AI Hype Fades, Shifting Focus to Business Value and Economic Slowdown - Episode Hero Image

AI Hype Fades, Shifting Focus to Business Value and Economic Slowdown

Bloomberg Surveillance · · Listen to Original Episode →
Original Title:

TL;DR

  • The AI boom's initial hype is fading, shifting focus from broad "AI" claims to tangible business value and return on investment, potentially impacting tech valuations.
  • A potential economic slowdown is signaled by weakening consumer confidence and slowing growth in non-durable goods spending, despite resilient job market data.
  • The market may be overestimating the pace of Fed rate cuts, with potential for faster cuts than currently priced in, benefiting smaller companies.
  • Companies are increasingly exploring AI integration through licensing deals, like Disney and OpenAI, to leverage intellectual property for marketing and brand value.
  • Despite strong large-cap performance, smaller companies and the broader market may offer better investment opportunities due to decelerating earnings growth in tech giants.
  • Persistent inflation and elevated prices, particularly from tariffs, are expected to significantly impact consumer demand in early 2026, despite current spending levels.
  • The energy sector may become a critical bottleneck for AI infrastructure growth, requiring substantial investment and potentially limiting future expansion.

Deep Dive

The current economic narrative is shifting away from the dominance of mega-cap tech stocks, driven by the cooling enthusiasm for AI investments and emerging signs of economic slowdown. While AI remains a significant long-term trend, its immediate impact is being re-evaluated, with a growing focus on companies that are effectively adopting and integrating these technologies to drive productivity and profitability, rather than solely on the infrastructure providers. This shift suggests a potential rotation into broader market segments that have been overshadowed.

The economic landscape presents a mixed picture, with traditional indicators showing resilience, such as strong consumer spending and a seemingly robust job market, contrasted by concerning "soft" data reflecting declining consumer confidence and concerns about future earnings. This divergence, termed "vibe pression," suggests underlying economic fragility masked by current spending patterns. The labor market, while appearing stable on the surface with low layoffs, shows signs of weakness in smaller businesses and potentially softer job growth ahead, indicated by metrics like the JOLTS quit rate returning to 2015 levels. This suggests that while a collapse isn't imminent, the economy may be slowing more than headline numbers indicate, potentially prompting earlier interest rate cuts than markets anticipate.

Furthermore, the sustainability of the current economic expansion is questioned due to potential headwinds like inflation, persistent high prices impacting consumer purchasing power, and the long-term effects of tariffs, which are projected to significantly impact consumer demand in early 2026. The housing market, despite potential rate cuts, remains unaffordable for many due to high prices, further dampening consumer sentiment. This complex interplay of factors suggests a delicate balancing act for policymakers and investors, navigating between supportive economic data and underlying inflationary pressures and potential slowdowns. The market's focus is shifting from broad tech optimism to a more nuanced evaluation of actual business performance and the sustainability of growth across different sectors and company sizes.

Action Items

  • Analyze AI impact on employment: Quantify potential job displacement and creation across key sectors (e.g., tech, creative industries) within the next 18 months.
  • Develop energy consumption benchmarks for AI infrastructure: Establish metrics for evaluating energy efficiency in data centers and AI model training/inference.
  • Assess consumer spending resilience: Track retail sales data and consumer confidence indicators for the next two quarters to identify potential slowdowns.
  • Evaluate AI adoption ROI: Define metrics to measure the return on investment for AI implementation in businesses, focusing on productivity gains and cost savings.
  • Monitor labor market indicators: Analyze job openings (JOLTS), wage growth, and hiring trends in small and medium-sized businesses for signs of weakening.

Related Episodes

Key Quotes

"The Russell 2000s doing very well I think there's still questions surrounding you know the big tech the AI story but you're seeing the equal weight S&P 500 do better Russell 2000 I think it's helpful that the Fed is buying some T-bills up to 40 billion a month so you're seeing all that."

Peter Tchir suggests that while large tech and AI stocks face uncertainty, the broader market, represented by the Russell 2000 and the S&P 500 equal weight index, is performing well. He attributes some of this strength to the Federal Reserve's actions in purchasing Treasury bills.

"The one thing that's I think coming up in every conversation we have is more and more questions about the electricity bottleneck how are we going to run some of these things if we can't produce the electricity so I think again we're going to see a lot of investment into electricity next year that's going to be a story."

Peter Tchir highlights a significant concern regarding the infrastructure needed to support emerging technologies like AI. He points out that the availability and production of electricity represent a potential bottleneck that will likely drive substantial investment in the energy sector in the coming year.

"I think the AI story is growing we're seeing the use but now it's kind of there's a little bit more question are you spending it are you getting value how do you want to use it going forward."

Peter Tchir observes that while the adoption of AI is increasing, the focus is shifting from simply implementing the technology to evaluating its actual value and effectiveness. Companies are now questioning the return on investment and the strategic application of AI.

"The one of the trades we've liked is you are either underweight QQQ's or you know the Nasdaq 100 and you overweight either the S&P 500 equal weight or the Russell 2000 I think that's where the performance is going to come as we realize all these other companies who are benefiting from AI they should trade maybe a better multiples the businesses here and you're starting to see rates come down again which helps a lot of those companies much more than it helps I think the big companies."

Peter Tchir advocates for a strategic shift in investment, suggesting an underweight position in tech-heavy indices like the Nasdaq 100 and an overweight position in broader market indices like the S&P 500 equal weight or the Russell 2000. He believes this approach will capture performance as the market recognizes the value of companies benefiting from AI, especially with falling interest rates.

"I think the job market's a little bit sketchy what I did of all the data I saw this week I still look at the JOLTS quit very very closely to me that's the closest we get to crowdsourcing and we're back to levels in the quit rate I think it was 1.8 or something it goes back to 2015 people aren't comfortable leaving their jobs that tells you everyone knows the job market's a little bit sketchy than maybe the data shows."

Yelena Shulyatyeva expresses concern about the labor market's stability, citing the JOLTS quit rate as an indicator. She notes that the rate has fallen to levels not seen since 2015, suggesting that people are hesitant to leave their jobs, which implies underlying uncertainty in the employment landscape.

"I think the bulk of the tariffs impact will be evident in the beginning of 2026 so Q1 Q2 and that is where we see the biggest softening in consumer demand actually."

Yelena Shulyatyeva predicts that the full economic impact of tariffs will become apparent in the first half of 2026, leading to a noticeable decrease in consumer demand. She suggests that while tariffs may not be a dominant news topic currently, their effects will manifest more significantly in the near future.

"I think you know you're referring to the level of interest rates and even if interest rates continue to um edged edge lower in terms that could improve affordability but the big part of the affordability calculation is prices and prices are still elevated well maybe they're growing at a slower pace but they're still growing so you have that 1 million house and it's now a million and 5,000 so it's still it's still very unaffordable to a lot of people out there."

Yelena Shulyatyeva explains that while falling interest rates can help with housing affordability, the primary barrier remains high prices. She illustrates that even slight price increases on expensive items like homes continue to make them inaccessible for many consumers, indicating that rate reductions alone are insufficient.

"Disney has first of all I've never had an investor tell me that they invest in Disney because they have an astute venture capital arm it's just not what investors care about that are your Disney shareholders the reason I think that is is Disney tends to have a propensity to invest its capital at sort of the peak of the mania."

Jason Bazinet expresses skepticism about Disney's investment strategy, particularly concerning its venture capital activities. He suggests that Disney has a history of investing significant capital during market peaks or "manias," which often leads to suboptimal returns for shareholders who prioritize core business performance over venture investments.

"The part that we like is we'd rather see a commercial deal than litigation and so we liked the idea that they've inked something we think Disney is going to get some cash for the use of its IP and we liked the idea that the use case has been ring fenced these animated characters short form video that makes a ton of sense."

Jason Bazinet views Disney's deal with OpenAI positively because it represents a commercial agreement rather than a legal dispute. He appreciates that the partnership is focused on specific, contained uses like animated characters and short-form video, which he believes is a sensible application of intellectual property.

"I think there's still an outstanding question of how these AI tools are going to be used for the bulk of the IP that exists in Hollywood."

Jason Bazinet points out that while the Disney-OpenAI deal addresses specific use cases, a broader uncertainty remains regarding how AI tools will impact the vast majority of intellectual property within the Hollywood industry. He suggests that the implications for actors and other creative professionals are still unclear.

"The shift is more toward the adopters the effective adopters um not just in a very general sense but actually starting to get meat put on the bones in terms of impact on productivity what it means for labor costs can it help improve uh profit margins so I think that may be one of the newer themes that develops within AI is that adopter theme."

Liz Ann Sonders suggests that the focus within the AI narrative is shifting from the technology providers and infrastructure to the companies that are effectively adopting and implementing AI. She believes the next phase will involve analyzing AI's tangible impact on productivity, labor costs, and profit margins.

"I think the net is it looks just sluggish

Resources

```json
{
"books": [],
"videos_and_documentaries": [],
"research_and_studies": [],
"tools_and_software": [
{
"name": "ChatGPT",
"context": "Mentioned as a tool for generating text and potentially assisting with tasks, with a note on its limitations and potential for hallucination."
},
{
"name": "Grok",
"context": "Mentioned as a tool used on Twitter for information retrieval."
}
],
"articles_and_papers": [],
"people": [
{
"name": "Peter Tchir",
"context": "Mentioned as Head of Macro Strategy at Academy Securities, discussing market action and technology stock selloffs."
},
{
"name": "Yelena Shulyatyeva",
"context": "Mentioned as Senior US Economist at The Conference Board, providing outlook for year-end US economic data."
},
{
"name": "Jason Bazinet",
"context": "Mentioned as Global Head of Media and Entertainment at Citi, discussing the Disney-OpenAI deal and its implications for the entertainment industry."
},
{
"name": "Liz Ann Sonders",
"context": "Mentioned as Chief Investment Strategist at Charles Schwab, assessing the macro environment heading into 2026."
},
{
"name": "Peter Schiff",
"context": "Mentioned in relation to Academy Securities and market analysis, discussing the 'Santa rally' and tech stocks."
},
{
"name": "Howard Schneider",
"context": "Mentioned as someone who asked questions about AI during a press conference."
},
{
"name": "Neil Irwin",
"context": "Mentioned as someone who asked questions about AI during a press conference."
},
{
"name": "Steve Liesman",
"context": "Mentioned as someone who asked questions about AI during a press conference."
},
{
"name": "Claire Jones",
"context": "Mentioned as someone from the FT who asked about the Federal Reserve's decision to cut rates."
},
{
"name": "Jay Powell",
"context": "Mentioned as Federal Reserve Chair, discussing concerns about jobs and the economy."
},
{
"name": "Kevin Gort",
"context": "Mentioned as having coined the term 'vibe pression' with Liz Ann Sonders."
},
{
"name": "Elon Musk",
"context": "Mentioned in relation to Grok, his AI chatbot."
}
],
"organizations_and_institutions": [
{
"name": "Academy Securities",
"context": "Mentioned as the employer of Peter Tchir and Peter Schiff, involved in macro strategy and market analysis."
},
{
"name": "The Conference Board",
"context": "Mentioned as the employer of Yelena Shulyatyeva and a source of consumer confidence data and economic outlook."
},
{
"name": "Citi",
"context": "Mentioned as the employer of Jason Bazinet, involved in global media and entertainment."
},
{
"name": "Charles Schwab",
"context": "Mentioned as the employer of Liz Ann Sonders, providing investment strategy insights."
},
{
"name": "J.P. Morgan Asset Management",
"context": "Mentioned for its active fixed income ETFs and their coverage of the US public bond market."
},
{
"name": "J.P. Morgan Chase & Co.",
"context": "Mentioned as the parent company of J.P. Morgan Asset Management."
},
{
"name": "J.P. Morgan Distribution Services, Inc.",
"context": "Mentioned as the issuer of financial communications."
},
{
"name": "IBM",
"context": "Mentioned as a company that helps businesses scale and manage AI."
},
{
"name": "TikTok",
"context": "Mentioned in relation to its 'Live Fest 2025' event celebrating creators."
},
{
"name": "Famous Footwear",
"context": "Mentioned as a retail store offering holiday promotions."
},
{
"name": "Bloomberg",
"context": "Mentioned as the source of the podcast and television program 'Bloomberg Surveillance'."
},
{
"name": "Federal Reserve",
"context": "Mentioned in relation to interest rate decisions and monetary policy."
},
{
"name": "Disney",
"context": "Mentioned in relation to a deal with OpenAI involving its intellectual property and characters."
},
{
"name": "OpenAI",
"context": "Mentioned in relation to a deal with Disney and its AI technology, including Sora."
},
{
"name": "Intuit QuickBooks",
"context": "Mentioned as a tool for small business financial management and operations."
},
{
"name": "Odoo",
"context": "Mentioned as an integrated business software platform."
},
{
"name": "Genentech",
"context": "Mentioned as the manufacturer of Ocrevus."
},
{
"name": "CVS",
"context": "Mentioned as a retail pharmacy and community partner."
},
{
"name": "Cisco",
"context": "Mentioned in relation to its Duo security product for phishing prevention."
}
],
"courses_and_educational_resources": [],
"websites_and_online_resources": [
{
"name": "omnystudio.com/listener",
"context": "Mentioned for privacy information related to the podcast."
},
{
"name": "jpmorgan.com/getactive",
"context": "Provided as a website to learn more about J.P. Morgan's active fixed income ETFs."
},
{
"name": "tiktok.com/livefest2025",
"context": "Mentioned as the location to find information about the Live Fest 2025 event."
},
{
"name": "famous.com",
"context": "Mentioned as a website for Famous Footwear promotions."
},
{
"name": "odoo.com",
"context": "Provided as the website to try Odoo for free."
},
{
"name": "ocrevus.com",
"context": "Mentioned as a website to learn more about Ocrevus."
},
{
"name": "stello.com",
"context": "Mentioned as the website to learn more about the Stello glucose biosensor."
},
{
"name": "duo.com",
"context": "Provided as a website to learn more about Cisco Duo."
}
],
"podcasts_and_audio": [
{
"name": "Bloomberg Surveillance",
"context": "The name of the podcast featuring discussions on markets, economics, and geopolitics."
},
{
"name": "Mind the Business",
"context": "A podcast series featuring small business success stories and discussions on AI."
}
],
"other_resources": [
{
"name": "AI (Artificial Intelligence)",
"context": "A central theme discussed throughout the episode, covering its impact on business, job markets, and investment."
},
{
"name": "Fixed income ETFs",
"context": "Mentioned in relation to J.P. Morgan Asset Management's offerings and coverage of the bond market."
},
{
"name": "Live Fest 2025",
"context": "A global creator celebration event on TikTok."
},
{
"name": "Santa rally",
"context": "A market phenomenon discussed in relation to year-end stock performance."
},
{
"name": "Russell 2000",
"context": "Mentioned as an index performing well, indicating strength in smaller companies."
},
{
"name": "S&P 500 equal weight",
"context": "Mentioned as an index performing better, suggesting broader market participation."
},
{
"name": "T-bills",
"context": "Mentioned in the context of Federal Reserve purchases."
},
{
"name": "Oracle earnings",
"context": "Mentioned as a factor that influenced market sentiment."
},
{
"name": "Electricity bottleneck",
"context": "Discussed as a potential limitation for AI development and deployment."
},
{
"name": "Disney-OpenAI deal",
"context": "A specific business transaction discussed in relation to AI and intellectual property."
},
{
"name": "QCCs",
"context": "Mentioned as an index that might be underweight in favor of other indices."
},
{
"name": "Nasdaq 100",
"context": "Mentioned as an index that might be underweight in favor of other indices."
},
{
"name": "JOLTS quit rate",
"context": "Mentioned as an indicator of employee confidence in the job market."
},
{
"name": "Jobs report",
"context": "A key economic indicator discussed in relation to labor market strength."
},
{
"name": "GDP forecast",
"context": "Mentioned in relation to the Federal Reserve's economic outlook."
},
{
"name": "Fed funds",
"context": "Mentioned in relation to interest rate targets."
},
{
"name": "QE (Quantitative Easing)",
"context": "Mentioned as a potential monetary policy tool."
},
{
"name": "Digital asset",
"context": "Mentioned in the context of treasury companies and financial innovation."
},
{
"name": "Productivity boom",
"context": "A potential economic outcome linked to AI adoption."
},
{
"name": "Vibe pression",
"context": "A coined term referring to the disconnect between soft and hard economic data."
},
{
"name": "Consumer confidence",
"context": "A key economic indicator discussed in relation to consumer spending and outlook

---
Handpicked links, AI-assisted summaries. Human judgment, machine efficiency.
This content is a personally curated review and synopsis derived from the original podcast episode.