Speaker 1: Good morning from our global headquarters in New York at Manus Cranny alongside Danny Berger. You're welcome to Bloomberg Brief.

Speaker 2: Let's set that agenda. A global risk sell off. Nasdaq futures fall more than 3 percent. Bonds rally. The 2025 optimism for markets gets a challenge from tariffs and tech. U.S. tech exceptionalism threatened by Chinese A.I. startup Deep Seek with a cost effective solution for A.I. and a compromise agreed in the standoff between President Trump and Colombia on the threat of

Speaker 1: sweeping tariffs. Good morning Manus Danny. Good morning. The first gray swan of 2025 afflicting Nvidia and the global tech market. We're now down 10 percent. Three hundred billion dollars worth of market cap has been wiped off Nvidia and counting. There's one word deep seek. Go Google it. Chinese startup more effective a cost effective at less power. Roll it over and have a look at the effect on equity markets. Nasdaq down 3.4 percent. We've now wiped out almost wiped out the gains of 2025. Last week we talked about Goldilocks on steroids. Is that challenge. We've only seen drops of 3 percent three times in 2024. Ground zero as equities come under pressure in this grace one moment. You go straight to the bond market. We are seeing yields fall. The question is the scale of the existential angst from the equity market as yields drop by eight basis points. Danny in the bond

Speaker 2: market. Yeah if you thought you were going to get a quiet start to what otherwise will be a busy week you've been sorely mistaken this morning. There are also some other stocks. I mean a lot of stocks that have been selling off with the deep sea concern that's been coming through. A.S.M.L. is one of them. Let's just get the pre-market check on that man is those shares are off 10 point 7

Speaker 1: percent of the stocks. I mean the question is this about the moat the moat around U.S. exceptionalism of Nvidia and therefore the moat around all the other majors in the tech sector. Broadcom also falling again on these concerns as a result of you got it. Deep

Speaker 2: sea. And just all those big spenders also falling. Microsoft being one of them. Any of the ones that have been spending a lot of A.I. falling Microsoft off nearly 5 percent in the pre-market session. Also coming up we'll catch up with Ella Hodge of Newton

Speaker 1: Investment Management. Amy we still haven't understand volatility. Join in at 530 RBC Capital Markets 1 0 1. That's a 1 0 1 for

Speaker 2: all. One of my favorite things that anyone has written about this is Jim James and Gillian of Citrini Research saying picks and shovels to dig your own grave. That's what we're seeing. The questioning of the picks and shovels trade which had been so popular not even just that but of tech in general of the heavy valuations. We had said that valuations are high. Once they come off it will be painful. Is this the thing. Mark Andreessen calling it the Sputnik moment for AI. Someone else saying that this is Silicon Valley Bank for AI. It is a finally as you put it a gray swan that's going to be forcing a sell off. The question is does it

Speaker 1: mysticize into something much more aggressive on a competitive threat to the landscape of U.S. that moat. Everybody talks about the moat around in video that has had a fissure. The question is whether that fissure turns into the moment of a dike that actually blows apart. You just think of it. I love what what one of the notes came through said this is the Texas hold a moment for U.S. tech. In other words throwing everything out the wall from Stargate announcement to matter you know doubling its expenditure last week. Well if you suddenly got a competitor. Yeah. They can produce at much less cost and it's open source. And this is what you and I talked about this morning. So there's a whole host of issues that can build the story for deep sea. Well this is the

Speaker 2: thing. I think today is just kind of sell everything sell tech as you try to understand this. But as we try to understand this are things going to merge. I'd say maybe this isn't bad news for meta. Maybe this isn't bad news for these companies that have been plowing so much money into capital expenditures. This is cheaper. This is more efficient. Hey maybe this changes from again not picks and shovel anymore but to the commodification of A.I. that other companies now have access to A.I. and if you can figure out how to implement it and use it cheaply because of deep seek maybe it's a boon to your bottom line. OK well let's talk about a

Speaker 1: little bit more. It is the top story. It is the Chinese A.I. startup. If you want to go off and Google at night you don't know about them. Deep Seek is the name. It's rocking global technology markets raising questions over that American dominance. The moat. The buzz grew over the weekend that the company's latest A.I. model poses a threat to the U.S. industry as we've been saying to Nvidia. Tom McKenzie is tracking this story. So Tom I put it out there that this is a grace one moment. This story has been bubbling. Just put in context what is deep seek offering to the world. Let's just put a framework around it. I mean look I

Speaker 3: think the grace one is a really nice framing of this. And you have both touched on some key points around this story. This is a company as a model. It's a research lab set up in the early 20 20s by a hedge fund guy done very well. He's built A.I. into his hedge fund for a long time down in Hangzhou. And then he used some of that funding to build out a lab a research lab. And they dropped this latest model on the 20th of January. And to your point it's about cost and it's about efficiency and about capabilities. And they claim that they spent just about six million dollars and they did in two months two months six million dollars. And that of course compares to the 80 billion dollar number that we're hearing from in terms of Microsoft in terms of how they plan to spend around capex to build on some of their models around A.I. So it's the cost it's the efficiency and it's the capabilities. And on many metrics deep seek is meeting if not surpassing the metrics of opening I anthropic and met as Lama models as well. Does the innovation around A.I. stop here. No it could well be accelerated to Danny's point. But it does raise serious questions about the supply chain supporting that A.I. innovation. Well it certainly is this idea Tom that you're working

Speaker 2: under constraints and something about that is the mother of all invention that you do this with much less money. Tom there isn't reporting from the information over the weekend that Metta has set up at least four war rooms to try to analyze what is going on. What are the consequences. You could kind of understand for NVIDIA that maybe this is bad. Not as many people need their most expensive chips. But what about for tech as a whole. What about the Mag 7. Well we already know that Silicon Valley and many

Speaker 3: builders app developers and product developers out there are using and have been using deep six models. It is being dispersed through the ecosystem in Silicon Valley and more broadly as well. So you could get apps and systems and services produced more quickly more efficiently. And that could be beneficiary of course a benefit to those who are buying them and producing them. But it does pose a question around whether or not that demand. And this comes back to the valuation story for NVIDIA trade trading at 33 times whether or not that demand for the high end GPUs the black whales is going to be there. If you can build models with these kind of capabilities on more quote unquote legacy chips as you say. China has been forced with its back to the wall and has had to innovate. They've bought on these systems engineers at deep seek and they have managed to build out a system. It seems if you trust the data and what is out there on the open source building blocks of this model that they have managed to do that with chips that are far less sophisticated than the accelerated GPUs that NVIDIA sells. It's just a great example of when your back is

Speaker 1: against the wall. You really do. You know the mother of all invention is oppression. What are the geopolitical issues here. We've seen the eruption over tech talk. But the difference is Danny and I were chatting about this morning when we came in. This is open source. This is a structurally different product for the world relative to perhaps the national security interests around tech talk.

Speaker 3: Yeah. What does it mean around the spend for the lithography machines the SML makes. And that's what's being questioned in the markets right now. What does it mean for the supply of GPUs from NVIDIA. What does it mean about the energy spend as well with those companies like Microsoft who are spending on nuclear power going forward years and have made those commitments already. Those are the question marks. And then on the geopolitics we saw how the Biden administration responded when Bloomberg discovered through its own reporting that Huawei had developed a very sophisticated chip using SMIC and equipment in mainland China. They responded by with further restrictions. Does the Trump administration to look to that as the playbook. Are we looking at further restrictions to try and clamp off even more of this technology. How far and how broad does the Trump administration go in response

Speaker 2: to this. Tom I think your first point is such a good one. Everyone's been clamoring on about how the trades de jure are picks and shovels infrastructure data centers. Does all of that now get questioned. Tom McKenzie excellent reporting. Thank you so much for joining us. We'll catch up with you later on the show as well. Tom McKenzie there of Bloomberg. OK let's get you now some other top stories that are trending on the terminal this morning. China's economic activity surprisingly faltered at the start of the year. Factory activity shrank in January. Chinese industrial firms also reported the third straight quarter of declining profits. That underscored the risk that the world's number two economy might be stalling again. They're going to be below one hundred

Speaker 1: thousand dollars on Friday. President Trump ordered the creation of a working group to advise the White House on crypto policy along the way to executive action. The order stopped short of confirming that the U.S. would establish a bitcoin reserve. Something

Speaker 2: Trump had vied to do on the campaign trail. And Elon Musk's Department of Government Efficiency is now officially online. A government job site to recruit full time software engineers and other tech staffers is up. Applicants must be U.S. citizens. And apart from a resume and a commitment to working in the office they're asked to list up to three items that quote show exceptional

Speaker 1: ability. Coming up in the show at a hot shot of Newton Investment Management on why we may not find the U.S. isn't as strong a position as it was last year.

Speaker 2: It's your Bloomberg brief. Danny Berger and Manny's cranny in New York as tech gets a big shake from over the weekend. People analyzing the new open source model coming from a Chinese hedge fund deep seek. Let's take a look at tech this morning. Man is NVIDIA selling off quite dramatically some 10 percent. It's down. This also calls into question all of the other tech players to the information reporting that Meta has set up for war rooms to dissect the model and what insights it can apply to A.I. Is this the moat being questioned. Is this the amounts amount of tech capex being questioned. Is it essentially all of the popular bets

Speaker 1: we've had of the two past years being quite it's going to be a heck of a week because you've got multiple Matt you know mega tech reporting this week. This is a questionnaire around the capex Danny. If a deep seek can deliver on the A.I. front a robust and faster chachi PT model for example that's out there at the moment at a cheaper price. What's it going to do the capex. You got two hundred twenty four billion dollars spent last year. You're looking at something like what two hundred eighty billion dollars this year. Meta just up their capex by 50 percent. So this again challenges all the precedence that we have in capex energy

Speaker 2: capacity for this space. And again they spent six million dollars building this model. I mean they could have spent more hiring engineers and scientists for all we know. But six million dollars versus the many many billions that you had to have poured in to build things like chachi PT bonds. Also as we saw they are rallying this morning. It's that kind of textbook risk off where you're finally buying bonds again. Yields down by nearly nine basis points for your 10 year yield. Ella Hoja writing this morning bonds offer value especially versus equities but could be under further pressure here. We do not have the all clear yet to own max duration. Joining us now is Ella. She is the head of fixed income of Newton Investment Management. Ella do bonds finally work again. Just evidence by what's happening today with all of risk selling off and people buying bonds. Are we back to some

Speaker 4: semblance of normal. Well I think for the prior to January as we did say I think international markets I guess the mantra was bonds are back and you haven't heard that this year I guess. So probably you should start thinking maybe they are back indeed. But look I think in terms of value when you look at yields and certainly when we're getting close to this 5 percent levels there's some value to be had. Having said that as I as you said in my in my quote earlier there are still some risks to clear. And I would say that probably more on the fiscal side. We need to hear more from the new administration in the US in terms of what's coming fiscally particularly on tax on the tax side and on the spending side. Right. And that's probably the biggest risk that bond markets are concerned about as well as tariffs of course. Good

Speaker 1: morning to you. We're describing this tech event as being the first sort of major gray swan which the markets are trying to grapple with. If I was to say to you the bigger gray swan for the bond market is the deportation prospect taking us back to 2020 level. Three million people would be taken out of this economy. It's a supply side risk rather than the tariff risk which is the

Speaker 4: bigger gray swan. It's possible. Yes that's why I say fiscal is probably most imperative for bonds. I think markets will obviously pay attention to the Fed. But that's less of a risk right now because we have repriced. But when it comes to this balance between inflation certainly and potentially bigger spending that's why I say the risk is not all clear for bonds here. Of course what's happened over the course of the last week with tech matters because there's a high level of concentration in equity markets on certain stocks as we know unprecedented in nature. So that could pose some market driven risks and that would support bonds for now. But as far as policy goes to have a bit more conviction over the next two quarters I think you need to clear

Speaker 2: a little bit more on the policy side. We need some more clarity. But Ella this is the thing. It has been information overload over the past week. I mean forget this week where you have this tech news you have tech earnings you have an ECB and a Fed decision last week just on the fiscal policy side on its own. It was a firehose coming from Donald Trump of basically touching every single asset class from oil to where he thinks interest rates should be. How do you pick and choose what's important what's noise and what's actually tradable information when you just have such a vast quantity of things flying at you.

Speaker 4: Absolutely. I think this is where the value framework comes in. Right. So that's what you know when you say there's value in rates for example there's value in certain currency pairs. I think this is the important crux and diversifying some of your bets. You can't place all the bets for example as the market had coming into this year that everything is going to be ticket to boo and growth will fly and everything else. All other equities and bond markets are dire. So so I think you need to have a bit of a contrarian mindset. That's probably the first step that comes to mind. And second have a deep value framework because that will allow you to not get into trouble at least not into the major trouble spots. And so that's kind of how we're approaching it. On your last point how do you simplify it. Just go back to the basics. You know the 80 20 rule. So if you just take what's happened with tech news right and that in that vector what's the thing that matters the most is that we were priced for perfection. So we didn't know where the news was going to come from. It happens to come from deep seek obviously has implications for risk and for assets. And so take the simplest explanation to that. It's high level of concentration. So it's will some people be forced to sell. Yes. But take that explanation as your basis I guess. Well OK. We're having this sort of massive

Speaker 1: reevaluation in equity markets the biggest drop since 2022 on the Nasdaq. This to me presents you're going to hear the moment by the dip in these equity markets. But what does it mean for the broader credit bond situation because the growth story here in the United States of America is still very very strong. So on these disruptive moments what are the opportunities.

Speaker 4: Well we would probably say that credit spreads are meant very tight. I don't think that's revolutionary. I think the market knows that it's entered this year with that view. So nothing new there. But I guess credit is the glue that holds equities together. So certainly worth watching if credit spreads start to widen on this concerns I'm not predicting that we're certainly not betting in any major way to that effect. But I think there is a risk here of some correlation to that effect. Then clearly it can feed through into equity markets. But the biggest risk has been from rates pricing higher. And that's that's one of the ways we saw potentially rates markets feed into broad equity weakness. But it seems like we might get the reverse for now. It might be equity equities that feed into credit and certainly give some support to core bonds. You have to be open to that scenario right now. OK.

Speaker 1: And I thank you very much. Hunter there of Newton Investment Management's on Bloomberg this Monday morning setting the agenda. Context matters from New York.

Speaker 2: It is a rupture in global tech that we're monitoring this morning. Is it a Silicon Valley bank moment. Whereas in one area the market experiences pain everywhere else feels it too. Let's check out the yen this morning strengthening versus the dollar by more than one and a quarter percent. Manus it's again that connection between Kerry and tech we're seeing play out. Yeah the

Speaker 1: question is do you know how much more does it explode. It's nothing like the volatility moment that we had last August when the carry trade was taken out. But it certainly is going to add to that momentum in strengthening yen overall. Let's look at some of

Speaker 2: the other front page news that we are tracking this morning away from tech. First off off on The Wall Street Journal leading with activist investor and Cora holding they're preparing to wage a proxy battle at U.S. Steel. They intend to rally shareholders around a plan to oust the CEO and not salvage the Nippon merger. The firm isn't interested in pursuing a sale of U.S. steel to another

Speaker 1: party. Next up New York Times leads with the Philadelphia Eagles and the Kansas City Chiefs are heading to the Super Bowl. Why do I get this. Why do I. Why do I get the sports story. Go to the Super Bowl. It's a big weekend over the weekend for sport. It is the third consecutive Super Bowl for the Chiefs. And it'll be the second time that the two have faced each other in the big game in a rematch of Super Bowl. You already know all that. I knew all I know is Kelsey's going out with Taylor Swift. And that's really all we got. No I'm buying the merch. It's all you need to know. That's really all you need to know. That's just downgraded football

Speaker 2: aggressively. That's OK. They're not watching yet this morning. OK. They're still out celebrating. And on the Bloomberg President Trump announcing sweeping tariffs on Colombia before a bop abruptly pulling the threat after reaching a deal on the return of deported migrants. The White House claimed victory late on Sunday saying Colombia had agreed to all of President Trump's terms without delay. For more on this story we are joined by me in the news director Roz Mathison. Roz it was a blink and you miss it moment on tariffs. Is this the new blueprint for tariffs in the Trump administration.

Speaker 5: Well certainly it tells us a couple of things. For starters it tells us that Trump indeed will use tariffs as a political tool for leverage with other countries on economic only tool but very much for political purposes. And he did this very quickly in response to Colombia saying we're not going to let these military planes carrying deportees land in our country in a flash. Trump said fine I'll put tariffs on you and that we can see that he's going to be very reactive then on the terrorist front. But equally the third part of this is that he's willing to negotiate. And as quickly as he put these he was going to put them on. He said fine I'll take them off again. He is leaving some restrictions on Colombia. Obviously he wants to see how this plays out but he is willing to use tariffs very quickly to play hardball and then see what he can get in response. So very much tariffs are going to be that game of leverage whether it be Colombia or be it with bigger economies again like China Canada and obviously countries in Europe. I think it depends

Speaker 1: on the size of the trade that you have with the country and that that allows you to immediately capitulate and turn around. The raids have started the very poignant raids on immigration in Chicago. Tell us a little bit more about the momentum there.

Speaker 5: Well obviously we saw these kind of the first official raids under the Trump administration. And it's not so these raids weren't already happening. The differences they were done across very much a multi-agency approach this time and very very publicly televised in a way. So very much the Trump administration wanting to demonstrate that it's doing something sweeping up these people in quite dramatic circumstances. And again the question is where does this begin and where is this going to end. You can see cities like Chicago some states saying hang on we're going to try and put up as many defensive measures against this as possible. We're not going to work very directly with ICE as the immigration agency is known on this. We're not going to cooperate. You want to do this. You're on your own. So it's going to be very very tense going forward. Well thank you very much. Ross Matheson there on the latest

Speaker 1: political moves over the weekend. Amy Rose Silverman joins us from RBC Capital Markets. We'll discuss volatility as Nvidia is dying over 10 and a half percent. Are you ready for this volatility in equity markets.

Speaker 2: From our global headquarters in New York. Welcome to Bloomberg Brief. Danny Berger and Manish Krani here. Let's set your agenda. A

Speaker 1: global risk sell off. NASDAQ futures fall more than 3 percent. Bonds rally. The 2025 optimism for markets is challenged from tariffs and tech. That's U.S. tech exceptionalism threatened by the Chinese AI startup Deep Seek with a cost effective solution for AI. A compromise agreed in the standoff between President Trump and Colombia on the threat of sweeping tariffs. Danny good

Speaker 2: morning. This is what you call a volatility shock in the making. It's a margin call kind of day. And this might be what's causing it. Nvidia down more or nearly 11 and a third percent. Is this the moment everyone had said that tech was overvalued. It was looking bubbly but without anything to disrupt it. What would pop it. Is this the event of the U.S. moat around chips and tech being questioned. Is the picks and shovel trade now dead. Is the data center trade now dead. You see across markets NASDAQ futures now off almost 4 percent. We've had roughly 200000 NASDAQ 100 futures contracts change hands by before 5 a.m. That is four times more than the 30 day average for this time of day. By the way is not if Nvidia ends the day down more than 8 percent it will be the biggest erasure in market cap in history of any individual stock. S&P futures down two and a third percent and maybe the havens are acting as they should. Bonds are rallying this morning. They are up a decent chunk of basis points nearly 10 when it comes to the U.S. 10 year yield. Other assets like the yen also rallying this morning. So man is this goes beyond tech at this moment. It is having worldwide and global market repercussions. And I think where you are this is the kind of VAR shock that nobody was

Speaker 1: pricing for. We were pricing for a Goldilocks scenario. So what you have are margin calls and you have a self-fulfilling prophecy which is you've got to sell your perhaps your most treasured assets to meet your margin calls. I think Danny as you said earlier you think about this company Deep Seek. They spent what six million dollars relative to open AI. They spent five billion dollars. The question is what is the product and can it really stack up on every front on power on capacity. And in terms of a real

Speaker 2: challenge to open AI and to Microsoft and to Nvidia. Citrini Research puts this really well that this necessarily has to question all of the companies that got their profit from the immense amount of capex that was being spent on AI. But on the other hand I think might be more interesting once the dust settles of this crazy sell off. What benefits from this. Again they call this the commodification of AI. All of a sudden it becomes much easier and much cheaper for basically every company to start to implement AI. And maybe the winners will be people who can do that in really interesting and productive ways. I think Jordan Rochester summed

Speaker 1: it up beautifully for me. And this week is a huge reporting week and some of the biggest companies are going to have to go on calls. This was a Texas Hold'em moment for the chip industry. They are you know you just think Stargate and I see five hundred billion dollars meta upping their capex last week. The calls that they were going to have this week. What are you going to do. And

Speaker 2: how are you going to beat and stand up to deep sea. And they usually unleash their 20 25 guidance in these earning calls. I mean is

Speaker 1: all of that upended. Indeed. Let's get a little bit more in the story. We've got Tom McKenzie standing by to answer some of these questions. Tom good morning. Good to see you. I've called it a great swan moment for global markets and for technology. Create the framework. What is deep seek. What do they do and what are they going to offer. That's so much more competitive relative to the

Speaker 3: U.S. technology sector. Yeah. When you love to hear from Jensen Huang at this point or indeed the CEO of deep sea. Look he's a former hedge fund boss. He still oversees a hedge fund in Guangzhou in the innovative capital of China. And in 2023 started this research lab. They launched January 20th. That's when the new model came through the R1 from deep seek. And it was picked up by experts and by tech bros and others in Silicon Valley. They started to build on it. They started to stress test it. You heard from Andreessen Horowitz saying this is a potential Sputnik moment. He released that comment on the 26th. So already Silicon Valley their heads were being turned by this. It was trained in about two months. That's the claim. Cost about six million dollars to train it. That compares as you say to open a spend on training their models but also meta spent about 60 to 70 million dollars training their most recent model. So that compares six million to 60 to 70 million. The capabilities of the model they match. Apparently on many metrics match those capabilities of open AI anthropic and meta is the capabilities is the efficiency and it's the pricing. To your point Danny around pricing the cost of about five on some metrics about 5 percent of the pricing the open AI charges. And that's already led in the domestic Chinese market to price cutting price wars from the model makers Tencent Alibaba Baidu. They've all had to cut prices already on the back of the models that come out come through from deep seek. So if you're building the AI products you're going to be on pressure if you're buying them. Maybe it's good news. I want to. I was going

Speaker 2: to ask you exactly about that Tom. Because to manage this point we're going to have meta Microsoft Apple and Tesla for what it's worth reporting this week where they're all going to be asked to outlay their 2025 outlooks. What does it mean for these players who've been spending so much on capex. We know from the information that meta has already developed four different war rooms or people just have their heads down analyzing what this could mean for their llama model. Is it a good thing or a bad thing for

Speaker 3: them. Well you would have thought it's a challenge for the likes of meta maybe longer term in terms of the cost of incorporating AI into their own business around advertising. That will prove a benefit for the near term. It does raise a huge question over that commitment to spend 65 billion dollars this year from meta 80 billion from Microsoft. Can they get the systems engineers that deep seek have to create the kind of efficiencies that JP Morgan have raised the question. Did deep seek lean on the 50000 or so hopper GPUs that the hedge fund that the boss the owner of deep seek also has. That remains a question mark. Some of the data is being scrutinized as well. But if we take this at face value then it certainly raises a pivotal question around the need to spend on the most sophisticated most expensive GPUs the likes of Blackwell for NVIDIA and what it means for those capex projects. Also the energy commitment as well. And we know that these companies are partnering with energy providers and spending a huge amount on that as well to ensure that they have the energy flow into the data centers. But if you can create models that are this capable as their U.S. competitors but a fraction of the price and a fraction of the energy use and a fraction of the GPU use then that raises major questions before we even get onto the geopolitics of this. Tom thank you very much. Tom McKenzie the closing off with the

Speaker 1: geopolitics critically important. Let's talk about volatility. This is the performance in the VIX over the past year. Let's see how it stretches out today. Amy Silverman is the head of derivatives strategy over RBC. Amy I'm looking at the chart. This is the carry trade was the last most exuberant moment in volatility and the December Fed meeting when you walk in this morning. You thought you were going to have a paddling duck kind of market for the year. Here we are. Goldilocks is challenged. You're talking to clients. What are you saying to them about volatility and how to take advantage of this moment or how to protect yourself. Where

Speaker 6: do you come down on the scales of risk. Good morning. Well it's possible this paddling duck might have just just paddled over a waterfall. We're about to see. I think we're a little early. I think there's going to be a lot of digestion today. But there's no question that this could be a potential game changer because one thing we've talked about this entire time is you know even as investors are wishing for breadth trade a breadth widening trades this year tech has to be OK simply because it's such a large weight in the market. And if tech is not OK the entire market goes. That's what we're seeing today. You know I'd certainly expect a spike up in VIX and I'd certainly expect a correlation across the board to rise. And obviously correlation is a massive component

Speaker 2: into volatility across all asset classes. Amy so many people had kind of called for a moment like this. Not exactly. I think Manners has been spot on when he's called this a gray swan. But all of those calls out there saying tech looks bubbly. Valuations are too high. And the retort to that would be well American tech has a moat around it and you can continue to navigate and get those higher valuations because of that very fact. Amy if that's being called into question is this the moment that whether or not we're in a bubble can again be questioned. But something is popping here and we could see a really ugly

Speaker 6: sell off continue for multiple days. Yeah totally. And I'd say you know for a lot of folks if you actually look back in time I feel a little empathy. I kind of get where they're coming from because if you look at other market drawdowns the flight to safety has actually been to tech. If there is if there is a growth scare right. If you see a change in the rate story it's actually mega cap tech that folks have actually flocked to in the past. So it's a really interesting shift in narrative. And I do think Danny that you know it takes some sort of exogenous shock to potentially change that narrative. And then you know look if you have that if it's a massive weight in the market and that sells off there's no breadth widening trade at that point that can save

Speaker 1: you because correlations across the board have just picked up. Is this an exogenous shock or just a reality check. Amy it's

Speaker 6: their early days. I know. Yeah for sure. You know look I think a lot of people when they talk about the richness evaluation they certainly didn't expect the differential numbers that your colleague brought up you know five billion versus six million in terms of spend. And then obviously the lead on effects to all the other sectors. And what's interesting is even coming into 2025 we actually had seen a pickup in SKU. So meaning we did see a pickup in demand for hedging. You know my take on that had been that it wasn't particularly ominous. It was actually just a function of folks being long. But you know a little bit of the danger here is the fact that people are more fully positioned than they were a few years ago where all we could talk about with people buying the right tail people buying mega cap tech because they had to participate. You know everyone has jumped in the pool. So that change in positioning man is also going to make things a little bit more painful on the other

Speaker 2: side. Right. It's just these buildup of products around it too. I mean there are multiple leveraged Nvidia ETFs you can buy if you want to get two times the upside in this morning two times the downside. Amy what does that build up mean in terms of margin calls in terms of wider VAR shock. Do we seem to be anywhere close to that sort of snowball type event.

Speaker 6: Yeah. I have to be honest when I read news like this that's actually the first place my mind goes to because you know when you're a derivative strategist you think about that exacerbation. And I'll just give you a few dates. Right. When you look at August 5th of last year when you saw that about volatility spike you know what happened there was related to the yen carry unwind. When you look back to February 2018 when you look at volume again and what happened there. Yes it was spurred by rate and growth worries. But what actually happened was there's too much massive notional in short levered ETF products and that causes not not only an unwind but that unwind to be very explosive. Now I'll say a couple of things related to that. Obviously you have to watch these inverse products but the notional size of a lot of the short VIX products is a lot lower now than they were a few years ago. So you do have that going for you in terms of what we could see in the follow on for the days to come.

Speaker 1: When you see moments like this Amy I'm looking at Dolly. Yeah. I mean this is the consensus trades as Tim Graf I'm chatting to him on the I.B. This is the consensus trades being taken to the woodshed. When you see rally in dollar and a rally in yen and a rally in bonds that that signals to me that we're at some kind of a different moment in the reaction function by markets. This is

Speaker 6: that this is more than a soup song of fear. Yeah I would agree with that. And you know this is one of those things man is aware that like I just have to say time and time again you can't count on traditional correlations to stay the same. You know bond equity correlation I'd say being the number one worst offender. Right. Like so many models were built off the fact that we were expecting this inverse correlation. And then you get areas like Covid when it just doesn't work anymore and everything becomes positively correlated. I think the same thing has happened within the market between mega cap tech and the rest of the market as it relates to correlation. And if we get that correlation all going in one direction again you better expect just formulaically that volatility is going to pick up. You know you're going to see that threshold rise and it's going to rise not only in equity volatility but across cross asset volatility too. So I mean just to put a finer point on this is this the kind of dip

Speaker 2: then that you do not want to be buying at least for now.

Speaker 6: I would say look it's a difficult question because it's early and I'm by no means an expert within A.I. specifically. You know this is something where today I'm going to go back to the folks who actually cover these stocks who actually you know look at Microsoft and Metta et cetera and the semiconductors and say you know how big a deal is this. Because certainly from a hedging perspective it's something people want to do anyway. So perhaps it's not necessarily by the tip because remember everyone's quite long. But perhaps it's we still hedge even though it's very expensive. What we're going to hear from them themselves this week we're going to get Metta

Speaker 2: Microsoft Apple and Tesla all reporting. And by the way a Fed and an ECB decision. If you were concerned we'd have a quiet rest of the week. Amy thank you so much for joining us. Pray for that poor little ducky off the waterfall. Amy Wu Silverman RBC Capital Markets. Let's get you some other stories now that are trending on the terminal this morning. China's economic activity surprisingly faltered at the start of the year. Factory activity shrank in January. Chinese industrial firms also reported a third straight year of declining profits. That underscores the risk of the world's number two economy that it might be stalling yet

Speaker 1: again. They're going to be below one hundred thousand dollars as we have this risk of narrative across global markets despite President Trump ordering the creation of a working group to advise the White House on crypto policy along the way to executive action. The order stopped short of confirming that the U.S. would establish that Bitcoin reserve something that Trump had vied to do

Speaker 2: on the campaign trail. And Elon Musk's Department of Government Efficiency is officially online. A government job site to recruit full time software engineers and other tech staffers is up. Applicants must be U.S. citizens. And apart from a resume and a commitment to working in the office they're also asked to list up to three items that show quote exceptional ability off to rewrite the CV.

Speaker 1: You've got to find manners. I'm not an American citizen. Oh of course. I've just got so sad on the outside. Coming up President Trump whiplash markets by first announcing sweeping tariffs on Colombia before suddenly reversing them. We'll discuss the context in just a moment.

Speaker 2: It's your brief on a day that looks a whole heck of a lot like a margin call day. Let's get straight into what tech is doing selling off across the board. NVIDIA plunging more than 12 percent. Microsoft down six and a third percent. Meta down 5 percent. Manus you've mentioned this meta has earnings on Wednesday. Is this the moment that Mark Zuckerberg is going to have to ditch the T-shirt and gold chain for a suit to try to explain what their 2025 outlook is not going to look like. Well listen everybody was

Speaker 1: cheering on Friday when it was announced that they're upping their capex to 60 to 65 billion. I think one of the best lines is you know and this is about the threat from from deep sea. They spent six million dollars open. I spent billions five six billion dollars. So what are you able to produce. How competitive is that. And what is the real scale of threat because it is open sources 100 percent open source. So everybody that's talking about geopolitics maybe just needs to recalibrate their thinking

Speaker 2: around that. It underscores this idea that picks and shovels a.k.a. NVIDIA is not A.I. It is just the picks and shovels. And maybe we go into a pure A.I. trade and man is this morning having global ramifications across assets too. They are indeed ground

Speaker 1: zero for where the money is flowing. It's flowing into bonds but also dollar yet. Have a look at this. This is not as explosive a volatility moment as you had with the unwinding of the yen carry trades in August last year. But it can certainly grow a little bit more aggressively yet not by over 1.3 percent. As Amy Silverman said it's a paddling duck that's just gone over a

Speaker 2: waterfall. Poor little ducky. Well it is it is an information fire hose both last week and this week between tech between central bank decisions and what we're getting out of the White House. Man is President Trump announcing sweeping tariffs on Colombia due to a dispute over deported migrants. The U.S. and then Colombia reached a deal and Trump called the tariffs off. You blinked and you miss it. For more we're joined by Bloomberg government Congress reporter Jonathan Tamari. Jonathan great to speak with you this morning. It was a fast paced deal being reached. Is this the new blueprint for tariffs in the Trump

Speaker 7: administration. It is and it just shows the president you know his feeling that he has a mandate and he has the power to influence things not just in the United States but with the region around the region here. And he's willing to both throw the U.S. economic weight around in order to get what he wants. And you're combining two of his biggest priorities both immigration and tariffs are two things he talks about more than anything else. And so I think we should expect a lot more of this kind of muscular approach and probably a lot more whiplash in the early days of his administration.

Speaker 1: Perhaps the most poignant images are of the national emergency national emergency at the border. We know that national emergency is there is the reason why these deportations and raids are taking place in Chicago. Multiple agencies involved. We think nearly a thousand arrests is the reporting on Sunday. Just give us a sense of the scale. We're looking at the images obviously of those people being boarded onto military aircraft. And this is the point of angst with Brazil and Colombia.

Speaker 7: Yeah the scale is unusual. I mean obviously these raids have taken place but the multiple agencies being involved the media being brought along for the ride. You know the director the incoming director of Homeland Security joining some of these raids. It's all again a show of force and a kind of a major symbol of Trump saying that he's delivering on what he wants and probably trying to stoke fear among undocumented immigrants that they that they might be getting a knock on their door. He really has always said that tough enforcement will discourage people and maybe even encourage people to leave. He's trying to follow through on that here.

Speaker 2: Finally the other information fire hose piece we'll be getting this week are more congressional confirmations. Jonathan who's on the docket and what confirmations might be particularly difficult for this administration. Yeah we saw them get one of their top most

Speaker 7: controversial nominations through Friday night. Pete Hicks for Department of Defense. This week we have hearings for Robert F. Kennedy for health secretary. Tulsi Gabbard for director of national intelligence. Cash Patel for FBI director. These are three of the most controversial nominees Trump has made. Their hearings are going to be really closely watched. Republicans felt after Hegseth navigated his hearing that he would be OK. He was in the end just barely. So these three events they want to see these these three nominees you know handle the questions that they're going to get. And those hearings could go a long way to determining whether they all get through or whether one or two of them end up being blocked. Jonathan thank you very much. I remember a government reporter

Speaker 1: Jonathan Tamari on the very latest. It's a busy week for you. We just want to show you what's going on with U.S. equities. We are at session lows now. New York is coming in and beginning to really punch the docket here. The Nasdaq futures are down almost 5

Speaker 2: percent. Yeah it's really painful. NVIDIA continues to sell off to let us not forget. We have tech earnings coming up this week and we will bring you that coming up shortly. Your brief. Welcome back to your brief. If you were hoping for a quiet start to your week you are sorely mistaken. And it is a busy week coming up. A marathon of tech earnings begin Wednesday. We're going to have Microsoft Meta and Tesla plus the Fed's first rate decision of the year. Also on Wednesday. Then it's the ECB's turn for a rate decision on Thursday. We're going to get PC data in the U.S. on Friday. And man is before all that Nasdaq futures now falling 5 percent. Yeah we're halfway on the way to those

Speaker 1: exuberant corrections that that Julian Emanuel talked about. One story deep sea. What a I can they deliver and what are the chips that they're going to use. And that's why you're seeing NVIDIA down 13 percent. If we continue in this trajectory this is going to be the toughest the worst close in the history of markets broke on down 12 point four four percent. Again the contagion right the way across here Danny. Likewise on Meta Day up their game in terms of the actual CapEx they were going to deliver. That was announced on Friday. So this is a bar shock. This is about a real margin call shock to the markets this morning because it

Speaker 2: is a question of the picks and shovels and the data centers and the infrastructure spent behind them. Also looking at Siemens Energy in Germany pulling more than 20 percent. Their shares had more than quadrupled with the expectation that the A.I. boom would

Speaker 1: feed energy spend. Well this week it's going to be huge. You've got Apple Microsoft Meta and Amazon all reported. There you go. Nasdaq down 5 percent and change. If we continue on this trajectory there's a lot to justify on those calls this week. Well that's

Speaker 2: it for us. Surveillance takes the reins from here.