>> i am positive because it is a change in tone. >> there's a lot of optimism everywhere about what the u.s. will do. >> there is reason for optimism. there are green shoots people are able to point to. >> as america goes so goes the world. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city, good morning. for audience worldwide, bloomberg surveillance starts now. a huge shakeup in global tech. equity futures down across the

board. the pressure concentrated on the nasdaq months ago the nasdaq 100 is close to 5%. now negative by 4.7. nvidia down double digits plus. premarket -13%, unlucky for them , a deep seek, a chinese ai lab saying they can do more than -- do more with less. and the beneficiaries of it. >> the disruptors are becoming disruptive and that's the theory and the fear with some of what deep seek promises which is as you say to do more with less. they don't need that investment, they don't need the huge data centers and the certain types of energy they just need a little bit and it makes it something accessible for a lot of different companies if it is actually true. the key question is how much does this demonstrate how lopsided this has been in the market with a couple of names really taking all the momentum. >> it's not just nvidia that

will inhabit the big spenders. microsoft and meta down in the premarket as well. the buzz over the weekend was absently massive. two, the buzz around the utility players, check out siemens energy in europe. the biggest decline on the dax this morning we are now down by 20 .6%. we have to ask a question as to when this is really realistic. we see this morning asking if it's a synthetic scare and raising questions about whether this will subsidize the states in china. those questions will be asked through the morning. >> it is an important point. is there something behind-the-scenes that isn't as efficient as using so many fewer gp use, fewer chips from nvidia. it raises a lot of questions at a time or potentially this is a fragile u.s. market that is really concentrating in a couple of big tech names and if they could be disrupted could that

remove some of the u.s. exceptionalism story that could potentially hurt china. >> they've done this with serious limitations to chip access. >> the u.s. was trying to avoid this. they had export controls the most advanced chips of china, a deep seek was able to develop this ai model without that. an interview last year this is what the founder said, the problem they are facing has never been funding for the export control and advanced chips. it seems they were able to get to this incredible point potentially without that aspect -- access. jonathan: earnings season this week. microsoft and meta we will hear from tesla as well thursday, next week you will hear from a whole lot more including the likes of microsoft and amazon. >> what is fascinating is the spend that a lot of these companies are baking toward some of these investments in chips etc.. will they be punished for those investments. we heard about meta being 50 to

$60 billion of investments. will it become a liability for them at a time when there was a question about when those types of investments are needed. >> jordan rochester talked about this is happening after what he calls a texas hold 'em all in push on chips that's coming not just from meta and nvidia but also this white house when it comes to stargate pushing millions of dollars towards ai and all-inclusive of what that means. data center chips and the like spring >> down by 2.5% on the s&p and down a lot more on the nasdaq 100. we will catch up with steve at federated on the latest selloff in equities. as president trump walks back tear of threats against columbia and nina richardson out of the fed decision on wednesday. we begin with stocks falling as chinese ai start of deep seek demonstrating a can do more with less raising questions over the future of americans tech dominance. steve it is good to see you.

what's your initial reaction to this. it's obvious for the chip players of this is real, not great news for nvidia. what does it mean for the big spenders print the microsoft's, the meadows. >> i am not built well for panicking so i know there's a lot of excitement and panic this morning. i think there's three key points . the first is is it real. is it real or is there some spending that's not being counted for print let's take a breath and find out. if it is real paid i'm not sure this is university -- universally as bad as a run thought it would be. it certainly is for the infrastructure buildout play here but in terms of ai implementation, in terms of the ai buildout if you are telling me that companies like meta and google, you pick the company. if they can implement effective ai without the capex meaning that there is more chaos flow

but can return to shareholders. that's not a bad thing. it is not great from a geopolitical perspective but an efficiency perspective what we may be at here is we cross that cisco moment where it's all about that. now it becomes about building out using the internet and creating a new business model around that. the third point and this is one that always bears repeating, this is why you build a diversified portfolio paid it is not great to have the entirety of your capital and seven names because things like this can happen, a disruption happens and if you look today was carnage across the market but the value stocks look a lot better in the small caps look a lot better. and you only need a roof when it is raining. >> right now it is raining so let's talk about that per the decline with microsoft and meta traditionally don't to single names but you think there is an opportunity to get into those names now or would you wait to see things settle down. >> i think you will see a few

days here of rethinking. we will have some algorithms hitting some today. you are people asking questions about what's the right valuation. very interesting to see with the earnings reports this week. can company management pivot to talking about a this is real or it's not and if it is real here some savings we may be able to reach on cap. that might be early to do in the next week or so and so i'm sure these be under some pressure but i look out and i see the story wasn't about -- the ai story is not about who can spend the most money developing ai. that was never what was about. it's who can utilize ai and monetize it to make their company that much better pretty who can deliver that solution and if this allows them to deliver that solution quicker or cheaper without the bond energy or chips, so much the better in the long run. >> does it undermine the u.s. exceptionalism story. >> i don't think that story was

built just on chatgpt. it is built on this idea that we are the greatest innovator in the world trade you may have found a cheaper way to do this in china. this is not a country that isn't competing hard. but when you look at the u.s. you have kind of a population growth advantage. as bad as our demographics look compared to our past we don't have the 10, 20 or 30% working aged clients that you do have in china and japan and europe and then also great. you took technology and made it more efficient but let's not forget the magnificent seven are magnificent for a reason. one of them own social media, the other owns smart phones per you can keep on going down the list. so does this mean there other companies and other countries that will compete and challenge that dominance, sure. but that existed last friday as well. >> i was looking at the calendar ahead to what was coming up

today. and this week it was the fed decision, it was core pce, the earnings for some tech players and there is the overlay of the policies. i'm thinking what a maelstrom of information. now none of it matters. it seems that the fed and the government are offsides and the technological advancement is in the front seat. how much is that reality, as i can suckle the oxygen out of the room at a time when there's a lot of noise elsewhere. >> i think that's why you buy if you see weakness. as a lot of positives out there otherwise. there's going to be some disruption may be the mag seven aren't as dominant as they have been. i don't know if that is a bad thing. i think if you see a market broaden out if the beneficiaries of ai start to play out here companies that can use and implement this technology become more efficient. if that's cheaper that broadens out the opportunity so, you've got a lot of positives going on. inflation has come down from nine to three. we think it's going to two and a half. we have a fed, i think the data

you've tax rates so this actually enhances a thing we've been talking about of the last couple of weeks where if you look at a pretty constructive outlook for us for this year and you try to figure out what are the downside risks in the upside risks. all the downside risks are shorter-term. it is concerned that inflation will come down and the fed in this stubborn periods or the sausage making over policy or now this concern that we have to work through. on the others is inflation that is coming down and rates that are coming down at a policy that will be made. maybe cisco has had its moment, if nvidia is this generation's cisco, but now there's opportunities potentially for a whole host of companies if this is real to implement it on a much cheaper and much more effectively and that's going to be the real value. >> you mention geopolitical concerns. do you expect more policies like

export controls or tariffs because of this? >> i think it is incredible that we have had the columbia episode yesterday with we are not letting you in. it any other week that would've been 90% of the discussion. i don't know. i think that this president is certainly going to use tariffs is negotiating tool. we saw that very well this weekend. and i think generally speaking there is bipartisan support to make sure the united states becomes a leader in emerging technologies and i don't think that changes today. when sputnik was launched it was a shocking moment for the united states. we still got to the moon first. you may end up seeing the same thing. >> do you think this is a wake-up call and we can see even a bigger push from this administration it comes to ai. >> i think if it is real it is, because it tells you can just throw money at it you have to

innovate and let the engineers lead as opposed to just think it's a story about throwing money so we will see. it may not be real but if it is, maybe you've got to think more holistically about how you support those companies and not just chips. here's another interesting tidbit. does this make taiwan less important and does that lower geopolitical tensions because if you can advance in ai without invading taiwan that is a lot cheaper. jonathan: steve, it is good to see you. futures down across the board on the nasdaq 100. looking at nvidia in the premarket down by close to 12. lisa: i love what steve said about the cisco moment. we've been talking about this spring talking about how there will be a shift from the infrastructure and chips to the application rate is this that moment regardless of the truth if we are asking exactly what's happening here. >> let's get you an update on stories elsewhere with your

bloomberg brief. >> just to emphasize the height, the chinese ai start up we've been talking about is top of the iphone download charts over the weekend about their latest model being cost-effective if you been talking about or running unless advanced chips. a check on those tumbling down. elsewhere in this market, ryanair shares are rising. the european low cost carrier boosted stronger-than-expected third-quarter earnings driven by holiday bookings but also passenger growth targets the second time in three months due to the delivery delays. ryanair said the constrained market for aircraft will help them command higher prices. let's get the latest on the wildfires in los angeles. the region is getting its first rainfall in months posing a new risk of landslides. flood watch is in effect for los angeles county and several roads are closed due to mud flows per the palisades fire is now 90%

contained. the fire that destroyed much of altadena is 98% under control. that's your brief. jonathan: up next on the program, the tariff threat in action. >> to me the most you to forward in the dictionary is tariff. and it's my favorite word. the tariff system made so much money. it was when we were the richest. jonathan: live from new york city this morning, good morning. ♪

you go to sandals to connect on a deeper level. i've been waiting for this... [wind blowing] [zip up] time to get wet! thanks. with the caribbean sea. ♪♪ jonathan: stocks down hard. negative by 2.4% on the s&p 500 down by four on the nasdaq 100. yields are lower we are down by 12 basis points. the single name price action is

pretty crazy out there. nvidia is downgrade losses for the likes of microsoft. utilities up last year. bear that in mind look me the likes of siemens energy. lisa: this challenges the idea that a lot of people and talking about with artificial intelligence we would need that much more energy. and essentially you don't need to buy that with chips according to this new rubric. you don't need that much energy, this raises a question about whether chip exports just made china more innovative to do more with less. that's what people are grappling with. jonathan: rob i am going to bring you into the conversation earlier than i typically would. we are going to start on this pre-house spooked you think washington d.c. will be even what may be is coming out of china in the past week? rob: pretty spooked. the concern has always been as recent trips over to china they will outcompete us. the biden administration put a

little -- putting a lot of chip export restrictions. the trump administration has not pulled any of that offer eight i suspect they will keep it on and might add to it. annmarie: do you think biden was too slow? did this last administration drag their feet looking to combating china. rob: the truth of the matter is if we are looking at deceiving quickly comes to tech and innovation, if we are looking for them to be fast, i am not sure they have ever really followed through on that promise. the issue, of the bug or maybe the benefit of democracy is it just moves really slowly. lisa: the fact we have this -- annmarie: the fact we have this now, note trump likes use tariffs as a threat. does a story like this make that situation more likely. rob: we will have to see how he

responds to the news. do i think it makes tariffs more likely on china, perhaps at the margins yes but when it comes to february 1 we are really looking closely at the tariffs on mexico and canada. i am not expecting tariffs on china on february 1. as we've seen since and before, trump wants to at least speak with xi jinping, the odds of them getting to a mar-a-lago accord we know the trump deal 2.00 maybe maybe not. lisa: we will get to canada and mexico because those are important and columbia we will be talking about this reminds me of the masque of the red death which is a great story by edgar allan poe. a group of people try to keep things out and it comes in any way. it raises this question about the open-source nature of deep seek and may be keeping something secret right now and things are developing this quickly is not the most effective way to do things. how much is that changing the

discussion around isolationism in politics. rob: i don't think it will change in the public and party and trumpet administration in particular. deepseek and china more generally is a threat to the united states. china is a competitor and not a collaborator. it was trump 1.0 the really defined that agenda. biden sought through an trump will continue to so i don't think this news is all of a sudden going to make donald trump free-trade. i thing we will still be talking about tariffs and sanctions and restrictions from here into the next four years. lisa: i want to start talking about what the signal is from columbia, this idea that initially they were shipping immigrants from the united states to columbia, deportations and then one of the military planes was stopped and donald trump said we will put 25% tariffs on you unless you open up and the tariffs are removed. does this indicate tariffs are negotiating tool or does this indicate they are for real. >> both i think is the short

answer. we've talked about it's really injured bishops view that there will be some tariffs that are ideological. talking about decoupling. talking about punishing europe and maybe even punishing canada. those are ideological tariffs. they won't come off for they have been put on. everything else i think the tariffs are meant for negotiation. donald trump sees tariffs as a way to enact revenue and as a way to negotiate. are all of those things mutually exclusive, maybe to a certain extent but i think outside of china, outside of europe and maybe outside of canada i think tariffs are aimed at negotiation but it is those ideological ones that we are most concerned about because they are promised and put on they are not coming off. >> i think we can all understand what's going on here. an issue at the southern border. particular central america when it comes to china, reciprocity.

with the europeans there's been questions about protectionism in the european block for decades paid when it comes to canada i'm confused. i was confused last week i asked plenty of people questions about this and i'm still confused. rob: i can give you a couple of theories played the first is justin trudeau and his liberal government are down so if you're donald trump maybe that's reason enough to apply the tariff. honestly 25% would be pretty painful. it doesn't really pass muster for me is the exclusive reason. the second is this, a number of trades or outstanding talking about access to the canadian market. it is a similar situation to u.s. canada and u.s. europe and that is the trade relationship even though the defense relationship is collaboratively positive. the trade relationship is not always positive. sometimes it is negative. canada has won more than it has lost when it comes to trade disputes with the u.s. and that leads to the final point which

is we've done looking at some of the timing around the usmca revision and potential renewal and honestly these tariffs may be an opportunity or an opportunity to pull forward the view by the earlier than it should be >> a lot of leverage here if you strip out energy got the u.s. running a trade surplus with canada. if you include energy which america needs to include because it's the crude that comes out of canada that the united states needs. isn't this a real position of leverage put it can stay the same thing forever at this point. they have some leverage. rob: energy in particular, crude oil is the best levers that they have. one of the reasons we expect should we see tariffs on canada they will exclude crude oil. so then we talk about a 25% tariff universal except for the

most important. maybe it's 10% tariff except the most important important. it is true that these tariffs may have less bite than bark, but we do think canada is in the crosshairs. in relation to mexico, donald trump has made very specific demands when it comes to what he wants to see in the sheinbaum and administration to avoid tariffs and i think the truth is when it comes to canada there just aren't those very same explicit targets. to say we have accepted your demands, for canada those demands are pretty vague. annmarie: isn't trump just in full to go shooting mode. he doesn't even know who is going to be negotiating the new usmca with pride in the end he kind of has upper hand at the moment. rob: it is a good point as to the future of canadian politics. i am not an expert but we will get an election. and so i think if we are going

to add to the list of one of them is to his ensure the liberal party does not somehow make it extra ordinary, back and get reelected so it could be trump sort of putting his hand on the scales so that he's negotiating with the more conservative collaborator/competitor on the usmca review does come up. >> rob it is good to see you. if you are just joining us, a big shakeup in the equity market worldwide on the s&p we are negative by 2.4%. the nasdaq 100 was down by more than five full percentage points, nvidia getting hit. lisa: it highlights how much the american exceptionalism story has been leveraged off the chip sector in particular one name, nvidia and some of the big tech players. the second thing is how concentrated this equity game really has been in a few names at a time when we will get earnings and maybe some disruption. jonathan: if it is real it threatens the whole ecosystem.

u.s. dominance buildout data centers. all of those stories just unraveling a little bit and i think it really captures the fact this was all very one sided. everyone was on the one side of the boat. it does not take much to disrupt things when things are that one-sided rate lisa: is really elegant and i think a lot of people are looking at this. it's a reason marc andreessen said this is a sputnik moment. it is solving things in a different way. jonathan: the latest with bloomberg's tom mackenzie as deepseek rattles global tech stocks. you are watching bloomberg tv. ♪

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>> jonathan: this is quite a start to the trading week, s&p 500 down 2.5%. nasdaq 500 down by more than 4%. demonstrating they could do more with less. less nvidia apparently, down by 11%. less energy, down something like 20, maybe less of everything. guess what we were talking about last week? a lot of happy talk. take a listen. >> the dominant mood is extreme optimism. >> davos is all trump, all ai.

>> if you are looking to take advantage of the united states you are in for a rude awakening. >> is not as many miles away as it was. >> i got a little rattled at the start, you said we are coming up to a big event and i thought it was our interview. jonathan: live from dapo switzerland, the big -- dapo's, switzerland, the big event. lisa: my sport, which is looking at bond auctions. jonathan: could i say you look the part, when you walked in. straightaway, this is what the gap ceo should look like. >> it is pretty much banana republic top two toe. >> i'm an avid watcher and listener. jonathan: lots of happy talk

from u.s. executives, particularly from the bank executives. u.s. dominance, compare and contrast last week with this morning, this is why you are seeing the moves. we are questioning that u.s. dominance. lisa: it has been built on the back of nvidia, dominance on technological expertise. is that being undermined by development in china? the u.s. market is now waking up to it. steve was onto something when he said actually in these kinds of sell everything panic moments are when you want to be a little bit more calm to understand exactly what's going on. does not challenge disinflation, some of the efficiency of companies, adapting ai more easily. jonathan: nasdaq 100 down by more than 4%. welcome to the program. chinese ai start up says it can do more than -- with less.

its latest ai model is seen as cost-effective and poses a challenge to u.s. industry leaders such as nvidia. lisa: it basically is less specific, it thinks he could get the same result by being less specific. rather than using all of its experts at once, it uses specific experts that only have light up when needed. it reduces some of the energy intensive miss and chip necessity. if this is true and can be replicated, it changes the model of nvidia winning all the time and having these tech giants invest like they have been. annmarie: they did it without the access to some of the most advanced u.s. chips. trump has been in office one week, kept by the trump administration. my question is when he wakes up, an individual who likes to check the markets, what questions will he be asking on what they could

do to make sure the u.s. stays mark -- dominant in this space? i feel like i have whiplash based on your conversation you had in davos. u.s. exceptionalism, stargate, ai, tax cuts. this morning you have deep seek, a lot of concern over the weekend. jonathan: it's a big week for these developments. we go through the calendar again, microsoft, meta, dropping on wednesday, apple on thursday. next week alphabet and amazon. quite a time for them to come out and justify spending this much money at a time when we have seen what has taken place in china. lisa: how much will they be penalized for some of their capital expenditures when it is not being viewed as necessary. jonathan: check out the fx market, the euro had its best week going back to 2023. the sitting president will go forward with tariffs, the

weekend happened, walking back tariff threats against columbia after trump announced an emergency 25% tariff on the country over deported migrants. the white house and columbia agreed to all of the terms without delay. annmarie: the white house put out a statement saying they are letting the migrants enter the country, the tariffs and sanctions will be held in reserve. they were never put in place, this was the threat, we didn't get any sort of signature from the president either. unless columbia fails to honor the agreement, then they will be put in place. the one thing that is put in place is visa restrictions. you can view this as a carrot and stick approach. speaking to someone last night who said what you need to take away from all of this is how concern capitals around the world are seeing this play out in the last 24 hours. lisa: not a lot of logic in

terms of what they are for, there are differences depending on the region. i just want to put this in the record, why beat up on canada? it seems unnecessary. you kind of beat up on them. annmarie: trump knows he has to renegotiate usmca by 2026. you will not just go at mexico, he will try to get what he can out of both of them. you see the rhetoric, when he talks about canada one of the first things he talks about is fentanyl coming in from the northern border. jonathan: you can make a much better case that is coming from the southern border than the north. the politics don't make sense, the timing of this. the 20 point gap that i looked at in the last polls that i looked at. they will take a different look at things like energy, the

energy needs of america over the next several years. lisa: the only thing i could think of is it is just posturing and the blowback won't be that much. it is canada and they will understand if it's a posturing figure. jonathan: i'm in the same bucket as well. let's turn to the latest in the middle east, israel and lebanon agreed to extend the cease-fire to give troops times to withdrawal. this is over a dispute of a hostage held by hamas. annmarie: this administration wants to keep this deal in place , i spoke to someone who said it feels like they are giving the new lebanese president a chance to form a government. something we haven't seen in decades. after february 18, does this hold? israeli media reporting steven witkoff will be going to israel. jonathan: welcome to the

program, big selloff in the global equity markets, u.s. tech stocks leading the way after chinese ai released an update to its chatbot. raising major questions over the future of u.s. tech dominance. tom mackenzie joins us now. welcome to the program. for people who work aware of the buzz over the weekend, explain what is deep seek? tom: a company that drop this model on january 25. they have been running since 2023 spun off from a hedge fund. they draw the model on january 20. there has been $6 million training it, it took about two months. this raises the question about the cost because it has the same capabilities according to many metrics as openai, meta.

the cost, pricing, energy, that is the question mark. those are the questions being raised by deep-sea. it is already built on and tested. it could be deployed very quickly, it is open-source so they are able to see the data and able to tweak it as well. there are questions about what goes into building these models in the future. when they turn around and say this is a sputnik moment for ai, we have to take that seriously. lisa: is this real? is there something about this that we cannot see that sort of undermines the premise that everything some of the big tech giants have been doing they could do with a lot less money in energy? is there anything you could see that gives credence to those questions? tom: we don't know what chips

they are using, what types of ai accelerators, we have to make the assumption that they are not using the most sophisticated nvidia chips because of the restrictions in place. they have a 50,000 cluster, the hedge fund does that is funding this research and lab of -- deepseek. these questions we still don't have answers to. it is valid to scrutinize and question what deepseek is telling us. you have to assume this could change the equation in terms of the need and spend companies like meta committed to. not to mention the partnering and spend and investment around energy piece of this. this is an efficient model and a price point of about 5% of the

openai pricing. that is where you could see very rapid deployment. it doesn't change the innovation story, the adoption story, it poses a question for the builders of the model like meta specifically and companies that feed into the supply chain. if you are buying ai, this could be good news. lisa: it raises the question about keeping models proprietary , it may be open sourced, it is a better, more efficient way to create the most advanced ecosystem. how much is that alone changing the conversation and frankly the communities? tom: that specifically is a question for meta as well. they went into that open-source proposition to drive down the cost of open-source but raise the margin variable to get through the apps that are built. they want to squeeze openai and anthropic. the fact that deepseek took

open-source code and build on it as well as taking hardware, presumably from nvidia and used it to incorporate, that will raise a question. will this trump administration look like when the biden administration looked into huawei, will they look to that playbook and look at additional restrictions? they are already in place for hardware and software. how far they go in terms of trying to carve out space? annmarie: i'm sure a lot of those hardware proposals are being drawn up. when it comes to the tech cold war, how much does this challenge the notion that china is years behind the united states? tom: on the reading of horowitz and others who have looked at this model and stress tested it, i have played around with it,

each step you could pose questions about china you get nothing. china is able to innovate and iterate on the back of western technology. they have done that with tiktok and the fact that it became the leading social media app and electric vehicles, the challenge that poses to the european industry. when it comes to ai and models, china has the skills, engineers, particularly systems engineers. they have the data and they are able to build and iterate, innovate on western technology. that is a catch up many have not predicted in the ai space. jonathan: certainly on display over the last week. out of the city of london, nvidia is down 11% in the premarket. lisa: the valuations got very elevated and a lot of people placed bets on this story,

multiples that were incredibly high. that might be the biggest take of all. jonathan: it's a wake-up call of times when things were very one-sided. let's get an update and cross over to dani burger. dani: u.s. steel doubling down on its confidence saying the entrance of the core holdings are not aligned. holdings is pushing the company to abandon the nippon steel d eal. they told bloomberg they will push u.s. sales and litigation to rescue it. instead collect a $565 million fee. bloomberg has learned elon musk has initiated conversations about using blockchain at the new department of government efficiency. the tesla ceo has mused about the idea as a way to track federal spending, secure data, make payments, manage buildings.

covid-19 likely originated from a lab leak rather than a natural source according to the cia. the agency aligns with the fbi and department of energy which said the department of -- which said the virus leak from a lab in wuhan, china. that is your brief. jonathan: more from dani in 30 minutes. up next, a resilient labor market. >> the u.s. labor market has been the most resilient market in the world. no question. it will create demand and demand will create demand for talent. jonathan: lots of data through the week and a fed reserve decision that we have hardly talked about. that conversation, up next. ♪♪ only servicenow connects every corner of your business, putting ai to work for people. pfft ... every corner? every corner, nick. ow! so kate in hr ...

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what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com jonathan: major moves worldwide,

equities declined, down across the board. equity futures off by 2.3%. much bigger moves on the nasdaq 400. yields down by 11 basis points on the 10 year in america, down to 4.51. nvidia lower by 11.6 percent. meta, some of the big spenders down by 4%. utilities last year on the s&p up by 20%. siemens energy down by 20%. lisa: this highlights just how far some of this narrative has gone about ai, which i think is interesting and is going to have lasting legs regardless of what happens in terms of how much this could be replicated, the chinese model. it really focuses on people getting a little over the skis with the fed.

that has also shifted this morning. jonathan: fed reserve decision just around the corner. the surveillance elsewhere this morning, the labor market. >> the u.s. labor market has been the most resilient in the world, no question, hands down. we have held unemployment fairly steady. workforce participation steady. we have an overheated at numbers that traditionally they would say would be overheating. growth will create demand and demand creates demand for talent. the tone is more optimistic. jonathan: strong u.s. labor market and inflation raising bets that they will keep rates at a hold this week. jay powell said to give his first news conference since trump's inauguration. it is good to see you back from davos welcome to the studio. a lot of people assume this for chairman powell, do you share

this view? nela: what the fed signals on wednesday is super important for the rest of the year. borrowing costs are still at record highs. we have seen these rate cuts take route and influence moves, it hasn't translated yet. that's what mainstreet is waiting for. that will keep the labor market relevant in 2025 as a key component of u.s. growth. lisa: what do we expect to hear from them other than we don't get involved in politics? nela: you will hear that. i think it will be a nuance to those comments. they will try to signal future paths and tipped their hand. they want to engage with wall street, with stakeholders and the american public of what is next for the federal reserve. there will be some confidence on the future direction of the economy. economic growth is a huge part

of their overall context. there will be some thoughts on a future direction of the labor market and inflation. you will get more than -- we are pausing for now, come back after the commercial break. you will probably not get a definitive rate path for 2025. lisa: this raise the question of the relevance of the fed, even government policies that seem so far moved from some of these changes happening in technology that could disrupt the labor market. do you see a quicker adoption of ai completely changing the labor dynamic in the way the fed cannot lay out based on current information? nela: ai is just one of two megatrends that i'm watching. not necessarily the drugs themselves but -- jobs themselves but how they are executed. a lot of them are automated,

what does that leave room for? age, the fact that the u.s. workforce is rapidly aging with 10,000 americans turning 65 every single day. that is 4 million hitting retirement age every year. that means employment growth will slow down significantly over the last decade. a fraction of what it was the previous decade. you take generative ai and advances and it rapidly aging workforce with skills and domain knowledge walking out the door every day and what do you have left? that is certainly structural change where the fed will have to confront. they are here and now trying to get to that 2% target. annmarie: there's a ton of countries dealing with much older generation and actually don't have population growth. is ai and technology actually

matching the moment for what the labor force requires? nela: you think about how an economy would change with more older workers. it would be in health care. where we haven't seen these huge advances is something simple like the care economy, what it takes to be a caregiver. that is a human occupation. you have seen today in the december jobs report a huge increase in hiring and health care. there is some disconnect between where the labor market is now and where the tech advances are coming. over the next few years you will see them emerge. annmarie: this administration basically was brought into power for one major reason, part of that was inflation. we see this idea of tariffs and the fed will maybe be on wait and see. inflation expectations are still high. at some point will they have to do more to combat those expectations everyday consumers

have? nela: you make a very important point. we are so focused on hitting that 2% target and not as focused at anchoring to 2%. that is a degree stronger than hitting a 2% target. the fed has 400 phd economists whose job is to run these scenarios and they do it with -- for decades. this is not outside the fed's capacity to run scenario analysis about policy changes. they will have to be watch bill -- watchful of where the consumer is. jonathan: appreciate you. going into this week's federal reserve decision and the economic data as well, no doubt if this move continues chairman powell will be asked about it on wednesday. house prices, the s&p 500 is another. lisa: does it give him more room to express confidence could cut

again and remove political pressure from him? how much that leans into some of the rally we have seen at the front end of the yield curve, the likes of mark side and are -- sidner saying they will cut anyway. jonathan: if he disagrees he will come out and say so. we will hear that on wednesday after the press conference. lisa: i'm sure he will say they should've cut by 50 basis points. lower and inflation needs to come down. annmarie: he says he knows better but didn't actually say him. jonathan: if he could engineer the kind of energy prices it could lead to lower interest rates. that makes sense. lisa: sort of. over the past couple of years it wasn't an oil shock. jonathan: energy was part of the story in europe. the next hour on "bloomberg

surveillance," we will speak to henrietta tra yce, jim bianco. that is next.

>> having donald trump come into office is a very welcome change, let market forces drive. >> a lot of policies coming together. >> you have messages from the top about pro business, that causes investment. >> the growth will be something that is front and center. >> we will have to see what the year brings. there is more unknowns than knowns in the equation at this point. >> this is "bloomberg

surveillance" with jonathan ferro, lisa abramowicz, annmarie hordern. jonathan: down two point 35% on the s&p 500. look at the nasdaq 100, about 90 minutes ago that was down by 5%. we are now down something like 4%. nvidia getting absolutely hammered in the premarket down close to 12%. absolutely overwhelming. lisa: this is a chinese start up that began in 2023, was using chips that had less computing power and came up with a model that rivals openai when you take a must but -- much less expensive infrastructure and frankly just as much accuracy. everybody poured cash and energy into the buildout of chips.

jonathan: blanket coverage into the opening bell for now. microsoft lower, meadow lower, these are the companies that will spend $50 billion on this year. the chinese firm coming out saying we could do more or as much with a lot less. lisa: you made a great point saying how much does this raise the bar to show companies why are they spending as much as they are? as we get these earnings announcements, will they be punished even more for their capital expenditures at a time when it could be not necessary. jonathan: this wednesday you will hear from microsoft, meta, tesla, you will hear from apple on thursday, google, amazon,

nvidia at the end of the month. annmarie: what are they going to say? we are throwing more money at it? does that matter? what you see from deepseek's they were able to make something pretty incredible without this access to advanced u.s. semiconductors. funding is not the problem, the access to this money is. it's interesting what the associated professor had to say at the university of technology in sydney. particularly as they navigate restrictions in critical hardware and software technologies. you have to think they did this with the walls being up. what could they do if they had more access? lisa: there's a large takeaway, we are talking about change, we will have different narratives. before you go there, there is another takeaway, how much this

market got lopsided in one year. this to me really is a gut check of how much that could really be quickly shifted at a time where we know about deepseek. people in china knew about deepseek months ago. there's a larger takeaway. jonathan: just to reiterate i think that is really important, when you see moves like this you have to talk about where you have been over the past few years. it is also about the magnitude of the move. how one-sided expectations could become. our ability or capacity to absorb negative news is something we saw with rbc in the new year. these valuations were so elevated into 2025. lisa: we saw that with the tech stocks in the last week, another high in the s&p 500, they could do no wrong. when you have technology moving so quickly, some of the large language models talk about how we don't fully understand what

communications will be, to put all your chips in one basket and talk about elevated valuations into the future it becomes much dicier. jonathan: do we need to rethink the whole thesis now? the story of last week, we are in davos, everybody is talking about energy needs, utilities, i keep talking about this one name in europe, siemens energy, down by 21%. lisa: i do think there is this large question about whether ai could be deployed with the infrastructure we had. the answer was no in its current form. the only way to get it to have the efficiency people needed was to completely change the construct. you still need some of those energy sources, data centers, you get a much faster adoption which is beneficial for larger rates of companies. jonathan: prefaced with if it is real, if it's real.

asking those questions themselves, is it a synthetic scare? is it cost subsidized by the state? how much power was actually used? all of those different things need to work out. annmarie: there will be a ton of questions in this gray area because it's coming out of china and they didn't have access to these advanced chips. it is very interesting, where did the funding come from? is this something that the ccp's backing and what else are they backing? jonathan: plenty of commentary on all of this, stocks retreat from all-time highs. henrietta treyz as donald trump reiterates a key tax pledge. mandeep singh. we begin this hour with global stocks very much under pressure. investors rattled as chinese startup deepseek threatens tech sectors.

while the secular trend upward should persist over the long run, there expensive valuations should pay increased evaluations to shut -- stocks. welcome to the program, you wrote that before the news over the last week, how much does the news change your thesis for 2025? seema: there are a lot of questions, investors need time to ingest the impacts. as we said, there was going to be that vulnerability. i don't think anyone quite saw this coming. it does accentuate the need for divest of occasion -- divestification. the outlooks, it was exceptionalism, at the end of

january a lot of this has the potential to be rewritten for 2025. inflation uncertainty that investors were dealing with. jonathan: just to follow-up, this was a question lisa raised earlier, given what we know, not enough but a fair deal, is it sufficient to undermine u.s. exceptionalism and tech nominative -- dominance? seema: it really puts bigger questions around these valuations. it reminds investors that these companies will not never have competitors. companies like nvidia, what is going on with their future? could it be sustained? i think there has to be question marks. this exceptionalism can persist, probably not to such a

significant degree because of innovation. we have an administration coming in now who is very much focused on that growth insuring the u.s. keeps its stage. i think investors have to wake up and look, maybe we don't look at the u.s. global, it has to be even more prominent than it was just a week ago. lisa: i love when the market is flying high we have a million investors saying we have a buying opportunity. there is a true bona fide dip and people say this makes us rethink everything. does it make you rethink everything? seema: it's a good question. we have been looking at money markets wondering why people are not deploying. the answer that keeps coming back as they look at valuations and they are not sure. they want to get into big tech but they don't like this price. today when it comes down even further, investors will get back in at that point, there will be

question marks. they will not jump back in until they have real answers. what investors should be doing is what the opposite is. one of the things that deepseek offers outside of the mag7. lisa: how much does this actually point people towards the direction of where ai could be deployed, are there particular areas that are the quickest beneficiaries of this type of efficiency? seema: the two that really have stood out to us our health care and agriculture. i think that story is still very much in motion. i don't think there is questions around those, it is those specific companies that have really benefited from this drive

up thinking about all of the destruction necessary to drive ai. that is where the questions are. it does need some pretty good news from other sectors around the world. lisa: is this a moment you want to have more exposure to the chinese equity market? seema: that is a good question, did we make a mistake by not increasing exposure? there are still a lot of concerns around the fundamental story, are investors willing to go all in like they did with the u.s., the two companies in china or will you look at the whole ecosystem and say look, there are still some deep-rooted fundamental problems investors have to consider. i don't think it specifically means china, what are the other countries that might be a little bit less vulnerable potentially to us?

annmarie: you mentioned earlier the u.s. will make sure they maintain tech dominance, we have seen in the first week, president donald trump has really taken aim on canada, mexico, colombia, he has held off on china, will something like this push the administration to ratchet up the pressure on beijing? seema: i have to imagine the administration will try to do their homework, how much of a focus it really is before they jump headfirst into making additional threats. it doesn't mean tariffs won't come. how drastic could they be? if this does something meaningful, tariffs in china could be greater. the u.s. has more of a reason to try to rein in this. i don't think it's something

that you will start to see headlines. lisa: do you think the fed has ever been rest -- less relevant on the week will wear -- where will hear from microsoft, meta, tesla? seema: having said that, this won't be the headline news on the bloomberg. i struggle to see anything from the fed this morning. we have been very much reassured that u.s. consumers are very resilient. net worth has increased so significantly. net worth in the u.s. has been driven higher significantly because of equity market exposure. any kind of concerns of equity markets does bleed through to the u.s. economy. that is something we won't hear about from the fed but it is something they have been tracking very carefully. jonathan: appreciate your input

as always. off the back of the selloff this morning, equity futures down across the board, nvidia getting hammered. saying that despite concerns about this, the market is very bullish with the paradox almost certainly leading to the ai industry wanting more, not less. dani burger rides into explain what that is, efficiency increases demand, not decreases it. we saw that in the industrial revolution. lisa: if you could expedite the adoption you could increase demand across a wider swath of terms. maybe it won't be meta and microsoft buying all the chips, it will be unitedhealth or some of these other companies deploying it in other ways. a lot of unknown. we don't necessarily know how much actual investment went into

this, we don't know how applicable this will be. it counteracts some of the dominant narratives we have had the last couple of months that has driven a lot of the concentration. jonathan: let's get an update on stories elsewhere. are there any stories elsewhere? thank you dani burger. dani: funny you should say that, i want to give you a roundup of the deep selloff you are seeing. deepseek driving a global tech selloff. nvidia down 11.3%. its new model demonstrating performance similar to the world's top chatbot without the high price tag. challenging the notion that china's ai tech is behind the u.s. at&t meeting fourth-quarter earnings expectations. only up about 1% thanks to an increased mobile customer and fiber-based internet subscribers. seasonal promotions and bundle

products drove the results. revenue jumped 1% year-over-year. the communications giant confirmed 82,000 new subscribers. elsewhere, israel and lebanon agreed to extend their cease-fire through february 18 to give israeli troops more time to withdraw. the deal between israel and hamas holds after a dispute with hostages was resolved. the release of more hostages are set to begin. that is your brief. jonathan: thanks for this morning. more in about 30 minutes time. up next, henrietta treyz breaking down these big moves and what it could mean, that conversation just around the corner, from new york city, this is bloomberg. ♪

jonathan: equity futures down across the board on the s&p, negative by 2.3%. look at that number, we were down something like 5% a couple hours ago. plenty of messy names including nvidia down by double digits through most of this morning. nvidia down by 12% at the moment. the bears have missed the historic running in tech stocks the last two years, constantly waiting for the event to end the ai revolution trade. today is no different. these are just the opportunities to own nvidia, microsoft, alphabet, amazon and the broader tech ecosystem. lisa: this is not necessarily a

challenge to the ai revolution, whether we are moving from the chips to the application. annmarie: no u.s. global company will use chinese deepseek to launch infrastructure. is it even real? do you want to rely solely on this chinese startup when there is a ton of questions about everything coming out of china? jonathan: chinese startup deepseek raising questions over america's tech dominance. looking back a week ago, looking out a week, here we are. this one has really spooked equity markets worldwide. i expect it might've spooked some people in washington as well, what are you hearing? henrietta: all eyes are really on the attention to the phase one trade agreement that was reached under trump's first term

in february, 20 20 and had mostly an emphasis on agriculture purchases. all of this tech stuff, all of the components we are talking about now including state subsidization is something that is not included in the phase one deal. the first issue when i think of d.c. and how they are prepared to respond since the senate is dealing with nomination and the houses on recess, what will happen from the administration's perspective? they are reengage in on the phase one deal, this will bolster their resolve as soon as -- annmarie: what options do they have in the white house when they want to combat something like deepseek? henrietta: obviously we have

that one example in the pipeline, if you want massive subsidization on the chips or reduction in clean energy, the manufacturing plants in the united states you really need an act of congress. we are months away from that. the best the administration could do continues to be on the restrictive side. things that we have seen throughout the biden administration and will continue under trump 2.0. annmarie: if this is real, is an example that export controls don't work? henrietta: the fact that it is so much cheaper, this has to be a core concern of not just the trump administration but the whole tech universe that has moved into the west wing. those are definitely areas where you'd expect to see them really get up ideas and come under pressure for president trump to come up with ideas to advance this.

lisa: if you want an open source, you also want to be importing talent who has expertise in specific fields related to large language models, artificial intelligence. as we hear about all of the deportations, the roundups, how much is the discussion about reform and potentially amending some of the h1b visas surrounding the u.s. workforce? henrietta: it is an open wound in republican circles. one wing wants to raise visa fees, make it more expensive for migrants to come to the united states, for corporations to hire applicants, to restrict the number of h1b visas dulled out across the pharmaceutical, banking, technology sectors. you have another group that wants to expand this access. that immigration fight is one that we are seeing play out in

this broader conversation about reconciliation. republicans have a chance to pass legislation this year. you will not see legislation passed because we will be deep in the primary season for the general election of 2026. they are meeting this week to come to any kind of consensus they can. the number one take away i have is they need money. therefore increased costs of bringing in high skilled workers is almost guaranteed to be part of the first reconciliation bill or the only reconciliation bill. lisa: there are different camps within the trump administration, some of the big tech oligarchs some people talk about. you have some of the more populous members on the other. you have a sense of who is winning out so far? henrietta: the deficit hawks are the ones winning out. i think it's a mistake to think about this in terms of who in the white house is winning. your real problem is the house

republican congress where you have pockets of opposition to everything being proposed. this grand thinking about who will win the white house, we have 18 members of the caucus who won't vote for anything who won't hike by a certain amount. you have 30 members who support all of the clean energy tax preferences in the inflation reduction act. you have other members who want to expand the child tax credit. these sort of high-end conversations about what is the future of the party will get lost the second we start a new tax bill starting really this week as they try to come up with what the budget resolution will look like. jonathan: nothing easy about any of this. appreciate your time. henrietta treyz there. already causing some problems, right? annmarie: absolutely. they have all of the leverage. if you don't have a raise of the cap and tcj goes away it becomes

a limited. every single representative has become aching or queen. they could make any one issue you or died. republicans in the house have one of the slimmest majorities they have ever dealt with. they are not in agreement on a vast majority of issues. jonathan: equity futures down across the board. negative by 2.3%. lisa: how do they talk about changes in ain how to support that? annmarie: they don't. lisa: that is part of the issue. jonathan: up next, mandeep singh , on deepseek sparking an equity market selloff.

jonathan: this probably was of the opera performance you were looking for, certainly not looking like this, but the major tech names getting hammered. the nasdaq is lower by 3.8%. as low as -5% early on in the session. let's cross over to manus cranny. manus: nasdaq was down 5% at 6:00. what has deepseek done? chipped away at the perception of a moat of nvidia.

you are looking at somewhere in the region of $380 billion of market capital wiped out. it is pervasive, not just in the chips that you use, energy. let's just take it forward and look at how that is permeating. meta doubled down, $65 billion in terms of. they have set up four more rooms to understand what deepseek is doing, understanding how perfort training. it is about theira for that? microsoft comes in down 6%. again, they put $13 billion into openai. no one is saying that is a squandering waste of money but

the numbers are simple. if we can trust these numbers, is this real? lots of questions we can ask around that, but right now you are questioning that $13 billion investment into openai. jonathan: that stock gets hammered. i think meta has to drop more than 3% before mark zuckerberg puts on a suit. lisa: he now has his necklace brand, which will carry him a long way before that. jonathan: american tech exceptionalism put to the test as deepseek reynolds the market. the nasdaq down by 3.9%. the tech stocks on the stoxx 600 in europe getting hammered as well. asml the big victim there. annmarie: this is putting an absolute ranch in the supply chain of semiconductors even if

they are doing this off of the less advanced chips, they are doing it off of open source ai as well. you may not need as many as these semiconductors as people thought. is it too much, do you not need it? lisa: frankly, it shows that people are looking for the next squirrel, giving them the next narrative. everyone hanging their hat on the idea that everyone will load up on more chips and the better. jonathan: you think this could be the squirrel? lisa: how much have been people chasing that squirrel to elevated valuations? does this undermine that? jonathan: jensen has been in china for a while, makes sense why he has been there and not in washington, d.c. lisa: what is the appropriate regulation of some of these chips, how much is the competition is shifting to china, how much is the

technology that the u.s. can adapt or will this stay in china? jonathan: you can make the argument this morning that it has led to greater efficiency out of china. lisa: that can be deployed in the u.s., can be beneficial for sectors. we are trying to figure out something that we have known about for a hot second, it feels like a revolutionary shift, nonetheless, when the people were expecting. so that is the take away how disruptive it's been. jonathan: let's turn to donald trump's trade war with colo mbia, then backing off as soon as they accepted deportees. is this a model? annmarie: this must have been one of the shortest trade wars we have seen so far. basically he was willing to throw around the weight of the united states and got what he

needed, which is why a lot of other countries, canada, mexico, the european union are looking at this and saying wow, this is what we have in store. terrace didn't come in place but the press secretary made clear they are fully drafted and they will be held in reserve. jonathan: february 1 is just around the corner, about mexico, china, europe as well. taxes will not be straightforward either. donald trump reiterating his campaign promise to eliminate restaurant tips. he says if you are a bellhop, one of my many caddies, anyone that relies on tips, they will be tax-free. annmarie: that is what he says. how difficult is it going to be to say something like they will be no tax on tips? also you have to start defining this.

who else can be paid in tips? could one of your bonuses just be a tip now that you don't have to pay a tax on? what does this mean for the underlying economy? let's say you work at the grocery store and now your friend who is a waitress is not paying taxes on tips, could there be a shift in the economy in terms of jobs that people will go after? a lot of complications. lisa: which goes to the heart of why people are looking for squirrels. the nuts and bolts are not very clear and you can tell yourself up in knots understanding what is going to go through. it does seem like clarity, there is a revolution in a, let's talk about that. jonathan: let's get to that big squirrel. deepseek continues to rental markets. the nasdaq down by 3.8%. nvidia on track for its biggest market capital wiped out ever,

down 12% currently, as firms look at western company competitiveness. mandeep singh, good morning. this came from jordan rochester moments ago. this puts into doubt the nvidia story, the pricing power of u.s. tech ai, and comes at a moment when you as long exceptionalism trades are looking fragile. is this the real deal? mandeep: when it comes to open source, this is the moment. companies were adopting it but it was never talked about in the same league as chatgpt, some of the other models. in this case what they have shown is not only open source comparable in its performance, it is far cheaper. you have to take that into account. openai is charging $200 a month for their model.

how do you justify that cost given that the open-source model is almost comparable in performance? jonathan: dani burger raise the question earlier, does that greater efficiency lead to greater demand or not? this morning for nvidia, people have made their decision on what side of the argument to come down on. mandeep: it should lead to greater demand and i'm in that camp. the problem with nvidia is the expectations are already so high, the stock will be driven by how much estimates can be driven upward. when you have a moment when everyone is questioning the pricing of these chips, nvidia is impacted the most because their gross margins will get impacted in this case. demand wise we should be good. a lot of this data center capacity is fungible. even if they are not using for training, they could deploy for inferencing. there was project stargate announcement.

all of this puts two more dollars going into generative ai. i don't think the deepseek changes that in terms of what companies are allocating. maybe we will find out more in earnings season this week. lisa: another element of the story, how did china get to this place? so far the narrative has been that they simply did more with less. they got these chips that were less powerful but they were more innovative. you are kind of challenging that thesis. what is your take on this? mandeep: what i look at meadow llama as it open source, it has been out there. that is the secret sauce. you talk to openai, they don't want to open source that, google gemini. the fact that you have one model comparable to all the others that is open source and everybody could use the model and keep improving it.

openai talked about the model being driven by scaling around inferencing. that is what deepseek has done, they have used the feedback from the model to improve the data being fed to their model. the baseline was still the open source model but they were able to improve the innerworkings of the model, based on the feedback. that is where they were quite creative in terms of using an open source model as a reference. lisa: there has been a longtime cliche that the united states innovates, china replicates, and europe regulates. are you saying it is more of that, that the innovation came from the u.s., china took what it learn from the open source models in meta in particular and built on that? mandeep: they were not the first movers. when it comes to chatgpt,

openai, anthropic at the models first. google had their own in parallel. everyone else has leveraged the open source model to an extent. meta's approach is we want to create an open ecosystem. . there are some things around this and they have done a lot with their reinforcement learning, human feedback element, so they have done alot around bringing down the price. that is the real improvement, the hardware efficiency, lowering the inference price. the fact that openai is changing to -- charging $200 a month and deepseek is saying we can do it at a fraction of the cost. i would say the baseline was provided by the open sourcing and then clearly labeled on that. annmarie: people in washington concerned about china getting

ahead of the u.s., saying that they are a year or two behind. what is the gap now? mandeep: this paper shows that they are more creative when it comes to the less hardware available on their training and inferencing side. in terms of widespread deployment, you could argue they have the local apps that leverage these models, chatgpt equivalent. but we look at broader adoption? i doubt it. annmarie: does this basically show that export controls don't work? mandeep: we don't know the exact training cluster that was used. some are saying it was $6 million, 2000 gp use, but others are saying more. we don't know exactly. but the paper they had given out shows clearly when it comes to

inferencing, their costs are far lower. training is a one time thing, you have to do it every three or six months, but inferencing is the bigger opportunity when it comes to deployment across a family of apps. that is where lower pricing really helps adoption. lisa: how much does this lower the bar for tech giants reporting earnings this week? mandeep: what they have to tell the street is now, let's say this is real in terms of deepseek bringing down the price. how do they plan to compete on that, incorporating it, and what does it mean for 2026-2027 capex plans? i don't think they are walking that back. nvidia is driven by what happens in 2026, 2027. jonathan: they may not walk it back. will investors put pressure on them to do that? mandeep: i think compute

capacity is quite fungible. let's say for training you don't need as many gpus for training so you can deploy that for inferencing because there is demand for ai to be used in current apps, websites. they can say in the case of microsoft, the cloud revenue will accelerate. google cloud revenue will accelerate. meta i don't know because they don't have a separate cloud business. all of these apps have places where they can deploy ai. jonathan: no doubt that will be talking again before the week is out. this is something that we've been talking about, the biggest risk one-off for the likes of nvidia, their biggest clients, investors losing patience with them with the capex spend coming out of companies like meta. i imagine a lot of questions around that over the next few days. lisa: it is not just this year

or next year but looking at where that we'll go when you can potentially do more with less. jonathan: we got some pushback from daniel ives. trying to scare investors that this is a black swan movement. this is actually bullish for hyper scalars, nvidia, use cases. lisa: it will speed up the adoption of artificial intelligence and increased efficiencies across the economy. i get that point to the question of incredible outperformance in the small caps this morning. jonathan: let's get an update on stories elsewhere with your bloomberg brief. let's go over to dani burger. dani: south korean prosecutors have charged president yoon for insurrection for his attempt to impose martial law last month. he can be detained for up to six months while his case is reviewed. the indictment comes just before he was set to be release from

the tension on monday. bitcoin down almost 5% this morning after president trump created a working group to advise the white house crypto policy last week. also tied to other risk assets which have been selling off with that deepseek advancement. the kansas city chiefs and the philadelphia eagles will meet in new orleans for super bowl 59, a rematch of 2023's game to achieve if the chiefs can get the first ever threepeat. the eagles trounced the washington commanders at home and will make their third super bowl appearance in eight years. that is your brief. jonathan: this is just a convenient way of getting tv ratings up? lisa: if they always win, is that really going to increase

ratings? jonathan: are they winning because the referees are letting them? lisa: are they even real? maybe they are just artificial intelligence images. jonathan: i find the nfl is all about marketing anyway. four corners, they don't play much support, and then a commercial. there is an affinity to your local team. annmarie: who is your local team? jonathan: alabama. next on the program, deepseek roiling global markets. >> investors, everyone needs time to digest exactly how real this is, the impacts. i don't think anyone quite saw this coming but it really does accentuate the need for diversification. jonathan: equity futures down 2%, recovering just a touch. that conversation is next.

jonathan: equity futures on the s&p down across the border, lower by 2% on the s&p 500. nasdaq 100, lower by 3.7%. the 10-year, 4.52. deepseek roiling global markets. >> investors, everyone needs time to digest exactly how real this is, what are the impacts. valuations can be extended. i don't think anyone quite saw this coming but it really does accentuate the need for diversification. jonathan: chinese startup deepseek sparking concern over u.s. tech dominance.

nvidia set for its biggest market cap drop if this holds. jim bianco writing we worry that mag seven technology is outdated and slow thanks to deepseek. you can argue that while it does not impact the broader economy, it is a big market event. welcome to the program. is this a big game changer? jim: it's a game changer for the mag seven stocks, in that they will have to rethink what capex spending will be, maybe even where they will go from here. is it a big game changer for everybody else, game changer for the economy? no, it is not. but the mag seven is 34% of the s&p. if nvidia has a problem, maybe people don't have to worry about their job, but anyone who owns anything related to a broad base of the stock market, they have concern because of these stocks

in their dominance. lisa: people have to question how far deepseek's innovation can go in terms of transforming nvidia's prospects. what does this say about how concentrated valuations got over the past year? jim: it is a direct mark on how they have gotten so concentrated. as much as we like to talk about the economy and stock market, investment ideas, we are all tied to these seven stocks and in particular nvidia. whether you know you own it, even if you don't, this morning, it impacts not only your stock investment but even your algorithmic response on the bond market because the stock market is down a lot. it matters to everybody even though it may not change the fundamentals underlying some of the assumptions we had on

friday. lisa: to that point, the readthrough to the bond market, is that when you attribute some of the rally to in u.s. treasuries, or does this open the door for the federal reserve having a more dovish message on wednesday? jim: i don't think it should open the door for the fed. nothing has changed, there has been no data out. the fundamentals and the belief that the fed will hold on wednesday still applies. about the only thing that will possibly change on wednesday -- i hate to say it -- they will halt and then president will disparage them. it will be a return to pre-pandemic levels. annmarie: is there a concern in the market about fed independence because of what you said? everyone is expecting trump to disparage jay powell. jim: i don't think there is a

big one because jay powell has a strong enough backbone, he understands it will happen, he will not let it affect the policies he wants to push forward from here. whether or not that will affect fed independence on who the next chairman will be, because presumably he will not appoint powell, that is a short-term question. annmarie: don't you think that trump may start dishing out names, and you have this idea that scott bessent talked about, this idea of a shadow fed chair? jim: i have talked about that and i think we are probably going to get a shadow fed chair. that was probably going to happen either way, where they cut rates or not, have a market response in late january or not. we were on the road to getting that in the spring or summer. jonathan: appreciate your thoughts. jim has talked about that a few times. that has to be the biggest risk

for the federal reserve. you completely remove his ability to provide forward guidance if you have a shadow fed chair. lisa: people expecting this to be the case, already trying out. this return to the past norms, how much does this affect the way that chair powell communicates in these news conferences when the pace of policy is not the issue? annmarie: arguably he is a lame-duck. we just saw this with the presidency for two years. donald trump was making moves in the market, it didn't matter who was sitting in the white house at the moment. jonathan: the market is lower by 3.7%. up next, victoria fernandez, angelo zino, neil dutta and oksana aronov. from new york, this is bloomberg. ♪

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>> i am positive because it is definitely a change in tone. >> there is a lot of optimism

everywhere about what the u.s. could do. >> there is reason for optimism, green shoots that people can point to. >> as america goes, so goes the world. >> this is bloomberg "surveillance." with jonathan ferro, lisa, and annmarie hordern. jonathan: all of that confidence getting some ice cold water in the market at least. tech earnings over the next several weeks just got a whole lot more important. you will hear from meta and microsoft on wednesday, alphabet next week along with amazon, then the big one next month, nvidia. these are huge given where the nasdaq is right now, down 3.8 percent, and questions will be asked about how much of companies are spending nvidia. lisa: they were already huge because the big tech names is what has been driving the rally

that saw the s&p rise to a record level last week yet again. on top of it, you have deepseek, a chinese startup that revolutionizes the efficiency of the artificial intelligence mortals, suddenly a question about whether the spending was for naught at some of these companies. annmarie: stories about meta, serious concern from their leaders that they are behind and in panic mode. they are concerned that their next version of their flagship ai will not perform as well as deepseek. the question i have, this gap between american and chinese tech, there is a consensus that the u.s. is still ahead. is that still the consensus? jonathan: the good news this morning, bonds are rallying. lisa: what did we just hear from jim bianco? algorithmic buying simply on the downdraft we are seeing in risk assets.

i wonder if it opens the door to a more dovish tone from the fed. everybody owns nvidia in one way or another. sentiment will be hit from this. jonathan: sentiment getting hammered so far. coming up, we will catch up with victoria fernandez from crossmark global investments. angelo zino from cfra, as deepseek threatens u.s. dominance. neil dutta looking ahead to the first fed decision of 2025. we start out with stocks lower, leading to questions about u.s. tech leadership and valuations. victoria fernandez would cross mark investments saying, we expect high levels of volatility as markets try to find a broader footing than the highly concentrated environment of just a handful of tech names. there appears to be little room for error as we enter the new

year with elevated sentiment and extremes and valuations. welcome to the program. you wrote that before the shakeout in the equity market. can you give us your thoughts, whether you believe this is really a threat to u.s. dominance? victoria: i don't know if i would say threat to u.s. dominance but i do think it is a threat to the expectations we had coming into the year that we would have this extremely strong growth this year and that was going to lead the stock market higher, bond yields higher. there is a threat to that component. what does that mean in regards to the fed? the tech game can turn on a dime, we have seen it in the last 24 hours. i think that u.s. is still probably a little bit ahead in the tech race because of all the investment we have put in there, but it looks like the story is china is not as far back as people thought. it leads to some questions and

we see that response in the markets today. it also leads to the concern about the u.s. china trade wars, restrictions on ships, could get even more heated which would bring more volatility into the market. jonathan: let's go through the individual market breakdowns, equities, you can share where you might be constructive and where you might be hands off. nvidia gets hammered, how many chips do we need to make this kind of progress? then you have the big spenders on those chips, microsoft, met up. they are declining this morning. then you have the energy names. the whole ecosystem is being questioned. utilities that ran up are getting hit this morning. where are you looking to pick up the pieces, where are you willing to say, i will stay away for the time being? victoria: at cross mark, we have been underweight a lot of these

names compared to the market because we were taking some off the table as things went along. that is what you have hopefully done so your position is less. i wouldn't pick names up right now at this point in time. i would let this shakeout a little bit, unless you want to make a tactical move and be trading every few hours, every day in these names. if you are a long-term investor, let this shakeout. the whole ecosystem from utility to chips to support have all been rattled here. i would look at other areas of the market. i would look at some industrials, financials, see if you can find some areas there to put your money to work while you let these elements fade a little bit. lisa: there is still a lot to be learned in terms of how broadly applicable, truly revolutionary this is, but how much does this change your thesis on the energy space already at a time when

donald trump wants to increase the infrastructure and keep prices low? victoria: the energy names being hit today, there was such huge expectations that demand would increase because of a, we would be building lots of data centers, need a lot of power coming from these companies. in that town has shifted. when you look at the energy companies we have been expecting the price of oil will come down. we know that is what the administration wants to do. we knew that would be difficult for some of these companies, so we were looking more at the midstream, transportation components of the oil and gas and energy companies versus the upstream or utilities themselves. you can make that shift. if the expectation start to move higher again, you can add a little bit more back to that part of your portfolio. lisa: another aspect of the

trade, something that jim beyonca pointed to come algorithmic buying. does that change your view with the fed's speak this week, so much expectation around growth, even inflation, does this put a damper on that given where the stock market goes, so, too, does sentiment. victoria: i think it does. we have been talking about the rise in the longer end of the curve. breakevens have held steady. it was due to term premium, the growth we were looking for. imf was saying 3.3% globally over the next couple of years. i have a feeling that will come down if the story comes down and continues the way it is today. that is why you are seeing that locker and part of the curve come down. that steepness of the curve that has been a benefit for financials and banks will start to go away a little bit so it

starts to shift the story. i actually think it gives the fed more room to take this pause because volatility is continuing to go up. vix is up 30% this morning, and it was a net speculative short position over the weekend. volatility give the fed more time to pause. lisa: there are these competing narratives that are hard for me to get my head around. you have the ai revolution that may or may not transpire as a result of greater efficiency, the fed grappling with expectations in the economy, and then you have politics over lying on top of that, which is part of the reason why people were saying bonds were selling off. which story are you paying most attention to? what is your lone star at a time of so many crosscurrents? victoria: depending on what you want your story to be, you can

find the right evidence to back that up. for me it is the bond market. the bond market is giving us a lot of clues as to what is going on in regards to inflation expectations, growth expectations, in regard to debt issuance coming in. obviously that is tied to the political element. what will issuance look like, more bills, more longer-term coupons? what does that mean for interest expense? it is all tied together. i would be watching the bond market to see how yields go, see how long bond vigilantes want to play the game. jonathan: no sign of them this morning at least. appreciate your time. victoria fernandez of crossmark global investment. across the curve, the 10-year, down 11.

rally across the board in fixed incomes. lisa: $69 billion of buy my notes, five-year notes being sold later today. right now, a really good time to be selling. maybe this is actually beneficial for the u.s. treasury department and they can send a thank you letter over to china. jonathan: it is a real confidence shock. you think about the trades this year long united states, equities, concentrated in big cap tech. in fixed income, worry about higher inflation, yields are going to creep higher, everything just turns upside down this morning. lisa: it also shows how much people are following a narrative without digging in. ultimately people were saying that ai couldn't relate to a revolution in other sectors of the suit was much less energy intensive.

it really just highlights how expensive a couple of stocks have gotten. jonathan: how one side market had become. we will see if it sticks. the opening bell, about one hour and 20 minutes away. with your bloomberg brief, let's go to dani burger. dani: chinese ai startup deepseek driving a global tech selloff. nvidia down 12%, tsmc nearly 11. it's model perform similarly without the high price tag. it challenges the notion that chinese ai technology is behind the u.s. geopolitical scrimmage between the u.s. and colombia. trump walked back his tariff plans. colombia initially refused to allow planes with migrants to land because of the objection on the use of shackles. the white house declared that they will provide conditions of

dignity. jannick sinner won his third grand slam at the australian open. he dominated the match, winning in straight sets without facing a breakpoint. in the women's tournament, madison keys won her first ever grand slam title. jonathan: thank you. more in 30 minutes time. next on the program, in morning calls, and angelo zino from cfra as jitters from chinese startup deepseek rips through markets worldwide. this is bloomberg. ♪

jonathan: equity features of the s&p negative by two percentage points. down 3.5% of the nasdaq 100. let's get some morning calls. raymond james reiterating it's a strong buy on meta, noting deepseek could lower training costs for hyper scalars. citi reiterating a buy on nvidia. we don't expect leading companies would move away from more advanced gpus. still negative by 11 point 6%. cantor fitzgerald reiterating it's overweight on nvidia, calling the deepseek announcement bullish for the industry. the argument being as efficiency goes up, the man is not going anywhere. lisa: it will actually increase demand if companies can figure out how to adapt ai models to make themselves more efficient. jonathan: nasdaq futures well

obsession lows, down by 5% at 6:00 eastern time. u.s. tech leaders under pressure ahead of earnings as deepseek's latest model boosts cost effectiveness while running unless advanced chips. angelo zino is with us now for more. meta says it will spend $60 billion on capex and then deepseek says maybe don't need to spend that much. is this good news or bad news for the likes of meta? angelo: an with a couple of days will do. as far as what this means specifically for meta, i don't think it necessarily changes of the story very much to be honest with you. the company announced their capex plan on friday, 60, 60 5 billion. they will reiterate that when they report this week. when we think about the hyper

scalars out there, we think they are well-positioned given the free cash flow generation, business models, their ability to continuously aggressively spend on these next-generation tools out there. whether or not this allows them to lower their cost of modeling remains to be seen. i don't think it changes the story much specifically for meta. for some of the chipmakers, may be a different story. jonathan: may not change things for management, i wonder if it changes for investors. will they carry on supporting the amount of spending this company is doing? angelo: they will have to tell a really good story in terms of the monetization of ai when they report on wednesday. investors will want more clarity on how they plan to modernize -- monetize ai. roi is therefore the company but

maybe not as clear for the cloud companies out there, the need to increase capacity, but i think it's extremely important for meta on wednesday to tell a clear-cut story on how they plan to monetize ai. you will have llama 4.0 in the first half of the year. meta ai has seen an increase in its installed base so we think they can monetize over the next couple years. they just have to make sure they tell the story properly for investors. lisa: how worried are you about a 1999 moment, where suddenly we have valuations on a story that is true, a revolution going on, but we don't understand the details of it yet, who the winners will be? do you think there will be disruption to the rather we have seen in big tech? angelo: i think you will continue to see a lot of noise,

the game will change as far as the ecosystem is concerned. as far as valuations are concerned, what we like about tech, valuations are not extreme at all. for the most part, you have growth at a reasonable price, among the mag five names that i cover within tech and comm services, not taking into account amazon and tesla in that ecosystem. you look in valuations, secular drivers tied to the cloud, digital ad spend, that remains intact. i don't think a lot of this monetization of ai potential is embedded in a lot of these stories for these names. i am not necessarily worried about valuations here. as far as the chip industry, what you'll see happening is potentially multiple compression on any sort of rallies because i

think there will be some concerns about the magnitude of spend as we go into 2026 and 2027, not necessarily 2025. lisa: all that being said, there was a story that if this was correct with artificial intelligence, it would be the non-tech names that would benefit more because they would not have to be as heavily cost driven as in the past. do you think we are closer to that shift, that rush holt and who benefits from future advancements? angelo: i think the story will continue to change in the market here in terms of who potential winners are, where you should be investing, what have you. we continue to be big believers, the way you invest in ai long-term, the cloud companies that we think will be the biggest beneficiaries out there.

especially when you look at those companies from a valuation perspective, the amount of capacity that you'll need over the long term. we also think there will be select semi names despite the concern in the market right now that will benefit in the long term. not talking just about cloud- oriented in nature. that said, there will be narratives that change over time. whether you are an investor or trader, will also dictate how you navigate through the market. lisa: do you think today is just the trader reaction, not the investor reaction? angelo: there is a lot of trading involved in the market right now. at the same time, one thing the market state is uncertainty. when you think about the uncertainty that has been created here from this deepseek scenario out there, you have to selloff on some names, compress

some of those multiples out where the uncertainty is greatest. when you look at nvidia, a name that we have liked for a long time, you have to question, do you need to continue to upgrade at the pace that we have been at? these annual cadences that nvidia is on, is the pace in the amount of spend we have on nvidia right now oriented in nature? time will tell on that. one of our biggest competitive advantages is the fact that we have access to these leading edge gpus and capabilities. from that perspective, i expect these hyper scalars to continue to invest. annmarie: that is what dan ives is talking about this morning talking about this. i would love to get your thoughts on the fact that there is a story out, almost a panic

that meta, leaders saying they are not sure if the next flagship ai version could perform as well as deepseek. can even catch up to what deepseek is doing? how much our analyst going to demand answers, wondering if they knew what the competition is doing? angelo: the competitive landscape has definitely intensified over the last couple days. we do have to take china seriously at this point in time. there are definitely a number of storylines also created. from a privacy perspective, other storylines as well, that i think the u.s. government will have to address. as far as the ability for meta's models to be compared to the likes of deepseek and others out there, you will continue to see that.

that competitive landscape long-term is good for the industry. near term, it gets a lot of investors worried. jonathan: angelo zino, appreciate your time. we can see that worry across the board, in single names, certainly in nvidia. a lot of skepticism out there, how many chips were used, how are they used? lisa: elon musk weighing in on that. alexander wang saying that nvidia has things they cannot talk about because of export controls in place. that speaks to the skepticism of just how much they cannot disclose about what they used simply because of the restrictions the u.s. has put in place. lisa: so the restrictions are there but they found them anyway. annmarie: people are questioning whether they have use them. jonathan: not just the degree of

the big through, also how one side of the market was going into the news. you have to think about that in regard to the price action on the screen, close to 4%. lisa: this was the main driver of what we saw last week, last year. it just goes to the skepticism of how much further it can rally, how much you can price out what multiples look like when we are at a time, a transformative time with changes down the pike. jonathan: definitely worth checking out the u.s. equity market if you wanted to. coming up, neil dutta, oksana aronov from j.p. morgan asset management.

jonathan: it's going to be quite the open, 60 minutes away. equity future down 2% on the s&p. down 3.4 on the nasdaq. nasdaq was down five. with some movers going into the opening bell, let's go to manus cranny. manus: looking at history in the making. the biggest equity wiped out in the history of the equity market. everyone percent nvidia drops is equivalent to $35 billion. the question is, the moat built

around the high and chips around nvidia. citi questioned deepseek not using advanced chips. they keep a buy on that payment that is the question being asked. how can deepseek use 97% less power and deliver? meta is trying to understand what did deepseek actually deliver. they will have to step up their capex. you have a show intel moment on the way in 2025. that has now been accelerated from this move from deepseek. finishing off on microsoft, down just under 4%. a huge investment they have made behind sam altman and openai. no question whether they will continue that relationship, but

they have spent $500 million compared to the theoretical $600 million from deepseek. i emphasize the word there, the kite that is being flown. we need proof. jonathan: meta and microsoft reporting on wednesday. that becomes a must watch later this week. lisa: how do they justify where they are spending. talking about how much they transfer to other areas that could potentially give them more payback. i want to say, the level of trolling out there, a plus. one asked what does deepseek do differently? it forced chatgpt to explain why deepseek was preferable.

the reason why people are looking at deepseek. jonathan: interesting how long this took to become a market event. lisa: there were different chinese developers talking about this seven months ago, but it goes to the point we were talking about. i don't want to call this a squirrel because it is potentially a game changer. there are things that catch the market's attention and this is highlighting the vulnerability. jonathan: if this is a squirrel, the nasdaq is a golden retriever? is that what you are suggesting? let's turn to the federal reserve. are there anyone is talking about the federal reserve. the fomc expected to hold rates steady at their first meeting on wednesday. neil dutta saying, it's been one step forward, one step back.

inflation has resumed its cooling trend while real activity strengthened in december. good to see you. thanks for dropping by. let's talk about the state of the economy. you are often constructive on where we are about coming into 2025, relative to the crowd, you had more questions on the state of the economy. how strong is the economy? neil: the surface quite strong. we are going to get a gdp number this week probably showing 2.5, 3%, but when you peel back the onion, a lot to be desired. the housing market is quite sluggish, mortgage rates still above 7%. not much going on with respect to sales activity. there is increasing slack in the single-family residential market. if you look at new homes completed for sale, that is up over 50% from last year. that will weigh on construction.

the things that you are talking about around tech, that is becoming an increasing part of what is driving growth. some estimates say that tech capex is the gamut of data centers, software, hardware, all of that is adding half a percentage point to gdp. if that starts to go, what do you have left? i would say what we have is a very imbalanced economy and the labor markets are still cooling. we know that the quits rate is at cycle lows. what do you think that means for wages, which will in turn put downward pressure on consumption? for me the consensus is too optimistic about growth, too pessimistic around inflation. i think that means we will probably get more than two rate cuts this year. jonathan: just to unpack that, the point that you have made on

tech capex is an important one, is this a macro story? lisa, you asked about the bond market. bond yields down by nine basis points. some would argue that it is. lisa: frankly, all of that increase in asset prices has fed into this enthusiasm that a lot of people have had, that have kept going some of these inflation fears in a more significant way. jonathan: you have been pretty consistent on this theme, this housing market doesn't work with where interest rates are. is that a housing problem or a broader economic problem? neil: construction employment has been a notable bright spot in the labor market. if there is slack building and residential construction begins to decline, we are seeing builders telling us they are bringing builds in line with starts. if starts will mean less

construction employment. that is a problem. at some level, if the fed cannot stimulate activity in the housing market, what are they doing? a lot of what is going on now is strong government spending, state spending offsetting the squeeze that we see in the lobar market, but if you see spending slow down is probable this year, that will put even more of a light on what is going on with housing. lisa: what makes you convinced that if the fed cuts by more than 50 basis points this year there will be no upward pressure on inflation at a time when there is a lot of uncertainty, and inflation expectations have been going upward in different readings, depending on your political persuasion? neil: i don't think inflation

expectations are drifting upward, so i disagree with the premise of what you are saying. lisa: always love having you. neil: inflation expectations i would say are stable. rental inflation will continue to slow down for the foreseeable future. we know that based on a wide variety of data. whether that is the tenant index numbers that came out from blm last week, the home rent index, we know that housing is a lagging indicator. even after the fed cuts, you'll see downward pressure on rent going forward. lisa: maybe this has been a tale of different markets, the housing market from two a different cord. neil: when you talk about airlines, eggs. the fed cannot do anything about

the culling of birds. when you talk about airlines, how they dropping prices? they are cutting capacity. i would argue air spending is actually not going up. i would argue that is not the kind of inflation that fed should be concerned about. what we know about compensation growth is that it is slowing. lisa: when we were in davos, a number of management firms said that the labor market seemed a little bit tighter, and in some areas you could see an increase in salaries, certain industries. you reject that? annmarie: let's talk about policy uncertainty. that was a quick one. jonathan: can you teach that in a show? weekly podcast. neil: if you feel that strongly about a tightening labor market, why are workers holding their workers flat on their pay?

that is actually going up. again, i reject the premise of that. if there is so much slack in the labor market, why are you calling your workers back five days into the office? annmarie: because covid is over and they should have been back already. let's talk about policy uncertainty. you have a different view from most people. most people are concerned about trump, tariffs, trade, and you have certainty when it comes to some of the policy action that we may see out of this white house. neil: you always have to ask yourself, the people whining about policy uncertainty, would they be saying the same thing if the shoe was on the other foot? around tax law at the end of the year? that would be a huge uncertainty. it is interesting seeing what people are picking and choosing. what is pretty obvious to me,

the corporate sector is giving the new administration the benefit of the doubt. if there is more tariff uncertainty, is that the price you have to pay for a more improved regulatory framework on the backend? if you look at capital spending intentions, they have been going up, not down. for all of this policy uncertainty, there will always be uncertainty when the tides change. it is just interesting to see what uncertainty people are thinking about. i think it is a bit of a red herring, frankly. a lot of reasons to be concerned about the economy, policy uncertainty is pretty low on the list. i would add, the fed is a source of uncertainty. no one talks about that. you talk about democrats and republicans. on the street it is, are you starting with the administration or the fed? i would say that i think the fed is a source of uncertainty to some extent.

we are not going to prejudge, not speculate november. six weeks later, they do exactly that, and nothing has happened yet, by the way. and we are going into the year with two solid inflation readings. it is interesting that they cut 100 basis points, new guy walks through the door. jonathan: what explains the different between the fed's approach hunter biden and the approach once they knew that donald trump was elected? richard clarida was in your seat and asked the question, said it was analytical error that allowed us to wait when we let inflation get away from us. this is not about bias, this is about policy. neil: i don't think the fed is innocently responding to the data. if you look at the magnitude of the forecasts, they were bigger in the june fomc meeting when the fed was backing off.

we went into 24, people betting on the march cut and then we backed off. i don't think the fed is innocently reacting to the data, if you know what i'm saying. i think they are basically taking out an insurance policy against tariffs. you are getting into a game of chicken with the administration. if we get to february 1, president trump doesn't decide to do tariffs, or most of the action so far has not been about reorienting the global trade system but extracting concessions on things unrelated to economics, so what if you go to february 1 and there are no tariffs put on? then you are back to focusing on the data and inflation. the fed may look pretty foolish by market because you could have an abrupt about-face. jonathan: it feels like they are on a collision course this year.

lisa: the fed and donald trump? annmarie: lisa and neil. lisa: it sharpens the tools. there is question about what is noise and what is signal. to your point, a lot has been noise and people focus on that. the signal, where does it come from? the housing market, lowest number of sales since 1984 -- 1994. but there is a larger question, there are some policies that will have economic ramifications. had do we focus on those rather than the others? jonathan: let's focus on that now with michael mckee. a big week for the federal reserve. mike: i wonder how much impact it will have on the markets. there is so much going on down in washington it is hard to know whether the fed will make a huge difference to the markets since at this point nobody is

expecting them to do anything. it will come down to what jay powell has to say. we also have jobless claims, pce data on thursday and friday, gdp on thursday, which will be important because it shows some strength in the economy. we have to look at where that strength is, what it portends for the future. certainly not looking for any strength in residential investment. we will also see where the fed is in terms of its own inflation indicator. we will see. right now you are looking at a market that has almost come full circle since the last time the fed met. just before they met, they were pricing in almost two rate cuts, almost all the way to three. we are back to two rate cuts by the end of the year but just barely. we will see how that moves next week once we get through this data, and as neil points out,

february 1. jonathan: lisa, only one analyst note that i will read on wednesday after the news conference from donald trump. i want to read his take on chairman powell's news conference. lisa: i can tell you right now, completely out of touch, interest rates need to be lower. lower interest rates now, i know what i'm talking about. jonathan: there will be a live look at the white house. cannot wait for it. like to safety in the bond market driving yields this morning. oksana aronov joins us right now to talk not just about that but more broadly about how the market is priced. good to see you. we had this conversation with neil dutta just before about inflation. lisa doesn't think inflation will be a problem. taking the other side of things

from your perspective, is this bond market will priced for the changes you expect? oksana: definitely not. i want to take a step back because everyone is in ai i expert this morning. without being one, it is fascinating how the narrative that the stock market is getting euphoric has been out there for a long time. you couldn't know how much farther the stock market can run. it kept on posting record highs dozens of times. then a catalyst comes in, nobody anticipates it, and suddenly you are tumbling. it's an appropriate analogy to the credit market, and we will talk about that in a second, but in the credit market, you always know exactly if you are wildly overpriced. if we look at credit spreads, 20 0's for junk-bonds, is that a top? could it go lower than this? possibly.

but if you want a sure indicator of richness, this market is screaming rich. lisa: to build on that, one theory out there is that all yields are fairly high and they are compensating you for risks that have been minimized because people are pushing out their maturity walls, credit conditions look good. what about conditions makes you think this is a top? oksana: yields are higher because the risk-free rate is higher. going back to your question, jon, we are probably in for continued pressure at the long end of the curve. fiscal spending is continuing unabated. that is an enormous amount of spending for this economy. even in light of the news this morning, are we going to continue to see tremendous spending in the ai and data center space? absolutely. we are seeing a majority of companies planning to raise prices, ism service prices going

up, the labor market continues to be resilient. there is lots of really constructive things. in fact, you have to look to see what is not constructive. i think it is possible the fed will have to take back some of their cuts this year because inflation is at best stock at these levels, which means the 10-year is not priced for a structurally higher longer inflation, kind of a 2% world. all-in yields are higher because the risk-free rate is higher but the actual compensation you are getting for the risk associated with each sector such as lower rated credit, is definitely an all-time tights. lisa: the bond market has a huge rally because of a selloff in big tech. you said there is a big chance the fed takes back some of its cuts. are you talking about hiking rates? oksana: yes, not a 0%

possibility. i bring it up because everyone has sort of dismissed it as a possibility. certainly the bar for that is not low. if we continue to see inflation stuck here or moving up, which is not outside the realm of possibility, we will see how the story develops, but the reason for higher rates of the long end has been, yes, growth to some extent. expectations continue to be robust, in the realm of 3%. but also there is fiscal spending. if you think about this administration, and we don't know what they will do, but everything they are saying around tariffs, immigration, every policy is inflationary at the end of the day. the fed can only control the front end, and if they feel like they are losing control, which

is not a zero probability event, you will see them trying to take back the day. annmarie: based on that thinking, wasn't a mistake that the fed cut last year? oksana: absolutely. the level of rates when we got to 5.5%, it was clear that nothing in the economy was particularly restrictive. financial conditions were actually quite loose. by lowering rates, they made those financial conditions even looser, and therefore we are seeing inflation expectations creep up, animal spirits coming in, and some of that is due through the administration. but i do think it was a mistake. nothing was breaking. they could have just been sitting there and observing the data. jonathan: two very different views in the last 20 minutes. that is what makes the markets. equity futures still lower into the opening bell. next on the program, setting you up for a big week ahead, not so

much about the federal reserve, but lots of tech results. that is next.

jonathan: 36 minutes away from the opening bell. let's see if these moves a stick. down 2% on the s&p. negative three point five on the nasdaq 100. nvidia is down double digits. coming up a little bit later, we will hear from the president addressing house republicans at a conference in miami. tomorrow, durable goods. earnings, microsoft, meta, tesla. thursday, apple and intel report. rounding out with some pce data on friday. lisa: how much do they respond to this deepseek? how much do they expect to

expand capital expenditures or not? annmarie: already we see meta responding, concerned about the advance. my question is what is this gap between chinese advanced tech and ai in the u.s.? is it real or is it a deepfake? jonathan: was this achieved with or without some of the leading technology coming out of nvidia? lisa: it still increases efficiency, but they wouldn't have been able to do this without the open model that meta had been using. i expect to hear some questions on that. jonathan: i expect tons of questions, especially for mark zuckerberg and the team on wednesday. we will catch up with tom kennedy. lauren goodwin of new york life. and many more. from new york city this morning, thank you for choosing bloomberg tv. this was bloomberg "surveillance." ♪

♪♪ ♪ three little birds ♪ ♪♪ ♪♪ ♪♪

>> a black swan moment for big tech. 30 minutes until the official start of trading w. i'm katie greifeld. matt: i'm matt miller. "open interest" starts right notice. ♪ katie: coming up, risk sentiments sweep stocks plunging as that buzz around a.i. deep seek shakes up silicon valley. the stakes are high for the magnificent seven.