# AI Compute Wars and Market Volatility

**Podcast:** Bloomberg Daybreak: Asia Edition
**Published:** 2026-01-29

## Transcript

Today's show is brought to you by Vanguard.
To all the financial advisors listening, let's talk bonds for a minute.
Capturing value in fixed income is not easy.
Bond markets are massive, murky, and let's be real.
Lots of firms throw a couple flashy funds your way and call it a day.
But not Vanguard.
At Vanguard, institutional quality isn't a tagline.
It's a commitment to your clients.
We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders.
These folks live and breathe fixed income.
So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.
That's Vanguard.com slash audio.
All investing in subject to risk, Vanguard Marketing Corporation distributor.
I'm Barry Rittholz, inviting you to join me for the Masters in Business Podcast.
Every week, we bring you fascinating conversations with the people who shape markets, investing, and business.
CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate commodities, crypto, you really need to hear these conversations.
Sometimes it's behaviorists like Dick Thaler or Bob Schiller.
Sometimes it's fun managers like Peter Lynch, Bill Miller, Ray Dalio.
Sometimes it's authors, Michael Lewis, author of The Big Short, and Moneyball.
Regardless of the conversation, these are the folks that move markets each week.
That's the Masters in Business Podcast with me, Barry Rittholz.
Listen on Apple, Spotify, or wherever you get your podcasts.
Bloomberg Audio Studios, podcasts, radio, news.
Welcome to the Daybreak Asia Podcast.
I'm Doug Chrisner.
Today it's all about earnings.
First in Seoul, Samsung's chip unit reported a profit increase of more than five-fold for the December quarter, given that robust demand for memory for artificial intelligence.
And at the same time, Samsung announced a two and a half billion dollar stock buyback.
In the States, meantime, there were a number of key earnings after the U.S.
close.
We heard from Microsoft, Meta, as well as IBM, along with Tesla.
Joining us now for a closer look is Daniel Newman.
He is the CEO of Futurum Group.
Thank you so much for being here.
Let's start with Microsoft.
The earnings and revenue for the latest quarter were above estimates.
However, Microsoft's cloud sales growth seemed to slow, and CapEx spending hit a record.
So the stock was down quite a bit in late trading, around five percent.
How do you read this price action?
What is it telling us?
Yeah, first of all, it was a pretty good quarter, so when you see it fall six percent or so after hours, you definitely have to, you know, raise an eyebrow and say, What's happening?
I actually think the thing that's spooking investors has more to do with the large backlog that was shared by CFO Amy Hood.
I think it's about $620 billion, which is a massive number.
But if you remember when Oracle did a similar thing, sharing its big backlog, there's a common denominator here, and that's OpenAI.
So while Microsoft is having tremendous growth, record results, and by the way, I think the cloud miss that everyone keeps talking about at 39% Azure growth against a 40% a quarter ago.
So this is minuscule in terms of a miss, still really strong momentum.
But that open AI uh commitment and the relationship between Microsoft, OpenAI, and basically right now, everything that open AI is touching feels a little bit toxic.
So all the companies that are in the kind of ecosystem of Sam Altman's trillions of dollars of committed compute spend seem to be uh penalized because there's a lack of confidence in the market as to whether or not Sam and OpenAI are going to be able to execute.
So while some people are pointing to cloud, some people are pointing to the CapEx spending.
I see it a little differently.
I think people are a little nervous that there's too much of its business committed to being able to support open AI.
But I think Microsoft uh is well diversified, and I think that might be an overreaction.
Before we talk about Meta, I want to explore this open AI issue a little bit more vis-a-vis Microsoft.
Are you saying that open AI potentially could be facing a lot more in the way of competition, whether from Alphabet or Google, essentially, or perhaps Anthropic?
Yes, 100%.
I think what we're seeing, and by the way, Meta, which we will talk about, Meta, Google, Anthropic, but Anthropic has been especially noisy lately and in a really good way.
We've seen what it's been able to do with its code generation.
It it announced an outsized revenue performance for the year.
It has five times oversubscribed investment at $350 billion right now.
And while that still is smaller than OpenAI, there's no question that Enthropic is executing very well.
And it has to be creating some jitters within investors that are looking at OpenAI's large commitments.
And then of course, all of the companies attached to it in its ecosystem.
Google has no doubt outperformed.
It's its market cap has soared.
We were long uh, you know, very optimistic about Google over the last year.
We think it's grown into a fair valuation here, but it it saw its market cap almost double over the course of 2025.
And it's because it's been able to execute not only models, but it has its own infrastructure.
Uh Microsoft and Amazon, other companies are just catching up on their own homegrown chips.
That's gonna help with CapEx.
So, yes, all these things together are very important.
But in the end, what we are seeing, Doug, is compute is still the most precious resource.
And so you're seeing Meta go big on investing in compute.
It's outsized CapEx commitment.
Microsoft is spending, but they're spending to support that expected backlog.
And so we don't think the spending is as much a problem as it is whether or not and who the customers are that they're spending for.
And I think that's what's creating some some consternation in the in the uh investor communities.
So away from the hyperscalers, are you getting a sense that we're gonna begin for the people who are actually investing in artificial intelligence that we're gonna begin seeing an ROI, a return on investment?
We have said that this has to be, and we do believe it will be the year of ROI, of agencai AI and enterprise AI.
And that's basically where AI takes action to create greater productivity and efficiencies within business.
We think uh ServiceNow, for instance, this quarter showed a really strong outperform.
So did IBM, both uh companies that provide software to enterprises, AI platforms and AI capabilities to enterprises.
Enterprises are going to be consuming trillions of tokens.
So while many of us think of AI through the lens of us using ChatGPT or using Claude or using Gemini in our everyday searches, the future is really when we start to put AI to work to be able to help automate workflows and processes within our everyday businesses.
And when that starts to scale inside healthcare and financial services and inside manufacturing, that's where we think the inflection is where businesses are gonna be saying, okay, I spent X dollars on AI software agents capabilities, and we are seeing 20, 30, 40% increases in productivity, which is yielding greater profits, greater earnings, which should be what it really appeases investors.
Tomorrow after the bell, we'll hear from Apple.
This company has been struggling a bit when it comes to artificial intelligence.
What will you be listening for when Apple speaks to analysts tomorrow after the bell?
Yeah, it's like Apple's wearing a fire retardant AI suit.
It just does not want to get in on AI.
I don't know why.
You know, but it's funny because they are sort of the opposite of all of these other companies when it comes to their strategy.
They don't have the big CapEx commits.
They're really staying loyal to their existing hardware in the moat that is their hardware ecosystem, and they're really trying to maximize revenue by basically saying, yeah, we don't have the models, and we don't necessarily have the AI software, but everybody's using it on our device.
So the big question for Apple is going to be how long of a moat is the handset?
Because that's really where all of the momentum for Apple is.
And you're hearing things about wearables.
Maybe it's a meta glasses, maybe it's a pin or pendant that's going to be worn from OpenAI.
So the platform's going to really matter over time.
Apple, I think is one of those companies, though, they they do the buybacks.
They continuously are sort of a safe haven because while their numbers aren't as exciting as some of these other companies for growth, they tend to perform, and that's really what Tim Cook's great at.
But I do think they need a leadership change.
They need to bring a young, aggressive, sort of transformational leader to be the next Steve Jobs, the next person that's, you know, and there's no other Steve Jobs, but the next of that ilk that's going to come in and really change up Apple because right now it is definitely getting a little bit stale.
So the former Apple designer, Johnny Ive is working with OpenAI right now and developing a physical AI hardware device.
And before, and I heard the criticism that you made earlier of OpenAI and just how concentrated it is right now in terms of its ability to kind of connect with other companies in this AI space and the risk that that may present.
Is it too soon to write off OpenAI?
I mean, we don't want to throw out the baby with the bathwater necessarily, do we?
It's it would be a huge mistake.
I mean, this company has grown faster than any other company in history.
And it has some great capabilities.
It is still the synonymous brand with generative AI or LLMs, right?
You're using ChatGPT.
Even if you're using Gemini, people say I'm using ChatGPT.
So they've definitely created a brand and identity in the market.
But what has happened is a couple of things.
The first thing that happened is we have seen models, and we talked about this earlier, you know, with model parity.
We're seeing Gemini Leapfrog and OpenAI model, and then Anthropic and Leapfrogs both, and then maybe a Chinese open source model, leapfrogs, uh, all of them in a certain capability, and then open AI comes back.
But what all these companies understand is that the real moat is gonna be compute power.
So all of them, and this is why Sam was spending so big.
This is why Anthropic's now gone to Google and Amazon beyond NVIDIA.
This is why Microsoft is spending so much on CapEx.
And of course, this is why Mark wants to build the meta cloud.
Sam was right when he was trying to go out and build these contracts and get all these commitments for compute power, because what that gives OpenAI will be the flexibility to continue to innovate, to build, and to pivot, knowing that what they're building today may only be the DVD shipment version of Netflix.
And that the future might be something that looks more like the streaming version.
You know, we are gonna see great innovation in AI, and we don't even know what's gonna come next.
But the one thing that all of these AI labs know, that all of these hyperscalers know, uh, that Mark Zuckerberg knows is that if they don't have the compute power, they will not be able to compete at some inflection in the future.
So Sam should not be Sam and OpenAI should not be written off.
But there is very real reason to be concerned if the current offerings that Sam has, if he doesn't have a trick up his sleeve, because he's certainly been caught with companies offering parity, offering competitive uh products and offering uh you know alternatives that he has to deal with.
And so that's gonna be a big question, but it's too soon to say open AI won't be the winner.
So, given everything we're talking about, does it really come back to NVIDIA at the end of the day?
You gotta be along that company because it's involved in in everything that's going right on right now in this space.
Look, uh, if there wasn't great indicators from the TSMC results from ASML, which printed this morning, uh, that the insatiable demand for compute is is still very much intact.
If these CapEx numbers aren't proving it, and if NVIDIA isn't the biggest winner, I don't know who is.
NVIDIA is still making up the lion's share of the compute, it has among the most innovative products at any given time.
Of course, some may claim one spec or another, but they have the deepest moat, the most loyalty in customers, the largest backlog and revenue book that that we've seen in the marketplace.
And right now it is it is the incumbent.
And also for the investors out there, it's trading at a fairly low multiple if you believe the forecast uh that it's putting out.
And of course, the the order book that it sees over the next year, you have to be very optimistic that Nvidia's come back to you as an investor.
And you have to be very positive that it is still uh the the most likely to win the infrastructure uh battle over the long run.
Daniel, we'll leave it there.
Always a pleasure.
Thanks so much.
Daniel Newman is the CEO of Futurum Group, joining us here on the Daybreak Asia podcast.
Today's show is brought to you by Vanguard.
To all the financial advisors listening, let's talk bonds for a minute.
Capturing value and fixed income is not easy.
Bond markets are massive, murky, and let's be real.
Lots of firms throw a couple flashy funds your way and call it a day.
But not Vanguard.
At Vanguard, institutional quality isn't a tagline.
It's a commitment to your clients.
We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders.
These folks live and breathe fixed income.
So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com/slash audio.
That's Vanguard.com slash audio.
All investing in subject to risk, Vanguard Marketing Corporation distributor.
I'm Carol Masser.
And I'm Tim Stenovek, inviting you to join us for the Bloomberg Business Week Daily Podcast.
Now every day we are bringing you reporting from the magazine that helps global leaders stay ahead.
We've got insight on the people, the companies, and trends that are shaping today's complex economy.
That's right, Tim.
We're all over global business, finance, tech news, all as it is happening in real time, and we've got complete coverage of the U.S.
market close.
Gotta say, basically, if it impacts financial markets, if it impacts companies, if it's impacting trends and narratives that are out there, we are on it.
We also have a lot of fun doing it.
Bloomberg Business Week also brings you the analysis behind the headlines through conversations with our expert guests.
And we are doing this all live each weekday.
And then we bring you the best analysis in our daily podcast.
Search for Bloomberg Business Week on YouTube, Apple, Spotify, or anywhere else you listen.
Check it out on your way home from work to catch up on the conversations that you miss during the business day.
And on the weekend, check it out for a complete wrap-up of your business week.
That's the Bloomberg Business Week Daily Podcast.
I'm Carol Masser.
And I'm Tim Stenovek.
Subscribe today wherever you get your podcasts.
Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner.
The Fed left interest rates unchanged on Wednesday in a move that was widely expected.
Policymakers pointed to improvements in the American economy as well as the job market.
Here is Chair Jay Powell.
The U.S.
economy expanded at a solid pace last year and is coming into 2026 on a firm footing.
While job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated.
Now, as a result, the Fed did signal a more cautious approach when it came to future potential cuts in interest rates.
And that's where we begin our conversation with Jeanette Garedy.
Jeanette is chief economist at Roberts and Stevens.
She spoke with Bloomberg TV host Sherry On and Avril Hong.
Does today's Fed decision meet uh move the needle at all when it comes to rate expectations for the rest of the year?
Great expectations for the U.S.
economy, perhaps?
Uh not really.
I don't I don't think this changes much of anything.
Um, first of all, it was expected.
Second of all, uh there was actually remarkably little discussion in the press conference.
I was very surprised about uh the trajectory on interest rates beyond some discussion about the next meeting.
Um so I think he, you know, maybe everybody thought they knew what what Jerome Powell was going to say if they tried to pin him down to the second half of the year.
But uh there really wasn't a whole lot of substance there.
And he did a rather interesting thing, in my view, which is to shine a light on some of the fiscal policy issues, some of the some of the things that are bothering people in the US economy right now, if you will, that do not have monetary policy solutions, only have fiscal policy solutions.
So that's where I think he's saying that the needle is going to move.
And he's comfortable with monetary policy where it is right now.
That could change as it always.
Uh I the the only thing I made of it right now, uh actually one that's a bit of a um offhand remark, which is that he's the only Fed governor that the current sitting Fed voting member who is being contemplated to uh be a future head of the Fed.
So you know, he voted this way because perhaps he wanted single, signaled to various people that he in fact would be rather dumbish.
Uh the the leeway, the theoretical leeway for why he did that was in Jerome Powell's remarks, he did say that while he feels and why the majority of the board, while the majority of the board felt that they were very comfortably in the neutral range for monetary policy, the neutral rate of interest, that it was at the high end.
So there could be, you know, it's it's not uh out of bounds that Chris Waller could say, well, I think we could have cut a quarter point and we would still be firmly in the area of neutral policy stances.
Uh so that would be the cover for what he decided to do.
Investor seems to be just focused on the path in the second half for the Fed.
I mean, you look at the way goal has popped, right?
The expectation of a dovish shift.
What is your sense of, you know, in the first half, is it fair assumption that we're not going to see a cut?
Well, now you're pinning me down to time and date and magnitude, all of that stuff that economists love to avoid.
Um, I do think that there will be two cuts this year.
The timing of it uh I would see is mostly being in the second half, but could come in a little bit earlier.
But but my expectation is premised on an assumption that we will actually see some improvements in the inflation numbers because of the way the the numbers are calculated and because of other general trends in the economy, and I'm making a grand assumption that there won't be any um uh unexpected tariff announcements.
But if if that doesn't happen, then I don't know about those two cuts.
And we could we could have a very confrontational environment uh if inflation starts to go the other way.
Um I don't see that right now.
I think two cuts are in the mix.
I'd see it starting at mid-year.
Okay, so a couple of caveats to those outlook.
Um what is your sense of the dollar whiplash that we've been seeing this week and the overall negative trajectory for the greenback?
How might that affect the U.S.
economy?
Um it it will have macroeconomic effects.
It will have effects on prices in the United States.
So the the weaker dollar makes those goods coming in from overseas that much more expensive.
We always we always see that in play.
Uh, I think uh Scott Bessant and Jerome Powell are being um economically intellectually honest here in recognizing that uh first of all uh you can't do very often what you want to do for the domestic economy if you are trying to do something for the dollar, something in the global markets, for example, at the same time.
You usually have to pick one perspective to determine policy, it's domestic, and that's what they're going to stick with.
Um there's there's obviously a lot going on.
I I'm not sure how much of what is going on honestly reflects the fundamentals as I see it.
This is still a very strong time.
You know, and so it should the dollar should not weaken this much.
Uh yeah, I mean, to your point on the inflationary effects of the US dollar, we saw the long-term treasury yields actually move as the dollar was falling and actually move in the opposite direction as the dollar rebounded, right?
Um I want to take you to the earlier point that you were making about this uh bifurcation in the U.S.
economy as well, because we have seen the Fed now perhaps shift towards uh their focus on the stabilization of the job market, but that K-shaped economy that we continue to see in the U.S., how problematic could this be?
Uh well, it's it's very problematic from a political standpoint.
It's problematic for monetarists for the Federal Reserve because um it it partially goes to the heart of what they feel they are there to do, which is to protect the general fabric of the U.S.
economy, which is usually expressed in terms of inflation and employment, but it covers a number of other things.
So I don't think they like necessarily what they're seeing there, but they're but their tools are not tools that are designed to do something about many of these things.
And so that's why I think there was uh Jerome Powell correctly mentioned.
Well, it's understandable why from a spending standpoint, we are seeing stronger spending in one sector of the economy because that's a sector that tends to hold more stocks and bonds, more real estate.
Those are areas where prices have gone up, and so they're spending it.
Uh, but the fundamental problem of affordability and uh employment availability in certain sectors, uh, that's a hard one for the Fed to address.
That was Jeanette Gardy, chief Economist at Robertson Stevens, speaking to Bloomberg TV host Sherry On and Averill Hong, bringing it to you 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 Chris, and this is Bloomberg.
This is Caroline Hyde.
And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation, and the future of business.
Every weekday, we bring you the top headlines from the world's biggest tech companies.
From finance to defense, AI to entertainment, and from startups to the magnificent seven.
We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets.
We do this all every weekday.
Then bring you the most important conversations and analysis in our podcast.
Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen.
Join us every afternoon on your commute home and stay ahead of the tech news cycle.
That's the Bloomberg Tech Podcast.
I'm Caroline Hyde in New York.
And I'm Ed Ludlow in San Francisco.
Subscribe today, wherever you get your podcasts.