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Bloomberg Television1h 35m

Asia Tech Rally Defies SoftBank AI Concerns

Haidi Stroud-Watts, Avril Hong, Sam Liang, Aidan Gomez, Erica Poon Werkun, Chris Phelan, Goolsbee, Philip Lane, Heidi Stratwatz, Enda Curran, Michael Shepard, Anthony Stevens, Stephen Engel, Rachel Metz, Kirk Boudry, Jill Desis, Mark Cranfield, Catherine Lim

Interview
  • Elevated U.S. inflation and comments from Fed officials are driving expectations for a 25 to 50 basis point rate hike in December, with traders pricing in potential "jumbo" moves and market consensus shifting toward further hikes in January.
  • Fed Governor Christopher Waller indicated that at least two 25 basis point increases are needed, with a subsequent pause to assess economic developments, while Citi economists forecast rates ending 2024 at 4.25 percent and exiting 2027 at 3.5 percent following a pause in Q1.
  • Global equity markets, particularly Asian stocks and the Nikkei 225, are expected to decline broadly as tighter financial conditions and rising U.S. yields, with the 10-year yield pushing past 5 percent, pressure equity valuations.
  • Anthropic's IPO is targeting a $1.4 trillion valuation with shares priced on November 18th and trading the following day, aiming to raise approximately $90.4 billion through a $64.4 billion base offer and a $26 billion private placement involving chipmakers like NVIDIA, Broadcom, and AMD.
  • SoftBank is reassessing AI capital expenditure risks and data center projects, including a facility in Ohio, following write-downs and calls for moratoria, with analysts predicting the firm may become more defensive and reduce investing liquidity.
  • CoreWeave's bullish guidance, with annual sales potentially reaching $13.3 billion, is expected to alleviate neocloud concerns, though credit investors remain cautious due to exploding borrowing costs and the need for business model sustainability by 2027.
  • Otter AI plans to deploy $320 million in raised capital to accelerate AI development, international expansion including Korean and other Asian languages, and enterprise adoption, while co-founder Sam Liang views the U.S. political shift on AI as temporary.
  • Japanese Government Bonds and other regional yields are projected to rise in line with U.S. Treasuries, potentially prompting the Bank of Japan to consider a 25 basis point hike in December as the two percent inflation target remains out of reach.
  • Democratic majorities expected in Congress next year could reignite impeachment proceedings against Defense Secretary Pete Hegseth, though the likelihood of a successful Senate conviction remains uncertain due to potential veto threats and Republican opposition.
  • South Korea's labor market is forecast to remain solid with unemployment below post-2020 averages, and exports are expected to surge 111 percent year-on-year for the first 10 days, driven by the AI boom.
  • European Central Bank officials, including Philip Lane, have signaled that further rate tightening in December may be prudent if energy price shocks persist, with financing conditions serving as a key decision factor.
  • Chinese retail growth via Singles' Day is projected to slow to 4.4 percent year-on-year, with Taobao and Tmall growth limited to 2.7 percent, while instant retail is expected to drive 50 percent of growth and remain a critical category through 2027.
  • Volatility is anticipated in macro markets and specific sectors such as hardware and energy stocks due to reduced liquidity, while Hong Kong IPOs and the Taiwan AI trade face pressure from geopolitical concerns and shifting global capital flows.
  • Tesla and Japanese automakers like Honda and Toyota are reporting strong operational performance, with Honda's operating profit expected to reach nearly $5 billion and Toyota planning a mini-truck launch in Indiana.
  • Potential catalysts for shifting market expectations include a drop in oil prices or an end to the conflict with Iran, though inflation trends are not expected to reverse overnight.
  • Market participants are monitoring the outcomes of major IPOs, such as Anthropic, and institutional investments like NVIDIA's stake in CoreWeave to gauge confidence in the AI sector and the health of the broader equity environment.