeed. Well, I know a lot of Fed officials around the country at the various Fed banks and then down in Washington at the Board of Governors have tasked their researchers to come up with what-if scenarios. The problem is, without a lot of detail, it's been hard for them to come up with what-if scenarios. And

And so now if they get some details, it takes them time to work through it all because there's a lot that goes into it. It's not just what the tariff level is. It's how long it's imposed for and how it's imposed, you know,

over time or immediately? And then what do the tariff countries do? Do they put tariffs back on the U.S.? So all of that has to be accounted for. So it'll be a little while before the Fed has a clear idea of what it would mean. The January jobs report out this Friday morning, 8.30 a.m. Wall Street time. Our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent.

We turn now to earnings with two more members of the tech sector's so-called Magnificent Seven posting fourth quarter results this coming week. Alphabet on Tuesday and on Thursday, Amazon. And we want to focus on Amazon to see about sales over the holidays and its cash cow cloud computing and AI services unit and any impact at all from China's deep seek chatbot. Now for more or all of that, we're joined by Anurag Rana, Bloomberg Intelligence Technology Analyst.

Adirag, we'll start with the earnings. What are you expecting to see in Thursday's earnings report from Amazon?

You know, my colleague Poonam and I, we published our preview for Amazon and we think that the 4Q sales could be at the high end of their guidance of 7 to 11 percent, driven by AWS advertising retail sales over the holiday quarter, which were very strong, frankly. So those are the areas we also think advertising revenue could be in the high teens, given the addition of prime video ads.

So sales good on its signature site, ad sales. What about its cash cow, Amazon Web Services? And what is Amazon investing now in AI and infrastructure and services? You know, you're right. That's probably the most important question right now. We're looking at Amazon, you know, sales growth of somewhere around 19%, excluding FX impact. That's slight improvement.

better than I would say what would have anticipated just a year ago. And a lot of that is driven by the improvement in workload consumption or people

people running more things on the platform. AI will contribute as well, although they don't disclose contribution from AI sales similar to Microsoft, but that's because they do not have, you know, you could say the workloads coming from consumer apps like ChatGPT. Most of their businesses, enterprise and corporate clients are just starting the implementation of

AI-related products. So it's not as, you know, you could say that is not a mature market as some of the consumer apps have been. So a lot of room to grow for Amazon in AI. Absolutely. A lot of room for everybody to grow, including, you know, Microsoft and Google in this case.

What Amazon has done is they have a strong relationship. They've invested in a company called Anthropic, which is one of their, you could say, preferred large language model providers. They also have their own model. They also let people use models from a meta called Lama. So it's up to the

client, what kind of model they want to use. Amazon Web Services is just going to provide the platform and basically the infrastructure to run those products. Now, Wall Street got a real wake-up call last week with that low-cost chatbot from the Chinese startup DeepSeek. Boy, did it rattle the markets and rattle a lot of AI companies. How did Amazon react?

Well, in the long run, so first and foremost, we are not even sure whether we should see that as-- in a way, there are two scenarios, whether we can continue to see large amount of improvements in these models without the use of expensive chips. And that's where the argument is right now. If we were to take that aside,

If in reality we can come up with models at a much cheaper cost, that's really good for somebody like an Amazon because they don't have to spend that much in capital expenditures. And the growth curve or the adoption curve of AI goes up. These guys benefit from that because they are providing the infrastructure. So I think in the long run, it's good for the cloud providers like Amazon. But again, I think we still have to see whether that

It really is the case that you can build models that cheaply. Consumer spending, I want to go back to that. In the final quarter of last year, up better than expected, about 4%. A lot of that from Amazon.com, obviously. It's like most consumers can't live without it. But something I want to bring up, UPS in its earnings...

just said that they're going to slash deliveries they do for Amazon in half by next year. That's because of the home deliveries, just too costly. FedEx made the same decision five years ago. FedEx doesn't even deliver for Amazon. What do you think it could mean for their e-commerce unit? Yeah, I think, you know, one of the most important part of their e-commerce business is really their logistics at this point. Frankly speaking, you know, when you think about it, what they did in COVID, they've really invested so much to improve their logistics network.

So frankly speaking, I think you could argue that these guys really don't need anybody else. Now, that's not true. They will outsource when they need extra capacity. But their logistics are pretty impressive at this point. And in fact, this whole promise of delivering products within a few hours is really changing the way people buy. What used to happen, Tom, was I used to go to Amazon because it was the low cost provider.

That's no longer the case. You can find goods outside and other websites that are cheaper. But the reason you go to Amazon.com is because as a Prime member, you can get those products pretty quickly. It's happened to me several times that you need something right away and they will deliver it in four to five hours. So that level of service is what I think is the biggest differentiator for Amazon. And it's not price.

Amazon Q4 earnings out this coming Thursday are thanks to Anurag Rana, Bloomberg Intelligence Technology Analyst. And coming up on Bloomberg Daybreak Weekend, a rate decision this week from the Bank of England. I'm Tom Busby, and this is Bloomberg.

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For all types of jobs and a variety of reasons, choosing Express Employment Professionals is the move to make this year. With more than 860 locations in the U.S., find the one near you at ExpressPros.com. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, deep-seek move markets this past week. We see what's next for China's AI startup. But first...

Policymakers at the Bank of England are preparing to make their first interest rate decision of the year. A slumping currency and stagnant growth will be on the minds of officials as they make their choice. Now for more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom.

Weaker sterling is just the latest factor that Bank of England officials will have to think about when plotting the path for interest rates in 2025. Investors are still expecting a quarter point cut, one of just two fully priced in for this year. But stagnant economic growth alongside the threat of a global trade war has loomed large over the central bank's forecasts and

could dampen the Bank of England's inflation projections in later years.

This, as moves in gilt yields and rate expectations since the budget in October have tightened fiscal conditions, a real headwind for the British economy. Enter Chancellor Rachel Reeves. She's on a mission to revitalise the nation's economic health by going further and faster, as she puts it, for growth and potentially lifting some of the

pressure on Andrew Bailey's Monetary Policy Committee. She has been speaking to Bloomberg about her proposals. Well look at the reaction from business to the speech I gave two-thirds of businesses and the instant reaction. I said they now feel more confident about the government's growth plans and

And I want to make no apologies for putting our country back on the right path. And because of the planning reforms that we're making alongside the big announcements yesterday, it means that we can crack on and get these projects delivered quicker because they won't get clogged up in the courts because we're reforming the way that you build stuff in Britain.

Do you not feel, though, Chancellor, that you need to deliver something that will deliver now, that will give an uptick to growth now? We're looking at the labour market data, messages from recruiters, the purchasing managers surveys, all of those telling us quite negative things about the labour market, saying that businesses are shedding jobs at the rate we haven't seen since the financial crisis.

Well, if you look at the IMF forecast for the UK, they've revised up the UK's growth prospects for this year. The PwC survey released at the beginning of last week of global CEOs who see Britain as the second best place in the world to invest.

outside the United States. The first time in 28 years we've been at that position in the league table. And yesterday, businesses coming out and backing Labour's plans to grow the economy and making them feel more confident about the future. Can you give me a growth number by the end of the year then? If you are more positive about what growth is going to deliver in the UK, what growth numbers we can expect, do you have a number in mind? Do you have a target for this year? And can you share it with us? Well,

I'm not going to do growth forecasts. That's up to the Independent Office of Budget Responsibility, the IMF, and others to forecast the UK's growth prospects. But what I did was to set out some ambitious plans to get our economy growing, to get spades in the ground,

to deliver these infrastructure projects that in many cases have been available for years now, but the previous government balked at. So whether it's the Oxcam growth corridor to create Europe's Silicon Valley here in the UK,

or the third runway at Heathrow, a new stadium at Old Trafford, the Trans-Pennine route upgrade, a new airport at Doncaster. All of these things are about a confidence in Britain saying to investors, look again at Britain. This is a great place to invest, to start and grow a business. And this government has your back. When does the first spade go in the ground in any of those projects?

Well, let's take Heathrow. We've asked Heathrow to come forward with plans by this summer and we hope to be able to grant a development consent order in this Parliament, so spades in the ground in this Parliament. But other projects can get going sooner. We've committed to build 1.5 million homes in this Parliament and we've made it easier to build, for example, around commuter railway stations with the default answer for planning applications now being yes.

So he threw spades in the ground this Parliament, one and a half million homes in this Parliament, because we want to go further and faster to kickstart economic growth, to make our economy more competitive, to be a more attractive place for businesses to invest and ultimately to make working people better off.

Chancellor, we've heard a lot about growth over recent days and there do seem to be still some divisions amongst your team around what all of these will mean for the environment of course. Businesses might be a little bit confused about what kind of reaction function we can expect you to have around green issues. Do you think that the green policies of this government or the push towards electrification for example, all of these things, are they a little harder to predict for business now than they were?

Well, look at the record of this government. We've ended the moratorium on onshore wind and indeed have signed off planning applications in just six months for new onshore wind farms. Signed off planning applications for solar farms that the previous government blocked. We've invested alongside with BP and Equinor in carbon capture and storage in Teesside.

and Merseyside. So we know that there are huge industrial and investment opportunities for the private sector in these jobs and industries of the future. And Britain has unique strengths in this area because of our industrial heritage, because of our geography to reap the benefits of that investment.

OK, Chancellor, can I ask you just about the US Treasury Secretary, Besant, who is now going to be your counterpart in the United States? I wonder what you plan to discuss with him and do you have plans for a conversation soon? I'm really pleased that Scott Besant was confirmed earlier this week as the next US Treasury Secretary. I

I have written to him and I look forward to talking to him soon about how our two countries can work together to grow our respective economies and I look forward to having a close relationship with Scott Besant and his team at the US Treasury. That was the Chancellor Rachel Reeves speaking to Bloomberg's Anna Edwards, Kriti Gupta and Guy Johnson.

So the government is going for growth, but are businesses coming along for the ride? We've been getting reaction from the Director General of the British Chambers of Commerce, Siobhan Havilland, who was one of the first to turn critical in the wake of the budget last year as growth flatlined and we saw a dip in both consumer and business confidence. We spoke to her just after Rachel Reeves' big announcement. It was a big announcement.

It will deliver in the short term in lots of different places. Remember, this is a really difficult time for business. National insurance increases are coming in place in just a few weeks, so tax rises for all businesses.

So it was really good to see the Chancellor focus on economic growth, airport expansion, Heathrow, Doncaster, Sheffield, New Road Rail, Lower Thames Crossing, East West Rail and rebalancing the planning system, as you outlined. So those things will have not just a they're a great opportunity.

signifier, global signifier of confidence and the direction we're traveling in. Big infrastructure projects, as you say, take a long time, so you need to start now. But remember that indicator for the small and medium sized businesses in those supply chains will already give them confidence to think about investing now and growing their businesses now so they can supply into those infrastructure projects.

But Siobhan, is it going to be enough? Those businesses are worried about how they're going to pay for the national insurance rise coming in a couple of months' time. The budget has been very difficult and we've seen that reflected in both business and consumer confidence figures. The budget has been very difficult. It has. And especially if you have a business with a large employee base, it is going to be very hard.

Our businesses are telling us they're going to have to put up prices if they can. A lot of them have already put up their prices. That's going to be tricky. They're going to take it in their margin, which means lower investment, or they're going to slow down recruitment. And none of that is good. But you remember at the same time in the budget, the Chancellor also said to mitigate against those

those issues. We need more opportunity for business. And she talked about getting Britain back to building homes, hospitals, energy, infrastructure. And so, you know, the announcements yesterday are a really good step in that direction. They're a really good indicator for that. Things like

infrastructure projects. It's not just local supply chains and local economic development. Often supply chains run all over the country. Connectivity, airport expansion, that's fantastic for trade, you know, moving our goods around the world, and also global competitiveness. Okay, but she did not reverse the tax increases on business from the October budget. I mean, okay, you can understand why she might not do that.

but she will be under pressure to do something in the spring statement, potentially if her fiscal headroom disappears. That's either going to be cuts to government or it's going to be more tax increases. Are you expecting more tax increases to come? Do you want her to do, let's say, something that would be much more business positive, lower corporation tax in Britain?

we, uh, well, I don't know what she's going to do in the spring and we're definitely not expecting any tax increases for business. She's been pretty clear that that was a, what did you call it yesterday? Once in a generation tax increase. Um,

However, there are other places where she can help business. So we've asked her to accelerate her review of business rates. Business rates are the tax that you pay on property. So really hard if you're on the high street, you know, before you've even sold a single product, you're paying tens of thousands in tax. So how she can review business rates and change those more quickly to help our high streets business.

And actually, you know, the other thing is the quickest way to grow our economy is through trade.

Our biggest trading partner, the EU, it's still really hard to move goods over the border there. What is the government doing more quickly to help businesses who are trading around the world? That was Siobhan Haverland from the British Chambers of Commerce. She was sharing her reaction to Chancellor Rachel Reeves' proposals that came out in the past few days, speaking to me and to Bloomberg's Stephen Carroll.

Judging by her media blitz over the past couple of days, Reeves has a plan and she wants us to know about it. But just how long will it take for the results to materialise? And when can institutions like the Bank of England expect to see those improvements in real life? These are all questions that remain up in the air, some of which will likely be

be put to Bank of England Governor Andrew Bailey during his post-monetary policy committee press conference in the next few days. And of course, we will have full coverage of the press conference and the interest rate decision here on Bloomberg.

I'm Caroline Hepke in London. You can catch us every weekday morning for Bloomberg Daybreak here beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Tom. Thank you, Caroline. And coming up on Bloomberg Daybreak weekend, we head to China to see how AI startup DeepSeek has plans to take on U.S. artificial intelligence giants. I'm Tom Busby, and this is Bloomberg. ♪

I'm Alpine skier, Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there. It's

At Stiefel, we invest everything into our advisors so they can invest everything into their clients. That means direct access to one of the industry's largest equity research franchises and a leading middle market investment bank. And it's why Stiefel has won the J.D. Power Award for Employee Advisor Satisfaction two years in a row.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc., member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award. The average time to hire for most organizations is 30 to 45 days. Are you tired of a costly and lengthy hiring process? Simplify and speed up your recruitment by using the experts at Express Employment Professionals.

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. It was a story that sent shockwaves through global markets last week. A Chinese startup releasing an AI model said to rival OpenAI's ChatGPT and allegedly at just a fraction of the cost.

For more on what's ahead for China's DeepSeek, let's get to the host of the Daybreak Asia podcast, Doug Krisner. Tom, the model is known as R1, and the claim made by DeepSeek was that R1 rivaled or even outperformed leading Western chatbots on a range of AI industry benchmarks. I think the most shocking claim was R1 was built for just a small fraction of the cost of its Western rivals. Well,

Well, this immediately sparked skepticism on the high valuation of U.S. and European AI-related companies, but I think the eye of the storm was clearly NVIDIA. In the Monday session, its shares tumbled 17 percent, and

And that drop erased $589 billion from Nvidia's market cap in one single trading day. For more on the DeepSeek story, I'm joined by Robert Li. He is Senior Software Analyst for Bloomberg Intelligence. Robert joining us from our studios in Hong Kong. Robert, thank you for making time to chat with me about what's happening at DeepSeek, this Chinese artificial intelligence startup.

and the AI model that the company has apparently been working on for a while, R1. What do we know about it exactly? Can you fill me in? Sure.

Sure. Thanks very much for having me on, first of all. As you would expect, Bloomberg Intelligence likes to lead the way. This is actually DeepSeekers, a company we've been writing on for the best part of seven or eight months. I would say it's relatively well known to Asian investors at this point or has been for some time. But obviously, its international profile has only risen more recently.

So the main reason why, or which helps you understand why DeepSeq is doing so well at the moment, really goes back to the earlier export controls on the semiconductor or chip side that were put in place via the US. And one point I've consistently made over the last year or so is that

Again, not to trivialize software development, but the technological barriers to entry on software are significantly lower than on the chip side. It's far easier to develop these algorithms than it is to design a cutting edge chip at the atomic scale. So with these export controls put in place by the U.S., obviously any good engineer is going to try and work their way around a problem. Go around it, go under it, go over it, whatever.

So what the Chinese companies as a whole have done, with DeepSeq being the leading one, is move to more computationally efficient, smaller models that are more adept at utilizing and running on locally developed chips from the likes of Huawei. And that ultimately leads to models which are faster to develop and more importantly, lower cost to both develop

and to train or inference, and that gives companies like DeepSeq a significant cost and efficiency advantage

over their domestic competitors in China and also as we've seen in recent headlines some of the big US tech platforms. So it's really been a wake-up call to the entire industry. How long have software programmers in China been working on this? To give you a metric to work with, I guess, you know, how many of us had heard of large language models in China when ChatGPT first launched and there were next to none. So to quote a stat at you, in October 2023,

So, you know, roughly 18 months ago or so, there were 14 officially sanctioned models available in China from the regulator. And then rolling forward to where we were at the end of last year, there were close to 300. So that highlights the very rapid progress that Chinese companies have made.

And as I said, with increasing focus on smaller, more computationally efficient models in order to work their way around this problem caused by the US chip controls, the consequence of that is their developments have remained on track and relatively unhindered, but that has given them some potential cost advantage.

versus the, let me call it a more brute force approach taken by companies in other parts of the world, not just by the US.

But again, this is going back to basic principles and engineering. You know, you may have seen headlines at the end of last year, given the very high energy costs of these very large models. There was even talk about restarting nuclear reactors, etc. I think, you know, just gut feel, it just doesn't make sense. There has to be an easier way to go about things. And I think, you know, prompted by these external restrictions placed on them, like any good engineer,

the Chinese have focused, gone back to their code and tried to work around the problem and that has developed them some highly competitive models as a result. So it creates a big question mark over the bleeding edge market for that hardware that you're talking about. Obviously on the GPU side,

On the memory side as well, right, with those high bandwidth memory chips? That remains in question, and in no way am I trying to evade that question. Because if the cost of developing these models is decreasing, and on one hand, would that lead to a proliferation in the number of models, a proliferation, more importantly, in the number of applications out there, and in some way, you know, actually accelerate the uptake of

of these products within the wider market because of their increased availability. That's one way that things could go and I guess that would be a more positive way. On the negative side, and again, I think it really is up for debate and remains to be seen,

Is this a potential negative for the hardware suppliers and the likes of NVIDIA, etc.? Because again, this brute force approach that's been taken so far, I don't think it's sustainable in the long run, both from a capital point of view and an environmental point of view and an energy point of view.

So I think that it genuinely is uncertain at the moment, but should become clearer in the coming months. So what do you expect the impact to be of the fact that R1, this AI model from DeepSeek, is open source? How is that going to impact the industry? Well, again, my job is to take a critical eye to things, but I think potentially the

There could be a positive from that because in open source and allowing external developers to really understand the nuts and bolts of how they've put this model together, it's potentially a positive for the industry and will help the industry as a whole move forward.

towards more efficient, lower cost models overall. So again, that is one potential direction of travel that the industry could go in as a result of this because, and again, this may surprise some people out there, this innovative Chinese company has been pretty transparent about what it's done. So I think ultimately that could be to the benefit of the entire industry.

But again, it's early days. It remains to be seen. What do we know about the way in which this R1 model has been trained? When you hear stories of how U.S.,

AI chatbots have been trained. I mean, they are accumulating vast sums of data from the internet, and that is helping to train these models. It's a very different story in China, though, where data is concerned, is it not? And is there anything to read into kind of the context of a Chinese AI app being developed on the mainland? Yeah.

That's a very important point, and again, one we've raised in our research. One issue that the Chinese companies do have, first of all, there's the censorship rules, the Great Firewall, etc. So obviously their availability to data in Chinese language is relatively unrestricted within the confines of these censorship rules.

So it's been commented widely. Yep, sure, if you're asking more sensitive, politically sensitive questions, for example, the models sort of clam up and they're unwilling to answer that. But I think the reality is the World Wide Web is dominated by the English language. I forget the exact stat off the top of my head, but it's like 80 to 90% of all information on the World Wide Web globally is in English. And I

Again, the ability of Chinese companies to access that training data is more limited versus companies in the US or Europe. So again, I think that's another issue they need to work around in the long run. But their models, as I've said, are highly efficient, highly cost competitive. The fact that they're open sourcing this technology and making it effectively available to everybody

should ultimately help the developments and models globally. So if the efficiency of the technology, which seems to have been demonstrated, is there, that will likely then, I would imagine, lead to increased demand for the resource. Is this a pivotal moment for the adoption of chatbots because of what this company is doing?

Right. One thing I have done repeatedly, when I meet new people, when I talk to my friends and family and colleagues, I normally will drop into conversation a question just asking about their AI usage to see whether they're using these bots, whether they're paying for bots more importantly. And although this is completely anecdotal, I think the reality is the vast majority of us at the moment are not paying for these things.

So why is that? Particularly in this part of the world, in China, many of these apps are free to use. And that's the culture of Chinese apps in general. They tend to monetize through advertising.

But I think it reflects the level of value add that the average consumer currently sees in the current generation of bots and other AI tools. Whilst they're interesting to play around with, and maybe there are applications in some areas, the vast majority of consumers are not putting their hands in the pocket and paying for these things. So the biggest challenge this industry faces at the moment is monetization.

And tying back to the US tech platform spending $10 billion plus per quarter in capex, I would say largely driven by fear of missing out. You know, at some point, we are going to hit a day of reckoning if these companies are not monetizing fast enough or in a more meaningful way. So whilst

DeepSeek is a bit of a wake-up call to show that, you know, Chinese are obviously narrowing the gap on the technology front. The big challenge for all these companies, whatever region they operate in, is monetization. In our view, and we've published this repeatedly, this is not happening fast enough. And I think that is the major challenge this industry still faces. So what is the risk there? When I hear that, it seems to suggest a lot of caution. Well,

There have been so many bubbles and hype cycles in tech, not just in recent years, whether it's crypto or metaverse and, you know, going back to the year 2000 and the internet bubble. And

I think there are some parallels, in all honesty, with the internet bubble. Ultimately, you know, internet is an essential part of everybody's life these days. So I'm not in any way suggesting AI won't be or isn't a useful tool. But I can, you know, whether it goes back to human psychology, human nature, there tends to be an overreaction either way. So whilst AI is a very...

interesting and innovative technique that can drive efficiency and cost savings across many applications. I think the reality, as I've said, is the technology is still at relatively immature phase and therefore the companies are struggling to monetize at anywhere fast enough rate.

given the huge amounts, humongous amounts they're spending on CapEx at the moment. So I think, obviously, it isn't such an issue for the very large tech platforms, given their very healthy balance sheets and free cash flow generations. But I think the more marginal players out

there, you know, at some point we'll have to make a decision. Can I continue plowing such high amounts into CapEx when there's no or very limited chance of making a near-term return on this? Robert, great stuff. Thank you so much. Robert Lee, Senior Analyst for Bloomberg Intelligence.

joining us from Hong Kong. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom? And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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