00:00We've had years and years, decades of easy access to money.
00:04Liquidity has been plentiful. We are now in competition for capital.
00:08Where does that ultimately take us?
00:10Two aspects there. One, is it like a sudden snap?
00:13Or two, is it just slow wear and tear or something along those lines?
00:16And I think that the latter is something that markets can show more resilience against.
00:22But we're still finding out what kind of material that the market is made of.
00:26I'm not seeing any kind of panic in credit markets yet.
00:29I'm worried that we're seeing crowding out.
00:31And I think that the pressure from the AI debt funding on treasuries,
00:36I think it's slightly more problematic than the higher yields on what's happening to the AI space.
00:41We've had this, you know, three or four years of increased fiscal spend globally.
00:46And now we've kind of compounded that with sort of hyperscaler issuance and sort of the AI CapEx story.
00:52And, you know, both of these dynamics in the market are very big sources
00:55and have very big needs for global capital.
00:58At what point do those yields become an issue, particularly for tech?
01:02Tom, I don't think there's a set yield.
01:03In the AI sector, what we need for quality growth is those yields to stabilize in some way.
01:11I don't think it tests the AI thesis, but it does test the allocation of capital
01:15and what that means for portfolio construction.
01:18We are talking about that more than we ever needed to before.
01:22There is certainly some concerns about AI CapEx and being pushing too hard into the U.S.
01:31I mean, when does that really become a problem for U.S. equities?
01:35Are we at kind of peak earnings and that means CapEx goes down from here and that's worrying?
01:39The latest numbers that we've seen is that they're getting the return on this investment
01:43and CapEx is accelerating.
01:46And I wouldn't expect, therefore, to see a moderation in that CapEx.
01:50But it's just the sustainability of continuing to impress with the earnings performance and the margins.
01:56AI is starting to compete with itself on the risk-seeking side of things.
02:00So you have a lot of new issuance on both the debt and equity side.
02:04You have these higher yields and people can clock like around 7-8% on AI debt.
02:09You know, that's very equity-like.
02:11It's very hard to imagine the S&P moving, you know, another 8% higher in the back end of
02:16this year.
02:16You know, that's very good.
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