Bloomberg Surveillance TV: October 23rd, 2026

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m.

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Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App. We begin this hour with tech steadying following its worst day since June. Lizanne Saunders of Schwab writing, the AI story isn't over, but it's moving from who spends the most to who can afford to.

Stay up in quality with focus on balance sheet strength. Lizanne joins us now for more.

Lizanne, welcome.

How much pushback are you seeing to this build out?

You mean in terms of investors and how they're approaching their portfolios? It is absolutely the number one question. I just did a number of client events this week around the country and angst about AI, but really broad questions, not a lot of questions with specificity. Just what do you think here? Is it a bubble? Is the financing piece of this really being called into question, circularity of financing?

So, the interest is heightened.

And that, you know, John, another part of the reason for that is if we just lapped the start of the current bull market, October 12th was the end of the 2022 bear market. During that span of time, that four, slightly more than four years, Only tech and comm services outperformed the index itself. The remaining nine sectors underperformed. So, just from that, we know there's been concentrated positions. And that's why I think you've seen this shift toward more defense in the last couple of weeks.

Supporting that concentration, as you know, Lizanne, you've got the numbers. It's been massive earnings. Fantastic figures, particularly for this year. for the big tech players. Dan Ives was on the program a little bit earlier on this morning. He tried to make the case that next week when we get numbers from Google, Microsoft, Amazon, it'll calm things down. Do you see it the same way?

Well, I'm not an analyst covering the stock.

So, I think for things to calm down, those earnings collectively would have to be better than expected. And these days, companies need to be both top line and But what we've also learned with the action of certain stocks is you can outperform the published sell-side consensus and still underperform the unpublished buy-side expectation. We used to think of that as the whisper number. So that, to me, is really the key, is how wide a spread is there between the sell-side expectations.

And the buy side estimates.

And that's when you get stocks that in some cases get taken out to the woodshed. You just think about a few months ago when Samsung had the same problem. They reported better than the sell side consensus, but they arguably undershot the buy side expectation. ultimately took the cost fee down 40% along with it, subsequently rebounding, of course.

Yeah.

There's a real question, though, just to build on what John was talking about next week, what the hyperscalers are going to announce with.

Respect to CapEx plans.

Will bigger-than-expected CapEx plans be a positive for the market or a negative for the market, given either— you could.

Read it two ways, right?

On one hand, their ambitions are increasing, and so are their CapEx.

Yay.

On the other hand, they're being fiscally disciplined. Which is the story that the market wants to hear?

I think an undershooting of CapEx would be a bigger negative story than reinforcing what are pretty healthy CapEx numbers. So I think it's less about what that dollar spend is and how are we financing it. You know, you have seen a big drop in the cash flows of the hyperscalers. You had significant cash flow to finance the capital spending.

That has since dropped now.

And collectively, you've gone into negative territory in terms of the year-over-year growth in cash flows, which is why there is more debt financing. But I think it's a bit bifurcated, and I think it will stay bifurcated. It's down the quality spectrum that you're seeing troubles, especially as you move away from the mega cap names. I only track it on a weekly basis, so it's a few days old.

But as of last week's close, the profitable Russell 2000 stocks were up 18% year-to-date. That's handily outperforming the S & P 500. But the non-profitable Russell 2000 stocks were in slightly negative territory on a year-to-date performance.

So, that's a massive increase.

18, 19 percentage point spread just based on are you profitable or not? I think that's the bigger underneath the surface story is what your interest coverage is. Are you high or low debt to equity? What is the outlook for your profitability and profit margins? This is very much a quality trade. And I think that probably has some persistence.

How big of a signal was Meta's sell-off in response to, among other things, issuing more shares that didn't have voting rights?

I mean, if some of the.

Biggest, strongest players start to rely more on equity sales to finance some of their ambitions, how is that taken in the stock market?

Well, in the case of Meta, we saw how it was taken with its stock. And Meta is one of the primary reasons why, in an aggregate sense, you saw the hyperscalers free cash flow numbers drop so precipitously. So I think there's sensitivity to that in the equity market. By the way, there's also sensitivity to that in the fixed income side of things, in investment grade credit.

And that's another important point.

In this environment where We think about crowded trades and concentration on the equity side of things. You now have to consider when establishing a diversified portfolio that if a big part of the fixed income sleeve is also corporate credit. that you've got that AI exposure that spans into the fixed income side of the portfolio too. So I think diversification has to be thought of now more from an attribution standpoint as opposed to just purely from an asset class standpoint.

Lizanne, as we are.

Getting closer to the midterms, John made a joke at the top of the show, but honestly, how much is this is just anxiety and everyone waiting for that to be a clearing event or do you not think it will be?

Well, I think it's absolutely part of the anxiety. I don't have to tell anybody that this is an emotional period. And one of our messages is be mindful of not letting the emotions, particularly if they're election-driven emotions, infiltrate your investment decision-making too much. Part of the reason why volatility tends to pick up in advance of elections, particularly and even more so midterm elections particularly, relative to presidential elections.

But things do tend to calm down after. So I think it's absolutely a force that is behind some of the skittishness that you're seeing, at least under the surface of the major indexes.

Stay with us. More Bloomberg surveillance coming up after this. On our radar this morning, SpaceX expanding its infrastructure footprint. Sources telling us here at Bloomberg the company is in talks to secure at least 80,000 cell sites across the U.S. with the help of at least one major cellular infrastructure firm.

That name is up 2% so far this morning. Elsewhere, SK Hynix scrapping plans for the U.S. listing of its Soladyne unit. The chipmaker facing strong opposition from both regulators and shareholders. The company citing, quote, recent capital market conditions for the decision. There goes another one. And finally, OpenAI lowering its valuation target in its latest funding round. Sources telling us here at Bloomberg, the chat GBT maker has shifted its value by 150 billion in recent talks, bringing its new target to 125, the previous target much higher.

Yeah, $ 1.

4 trillion at a time when this is one of the big kahunas, right? It's the $ 1. 25 trillion now open AI versus the $ 2 trillion anthropic. And ultimately, that sucking sound you hear is money going toward these players and nobody else, potentially. If there is an anthropic IPO, it comes with nobody else really doing IPOs because the IPO window has essentially come to a shut. And so to the degree that the IPO window is open to these selective players, the key question is at what valuation and how much do investors welcome it versus fear it at a time of real questions around capital raising.

We've got Dan Ives of York for Life with us around the table.

Dan, good morning. Great to be here. What's breaking in your world? Look, I think it's a tug of war because on one hand, I was just in Asia last week. The demand has accelerated, I think, about 30% over the last month. Just in terms of what we see with chips, enterprises going full down. The AI stack, we'll see that from hyperscaler earnings next week. But then, like you talked about, I mean, just given, call it 20% of that is going to have to be bought. Ultimately, finance via debt, capital raises, the pressure, the core weave worries. I think the reaction that we saw with Meta, I think it was a head-scratcher to some extent relative to just unbelievable numbers, but yet the stock sold off. So I think, look,

it is as nervous as I've seen relative to maybe a SaaS apocalypse, if I go back to earlier this year.

Sure.

Someone says SaaS apocalypse 2.0 on the infrastructure side in terms of what's happening.

You mentioned a couple of companies. Let's divide them and draw a firm distinction between some of the major companies with massive legit balance sheets and then the more speculative leverage players. You mentioned a core wave. This market's starting to reassess and question the business model. in Neo Cloud firms.

If those Neo Cloud firms went away, and just do the scenario analysis with me, if that went away, that business disappeared, what would it mean for the marginal demand for, say, a chip maker right now?

Look, that's 50, I mean, if you think about even on an NVIDIA core, that's 10%. I mean, we're talking about the NeoCloud's play. You almost need more NeoCloud from a capacity perspective than we have today. I would argue the core weave is the nebulous. They're more consolidators, to some extent, what we're ultimately going to see on the neocloud side. But today, demand supplies 13 to 1. So it comes down to those that argue that the demand is not there relative to what the capacity bill that will be. I'll argue it's the opposite. So to some extent, when you look at the hyperscalers, they're going to have to continue to ramp up cap backs. We'll see that next week with the hyperscalers. And I just view this

as more of you call it like a growth scare, credit scare. But I don't think it dents my view that we're in year three of an eight to 10 year buildup. Because like I've said, this is Vegas Strip. 1955, the build-out. I'm not saying in 1956 there weren't issues, 1957, but that is how big tech companies are viewing it.

Are you saying it's a casino? Well, I'd say that to some extent, not in the casino, but in the fact that... You went to Vegas and people... But in the fact that there's one strip. And if you don't have a spot on the strip, then ultimately you'll be in Reno. Yeah.

Well, I guess the question isn't just whether you're building out the strip.

It's how long it's going to take.

And ultimately, does the disappearance of some of these neoclouds end up slowing down the build-out and prolonging the cycle and the earnings for the likes of NVIDIA and some of the big semiconductors? Because ultimately, on the margins, in the near term, that short-term demand goes away.

Yeah, I view it right now as that if there's some neoclouds on the lower end that go away, then that capacity ultimately gets bought up. So I don't think that necessarily slows it down. But my view, going into midterms, combined with what we see on the credit side, let's just say 5% of the data centers don't get built.

You still have 800 to 1,000 data centers that will get built. And for every dollar on CapEx, there's a five, six dollar multiply across the rest of tech. And that second, third, fourth derivative speaks to the Palantirs, the snowflakes, the crowd strikes, the Palo Altos, what's happening across software.

What I'm hearing from you is that the bigger are going to get bigger. simply because they have the cash flow to actually finance this. And ultimately, more of this is going to have to come out of cash flow. More of them are going to have negative cash flows going forward and are not going to really have or not going to see the desirability to turn as much to debt markets to finance this. Is that kind of what you're seeing and that ultimately that could affect their equity valuation, but they could emerge the winners overall in terms of their scope and scale?

No doubt.

It's a great way, and it's a balancing act for them because if they ultimately pull back, let's say Microsoft pulled back, Amazon pulled back, others would accelerate. You talk about Anthropic, that will go IPO in November. As they become public and as open AI goes public, whether it's $ 1. 2 trillion or $ 1. 4 trillion, the arms race just gets accelerated.

So I think these tech companies recognize there's 12 to 18 months to do this. Still. Still. The build-outs, they understand there's a window to do this because they see from their customers, like Microsoft, you'll hear it next week, they see from their customers, they're waiting in line. They're trying to accelerate ultimately where they're going to be. And if Microsoft can't do it, then they'll go to Amazon.

If they can't do it, they'll go to Google. That's why Oracle right now is maybe in the toughest spot because they're trying to be a hyperscaler, but they're doing it on debt. And that's why the stock you just continue to see reflect a lot of those negative concerns. Dan, you mentioned midterms.

Is it just about data centers? Because yesterday, dozens of lawmakers came out after this Axios report about AI agents breaking into people's bank accounts. Most notably, Bernie Sanders says AI needs to be paused now. Is there more of a risk of something happening, given the fact that it looks likely that Democrats are going to sweep the House and even potentially the Senate?

I think the worry going into the midterms, and I think that maybe this hasn't been talked about as much, because obviously we're talking about credit and tenure. But a lot of the concerns that I see is just more politically, because— If you have some sort of blue wave, Democrats negative on AI, negative on data center build-out, similar to Hochul and the moratorium we see. Look, that continues, that's a real threat. Because the reality is that for every data center that doesn't get built in the US, China wins.

So that, I think from an investor perspective, Now, you go state to state. If something doesn't get built in one state, you go to another. But I think that right now, from an investor perspective, is definitely a concern going into midterm.

So if it's a blue tsunami, which some Republicans have told me they're concerned about, do you think we open up much lower on all of these hyperscalers November 4th?

Look, if you have a blue wave, blue tsunami, it would be negative for tech, no doubt. Now, then the question is what becomes grandstanding political talk versus the reality? And I think that will ultimately be like, has investors sort of gleaned through it? But I think that's sort of the issue right now because... Any regulatory or any data center sort of slowdown, that's something that stifles innovation.

For the U.S. for the first time in 30 years is ahead of China when it comes to technology. And that right now is the conundrum. But I believe next week, hyperscaler earnings, that calms down the market, showing that I think we're the group.

I've got to follow up. I mean, we had Meta and SpaceX. Numbers were pretty good. Didn't calm anyone.

Yeah, and I think that this will be viewed, the Meta and SpaceX reactions in the coming weeks and months, as more of a buying opportunity relative to how the market reacted. I think if Meta reports earnings next week, stock's up. I just think it happened at a time where the nervousness is there. And right now, like, look, New York City cab drivers bearish on tech. There's a lot of nervousness that we're seeing. But I just view this as a SaaS apocalypse 2.0 rather than the time to, like, you know, hit X.

Never mind the New York City cab driver. When you get bearish, that's when I know it's a buy. Stay with us. More Bloomberg surveillance coming up after this. Let's talk about energy at the heart of some of these conversations. Brent Crude continuing to climb, heading for its third consecutive weekly gain. Rebecca Babin of CIBC writing, more oil is moving through a system that is increasingly expensive to operate and has far less cushion when something goes wrong. Playing with fire can leave you with third degree burns. Rebecca joins us now for more. Rebecca, welcome to the program.

How people understand this, the supply of energy is higher. It's bounced significantly. But the price of crude hasn't come down. How much more expensive is it to move energy now?

So it's a lot more expensive.

It's five times more expensive to get a barrel through Hormuz than it was kind of at the start of the year.

And it takes three times as many ships to do that.

So you're looking at a system that's under extreme strain to get those barrels through.

So there's a big distinction there.

With a barrel that moves in freedom of navigation and a barrel that moves under an escort or a ship-to-ship transfer. So those costs are very much being embedded into the risk premium we're seeing in Brent prices right now. So as the flows have increased, we're not seeing that pullback in prices because it's simply much more risky, much more expensive to do so And as we've seen escalation kind of come this week and rumors that there potentially is an attack coming before the midterms, you see traders very much on edge, not necessarily wanting to be short into a weekend where there could be kinetic action. So the market's reflecting a lot of risk premium and it's warranted.

We don't have a huge inventory buffer at this point. And yes, the barrels are flowing, but they're not flowing through freedom of navigation.

Do you see any way that the administration can ameliorate some of these concerns? I spoke to the energy secretary recently and was talking about the scale of the sanctioned oil tankers, that potentially real companies can use them if they're carrying legal oil.

Can that help at all?

So I think 13% to 15% of the global fleet is sanctioned right now for VLCCs. So removing sanctions on some of those carriers could, on the margin, help relieve this strain in the tanker market and get a little bit of relief on these freight raids. But I don't think it's necessarily this kind of silver bullet that's going to really solve this problem. And I think this really, Anne-Marie, points to the bigger issue we're seeing. We keep trying to solve this with one Band-Aid after another, but we are literally looking at a kind of a system that's broken and being held together by Band-Aids, and that's just not going to necessarily create a lasting solution. So could it help on the margin and reduce some of the

freight rate costs we're seeing? Potentially. But keep in mind, those sanctioned vessels are all like.

20 years old. They're the older.

They need repairs. Some of them have already been being used by the shadow fleets. So it's really, it's not a huge help. I mean, again, it's not going to hurt, but it's just not going to solve the problem.

Fragile environment. Where do we have cushions right now around the world?

Yeah, so where the cushions are, we do still have a European SPR that's fairly well stocked. Of course, they have announced that they're going to commit to releasing what they already announced they would release in March with the 20 million barrels of.

Diesel over the coming months. It's helpful.

There is a decent amount of remaining SPR in Europe that I think they are very cautiously deploying. And you can imagine why, right? They are importers of every molecule, every source of energy. Do they really want to release it out into the market with so much uncertainty as to what comes next? We don't really see the end line for the conflict. And where you're really seeing that reflected is in the 27th strip of crude. 27th strip of crude is making year-to-date highs. Front month, not making year-to-date highs. 27th strip is. So if you're Europe and you're looking at that, do you say, do I want to release or not? It's questionable. But that's where there's a buffer. Outside of that, we've really exhausted a lot

of the inventories. Commercial inventories are what comes next, and it's running pretty tight.

How high do prices have to go, Rebecca, before people start to invest in building new refineries or build new drilling sites?

That is a great question. And I think it's less about the front month price and more about that strip and looking longer dated. And I think if we can get confidence that this is a lasting cycle, this isn't just a we're going to rip higher, demand's destroyed, and we come right back down to 60, that's when you start to see the investment happen. And I think that is something that comes over the next six to 12 months.

This isn't a decision that's going to be made in two to three months. I think if we consistently hold kind of on that 27, 28 strip in the mid 80s, low 90s, you could see that marginal increases in barrels start to come on in bigger projects. A little bit different for refineries. I think that's a much harder battle on a regulatory front. So I think you would see crude production increase pretty meaningfully in 12 to 18 months.

But I think refining is not something that's going to be solved. I don't know what price that happens. It's more of a regulatory, I think, issue more than a price issue.

This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6am to 9am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App.

Bloomberg Surveillance TV: October 23rd, 2026

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