Netflix to Buy Warner Bros. in Historic $72 Billion Deal

Summary

Bloomberg Businessweek Podcast Summary

Episode: Netflix to Buy Warner Bros. in Historic $72 Billion Deal
Date: December 5, 2025
Hosts: Carol Massar, Tim Stenovec, Joe Weisenthal, Scarlett Fu

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Episode Overview

This episode centers on Netflix’s groundbreaking acquisition of Warner Bros. Discovery in a historic $72–$82 billion deal (including debt), shaking up Hollywood and the streaming landscape. The discussion explores implications for media consolidation, industry culture clashes, the future of streaming, and wider market sentiment. The episode also touches on labor market trends with LinkedIn’s chief economist, macroeconomic strategies in a volatile AI-driven environment, breaking news on a potential SpaceX IPO, and market outlooks into 2026.

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Key Discussion Points & Insights

1. Netflix Acquires Warner Bros. Discovery: The Inside Story

Guest: Felix Gillette (Media & Entertainment Editor, Bloomberg News; author of It’s Not TV: The Spectacular Rise, Revolution and Future of HBO)

• Surprise Victory for Netflix ([02:36]–[03:28]):

  • Netflix’s win was unexpected, with initial offers from Paramount and a joint interest by Netflix and Comcast, but most expected the Ellisons (Skydance/Paramount) to prevail due to financial backing.
  • “People thought that the Ellisons were going to be able to pull this off and were surprised that Netflix was able to do it.” — Felix Gillette [02:43]

• Potential for Counteroffers

  • The Ellisons could still challenge Netflix’s deal, taking an offer straight to Warner Bros. Discovery shareholders due to dissatisfaction with the process ([03:28]–[03:52]).

• Deal Structure & Asset Valuation

  • Netflix is purchasing only selected assets, leading to debate over fair value comparisons versus full-company bids ([03:54]–[04:20]).
  • Legacy cable networks (CNN, TNT, TBS, Cartoon Network) will be spun off as a standalone “cash cow” company:
    • “Those are declining assets, but they still throw off a lot of cash.” — Felix Gillette [04:32]

• Cultural Collision: Tech Meets Hollywood ([05:07]–[06:27])

  • Netflix accelerated cord-cutting and now faces merging its tech DNA with a classically Hollywood studio. Past mega-mergers (AOL-Time Warner, AT&T-WarnerMedia, Discovery-WarnerMedia) were tumultuous.
  • “Why would this be different? ... Netflix was able to master the skills of an entertainment company and how to develop original programming, how to build franchises quicker than HBO was able to master the streaming technology.” — Felix Gillette [06:30]

• Brand Identity & Integration Uncertainty ([07:27]–[09:00])

  • Unclear whether HBO will remain standalone or become a “tab on Netflix”; executives have 12–18 months to figure this integration out.
  • The trend among Warner execs is to see Netflix as a “utility”—everyone has it, and everything else is a complementary add-on.

• Implications for Industry Bundling & Overpayment Risks ([09:00]–[10:47])

  • The possibility of more “bundling” (HBO add-ons via Netflix) is raised as Warner failed to fully compete with Netflix on subscribers and engagement.
  • Netflix’s share price dropped with deal skepticism, echoing concerns about “overpaying” as with Disney’s Fox acquisition.
  • “There is some skepticism … questions about Netflix’s overall strategy … did you run out of other things to do?” — Felix Gillette [09:30]

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2. U.S. Labor Market Pulse

Guest: Karen Kimbrough (Chief Economist, LinkedIn)

• Labor Market Softening, Pockets of Momentum ([13:11]–[16:31])

  • Jobseekers are increasingly “open to work,” with a 20% YoY rise in U.S. LinkedIn users displaying this badge.
  • Tech, media, healthcare, and primary/secondary education and small businesses are hiring; construction, retail, accommodation, and manufacturing lag.
  • “What we’re seeing right now is a labor market in the US that is continuing to soften. … This is a labor market where employers are cautious and workers are feeling a little insecure.” — Karen Kimbrough [14:02]

• Small Business Resilience vs. Big-Company Caution ([16:57]–[18:07])

  • Small businesses are the current hiring engine; large companies remain cautious due to economic and technological uncertainty (e.g., AI impacts).

• 2026 Outlook ([17:55]–[18:35])

  • Cautious optimism for small business hiring, with larger enterprises likely taking a “wait and see” approach.

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3. Macro Environment: AI, Consumers, and Strategy

Guest: Dr. Rebecca Humkus (London Business School; Duke Corporate Exec Ed)

• AI Bubble & Market Concentration ([22:52]–[23:59])

  • AI investment is the current “primary driver” of US GDP growth and S&P returns; risk concentrated in a few hyperscalers.

• K-Shaped Economy & Consumer Bifurcation ([23:59]–[25:14])

  • The top 10% of Americans are driving half of consumer spending—rest are value-focused, research-driven.
  • Companies must actively innovate for both segments, not just chase the premium market.

• Executives’ Strategy for 2026 ([26:00]–[27:46])

  • Macro data is lagging and messy; calls for using data for insight, not just “good/bad” forecasts.
  • Continued AI and R&D investment expected; sector performance mixed.

• Risks to Watch: AI Sentiment, Geopolitics, Policy ([27:46]–[29:02])

  • Caution urged toward sudden pullbacks in AI investment, regulatory/political shakeups, and international trade uncertainty.

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4. Breaking News: SpaceX IPO on the Horizon

Guest: Ed Ludlow (Bloomberg Tech co-host)

• Details on SpaceX’s Tender & IPO Plan ([29:27]–[31:26])

  • SpaceX running a new secondary share offering, potentially valuing the company as high as $800B, though more realistic figures are closer to $600B.
  • Looking towards a full-company IPO in the second half of 2026.
  • “There is a tender underway … but actually the share price I was hearing is much nearer to $300 apiece, which would put the valuation nearer to $600 billion.” — Ed Ludlow [29:49]

• Elon Musk’s Leadership of Two Public Companies ([31:26]–[32:27])

  • Both Tesla’s board and Musk apparently see cross-company value in his leadership, despite potential governance concerns.

• Competitive Context: Blue Origin ([32:33]–[33:31])

  • Possible future IPOs from rivals; SpaceX’s revenue shift from launches to Starlink is noted as changing economics for the sector.

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5. Market Outlook and Investor Sentiment

Guest: Eric Wiener (Bloomberg Senior Editor, Equities America)

• Pre-Fed, Pre-Holiday Market Dynamics ([37:09]–[38:07])

  • Growth sectors (tech, telecom, discretionary) are outperforming defensives; earnings and anticipation of a “Santa Claus rally” are driving optimism.

• Fed Policy Risks and Scenarios ([38:25]–[40:17])

  • Market is pricing in rate cuts; surprise signals from the Fed could dampen sentiment.

• Global Rally and Value Prospects ([41:42]–[44:13])

  • International equities are participating in the rally; enduring hope for value stock outperformance in Europe.

• Consumer Caution Remains the ‘Big Fear’ ([44:15]–[46:31])

  • Low confidence among US consumers could pose risks to market momentum.
  • “So much of our economy and so much of the market is based upon people buying stuff. … If people just stop buying … it really adds up. And that’s where we don’t know, we do not know where the American consumer is.” — Eric Wiener [45:37]

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Notable Quotes & Memorable Moments

• On the Netflix/Warner Bros. Culture Clash:
  “These deals always look great on paper and then you start combining the assets and often you do get culture clashes … part of the question is why would this be different?”
  — Felix Gillette [05:21]

• On the Changing Streaming Landscape:
  “They see [HBO and Netflix] as complementary services, complementary brands. … Maybe there’s some world in which … you buy the HBO add-on in the future from Netflix.”
  — Felix Gillette [08:00]

• On the AI Bubble Fear:
  “AI investment was the primary driver of US GDP in [the] last quarter. … Ten companies in the S&P 500 are driving over 40% of the returns. This is incredible concentration. … If a few of these big AI hyperscalers have a bit of a hiccup, we could see a lot of the other market taken down with them.”
  — Dr. Rebecca Humkus [23:10]

• On Small Business Being the Job Engine:
  “Small businesses are hiring. Their hiring rate is positive relative to large businesses … so those big companies, 10,000-plus employees, they’re expressing more caution, they’re holding back.”
  — Karen Kimbrough [16:57]

• On Consumer Power and Uncertainty:
  “If people just stop buying stuff or even slow down … each one of them, when you count it over a thousand times, 100,000 times … it really adds up. … That to me is kind of the big fear out there.”
  — Eric Wiener [45:37]

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Timestamps for Key Segments

• Netflix–Warner Bros. Deal Deep-Dive: [02:03]–[10:47]
• Labor Market Pulse with LinkedIn: [13:11]–[18:35]
• Macro Strategy & AI with Dr. Humkus: [21:39]–[29:02]
• SpaceX IPO Breaking News: [29:27]–[33:31]
• Market & Investor Sentiment: [36:56]–[46:31]

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Tone & Style

The episode adopts an analytical, fast-paced, and at times wry tone typical of Bloomberg reporting—mixing data-driven insight with on-the-ground business and market analysis. Guests speak candidly about industry uncertainties, strategic shifts, and the evolving power of consumers and technology.

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Summary for New Listeners

This episode is a must-listen for anyone interested in the future of media, entertainment, and streaming, as well as those tracking broader market movements in an AI- and deal-driven economy. The hosts and expert guests break down what the Netflix acquisition of Warner Bros. could mean for Hollywood and beyond, the changing dynamics in the labor market, high-stakes investment bubbles, and the implications of an upcoming SpaceX IPO. The perspectives provided are timely, well informed, and essential for business leaders, investors, and anyone curious about these transformational moments in business and tech.

Transcript

[Podcast Host]

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[Scarlett Fu]

Bloomberg Audio Studios Podcasts Radio News.

This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.

[Joe Weisenthal]

We're going to stick with that big story of the day and as I said a moment ago, possibly the year Netflix buying out Warner Brothers Discovery or at least wants to buy out, they still have some hurdles they're going to have to have to clear. This is an $82 billion deal if you include debt. We want to break it down now with Felix Gillette here in our studios. Felix is a media and entertainment editor for Bloomberg News and the author of It's Not TV the Spectacular Rise Revolution and Future of hbo. The perfect person to talk to about all of this. Felix, thanks so much for being here.

[Felix Gillette]

My pleasure.

[Joe Weisenthal]

I guess first of all, this is sort of your sweet spot. This is your beat. Were you surprised to see Netflix come out the winner here?

[Felix Gillette]

Yeah, I think it was a little surprising. I mean, I think at the start of all this, Paramount kicked off this sale by making an unsolicited bid for Warner Brothers Discovery and for the whole company. Right. And they rejected three bids, opened it up for sale. Along came Netflix and Comcast saying, we'd like part of the business, not the Whole thing. But I think, you know, in spite of Netflix's strength in Hollywood, I think people were thinking, well, you know, they only want part of it. David Ellison, you know, just finished his deal to combine Skydance with Paramount. His father, Larry Ellison, the co founder of Oracle, has an enormous amount of money to back the deal. So I think a lot of people thought that Ellison were going to be able to pull this off and we're surprised that Netflix was able to do it.

[Scarlett Fu]

Well, the Ellisons might still be able to pull this off because there are reports that Paramount Skydance is considering taking its offer straight to Warner Brothers Discovery shareholders. So it's not quite over yet.

[Felix Gillette]

Yeah, we're all waiting the next move from the Ellison's. And they signaled some displeasure yesterday in a letter to Warner Brothers saying that they felt the process had not been fair and that, you know, sort of laying the framework for potentially a higher.

[Scarlett Fu]

Price than Netflix did too.

[Advertiser/Commercial Voice]

Right?

[Felix Gillette]

It depends. It was kind of apples to oranges, right, because they weren't bidding for the same thing. Netflix was bidding for part of the company and you know, Paramount, Skydance was bidding for the whole thing, but part.

[Joe Weisenthal]

Of the company, they were still out that they were still going to offer even more for part of the company than Paramount was going to give for the whole company, is that right?

[Felix Gillette]

It depends how you value the part of the company that Netflix is not acquiring, which is all of those cable, legacy cable networks.

[Joe Weisenthal]

Well, let's talk about since you wrote the book on hp, hbo, what, what would. Let's just say for instance, this deal goes through Netflix, Warner Brothers, Discovery, what happens to cnn, tnt, tbs, hbo, they'll.

[Felix Gillette]

All be spun off into a standalone company and that's going to be, you know, those, it's a declining asset, but it still throws off a lot of cash. And you know, will it be eventually, potentially combined with some of the other cable networks that are now out there? It's you know, conceivable that someone will come along and roll up what's left of all of the traditional legacy cable networks.

[Joe Weisenthal]

And I misspoke, HBO is not part of that. That would be cnn, the cable.

[Felix Gillette]

Right, the cable and Cartoon Network, tbs, tnt, cnn. Yeah.

[Scarlett Fu]

Felix, Netflix is the original disruptor. I mean it kind of accelerated the cord cutting that we saw that we're seeing everywhere. Are we setting up for a major culture clash here by having a tech company buy a classic Holly deal?

[Felix Gillette]

Well, these deals always look great on paper and then you start combining the assets and often you do get culture clashes and particularly with this company with Warner Brothers Discovery, which was previously WarnerMedia. You know, we're now 25 years into mega mergers for this company, starting with AOL Time Warner, which was one of the most disastrous, you know, combinations in entertainment history. And then, you know, then also the deal with AT&T buying the company later and there was a huge culture clash there. Discovery coming along and combining assets with what remained of WarnerMedia also has been a turbulent ride. So yeah, part of the question is why would this be different? And people ask that. You know, analysts brought that up today on the phone call with Netflix executives and what they said is, look, you know, we're in the entertainment business and they didn't bring up the other companies names. But AOL was not an entertainment business. They were a tech company. The dial up, you know, access to the Internet in the early days. And AT&T also had, you know, basically no entertainment industry.

[Scarlett Fu]

Netflix was a tech company. That's what they tell investors.

[Felix Gillette]

Yeah, I mean, and they, you know, there's the famous quote of that Ted Sarando said, you know, in early in the streaming wars where they said, you know, he said we have to become HBO faster than HBO becomes us. And you know, I think if you look back at what's happened in the, you know, dozen years since then, you know, Netflix was able to master the skills of an, of an entertainment company and how to develop original programming, how to build franchises quicker than HBO was able to master the streaming technology and distribute in this post cable era.

[Scarlett Fu]

I think about the culture clash and I think about how Amazon bought MGM for eight and a half billion dollars and you're about MGM anymore. It's kind of like it, it's lost its identity.

[Joe Weisenthal]

I can't imagine that would happen with Warner Brothers. But I mean, could it, Does Netflix just become so big it overshadows these legacy brands?

[Felix Gillette]

Yeah, I think there's some serious questions about how these are going to fit together, you know, and people ask today like what was, you know, what's the plan? Like is HBO going to be a standalone streaming service? Is it going to be integrated? Is going to be like a tab on Netflix? And they said, well, hold up. It's, we have basically a year to 18 months to figure out these questions. We're still ourselves kind of figuring out how they're going to fit together. But they see them as complementary services, complementary brands, you know. And I think it's interesting when you think back about the past year because in a sense this was something that, you know, executives at Warner Brothers, Discovery Also came to this conclusion in the past year. You know, they'd spent the past couple of years saying, oh, we're going to build this giant streaming service with the assets from Discovery, plus assets from Warner Brothers to build a Netflix competitor. And they weren't able to catch up to Netflix in a meaningful way in terms of subscribers and in terms of the amount of time people spend on the service. And eventually in the past six months, they started saying, you know what, we kind of see Netflix as a utility. Everyone has Netflix and there's a bunch of other complementary streaming services of which HBO Max is one. And so we're not going to try and offer everything. So in some ways there is, you know, other people kind of saw this come in. Maybe there's some world in which if you already have Netflix, do you buy the HBO add on in the future from Netflix to see, you know, another.

[Joe Weisenthal]

Bundle choice is what? We may have more bundling, but, you know, this is a. More bundling. Oh, yay. Something to look forward to. You know, real quick, Warner Brothers Discovery has a market cap of about 64.

Is it 64 million?

Yeah. Why do we have million here now? 64 billion, that's. That's right.

[Scarlett Fu]

Yep, 64.

[Joe Weisenthal]

So are they overpaying for this? Is Netflix overpaying because they're not getting the whole company and they're taking on the debt?

[Felix Gillette]

Yeah, I mean, I think what. The share price is down a little bit today. So I think there is some skepticism and, you know, questions about Netflix's overall strategy. You know, like, did you run out of other things to do? There had been talk in the past of, you know, how is, where is Netflix's growth going to come from? Well, you know, they did this password crackdown, you know, efforts that, you know, people were like, what could that really do? But it was actually pretty successful. And, you know, then they said, okay, we're going to, you know, we're going to start doing advertising, have an ad supported version of Netflix, which previously they'd said, we're never going to do advertising.

[Scarlett Fu]

Sports too.

[Felix Gillette]

Sports, live sports, which is part of attracting advertising. And you know, then what, what's next? So what's next is this deal and it's not that, you know, out of the realm of what they're already doing. So I think there's some question is like, you know, paying for all that additional library. How much does that help you? Especially when you look back at, say, Disney's acquisition of Fox and their, you know, their whole library, which again, huge library of really rich content, movies, you know, TV series. And when you look back at that deal, people now think Disney may be overpaid.

[Scarlett Fu]

Well, certainly we know that Rupert Murdoch sold out at the right time. Yeah, if nothing else. All right, Felix, Appreciate your joining us this afternoon. Felix Gillette wrote the book on hbo. He is Bloomberg Bloomberg's media and entertainment editor. Stay with us.

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More from Bloomberg businessweek Daily Coming up.

[Podcast Host]

After this.

When patients have a disease and the cause is known, it usually ends up needing a specific solution. On the podcast targeting the toughest diseases, we explore the innovative tools, methods and unique philosophy Vertex Pharmaceuticals is using to search for treatments for some of humanity's most challenging diseases. Subscribe today wherever you listen to podcasts.

[Advertiser/Commercial Voice]

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[Scarlett Fu]

You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple, Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. All right, well we also have data that we want to get through today. Some economic data. What I found really interesting was a recovery. I don't even want to call it a rebound. It's just a bit of a recovery in consumer sentiment rising for the first time in five months, although it's coming off some very depressed levels, the second lowest ever according to the latest University of Michigan survey. Let's talk about the health of the labor market and economy now with Karen Kimbrough, chief economist at LinkedIn. Kare, you are looking at the labor economy through your lens over at LinkedIn. What do you see when it comes to job postings on LinkedIn and the take up of those job postings?

[Karen Kimbrough]

What we're seeing right now is a labor market in the US that is continuing to soften. It's not collapsing. We still see some pockets of momentum, but largely this is the labor market where employers are cautious and workers are feeling a little insecure. So for example, when we look at our data, what we see at LinkedIn is a workforce that is adding that little badge on their, their profile that says I'm open to being hired someplace. And we saw 20% increase. Yes, a 20% increase in members on our platform adding that badge in the US Alone in the past year.

[Joe Weisenthal]

Wow, that's.

[Karen Kimbrough]

So that's kind of a sign of insecurity. So despite this, this confidence measure you just mentioned among the consumer, what we're seeing amongst the worker is a little bit of insecurity. It shows up also in our own confidence measures where we say, how do you feel about getting a job, finding a job? And it's at the lowest level we've ever seen since we began this over five years ago.

[Joe Weisenthal]

Yeah.

[Karen Kimbrough]

And we know that are. Yes.

[Joe Weisenthal]

Well, I was going to say it's taking longer. Right. For folks to find a job, which is an ongoing problem. So I'm curious to know where you're seeing the most hiring, the least hiring from your lens there at LinkedIn.

[Advertiser/Commercial Voice]

Yeah.

[Karen Kimbrough]

So just taking it industry by industry quickly. Some of the standout industries where we're seeing hiring pick up, it's actually positive. It's looking healthy. Tech, for one, believe it or not, is back in the, back in the black. It's positive. We're seeing hiring rates running around 6%. So tech is hiring, media is hiring. We also see it in health care, which has been a long standing story of health care just outperforming in terms of hiring. And for obvious reasons, we see it in education. When you think about primary and secondary education, a lot of hiring going on there. Not so much at the university level though. So there are pockets where we're seeing hiring happen. Finance is holding in as well. Where we don't see it happening, where there isn't much momentum is construction. Think about retail accommodation. Not seeing a lot of hiring happening there. Manufacturing is looking very depressed. So these are pockets of no momentum. And I think when you put it all together, what it tells me is that we've got a labor market that is still moving forward very slowly without much momentum, but it's got a fragility to it. If we were to get a shock, it probably would be pretty rocked by it.

[Joe Weisenthal]

Wow.

[Scarlett Fu]

Ok, so that's a great way of characterizing what we're seeing right now. I think there's also frustration for a lot of job seekers, Karen, by so called ghost jobs. There's an abundance of listings, but when people apply to jobs, there's very little follow through on actual hiring. And it's not clear if there's a qualifications mismatch or whether maybe companies are just building up an inventory of candidates for potential positions down the road. I'm curious what you're seeing at LinkedIn.

[Karen Kimbrough]

You know what, I wouldn't put it so much as ghost jobs, but I would put it as people are finding it's taking longer to find a job. So we do see applications per applicant having been, you know, elevated over the past year. Again, like I said, people are putting that open to work badge. They're feeling a little frustrated by a labor market where frankly it's just, it's a lot tougher and it's taking longer to find a job. But I don't think it's a question of just ghost jobs. I think it's a question of many more applications per job. The other thing I would say is, you know, there is a bright spot. There are places where people are having more success and one of them is in the small business area. So small businesses are hiring. Their hiring rate is positive relative to large business businesses. So Those big companies, 10,000 plus employees, they're, they're expressing more caution, they're holding back. They want to wait and see what's going to happen with the economy, with rates, with industrial policy, with AI. But the smaller businesses are taking up the mantle. They are absolutely hiring right now in about 30 seconds.

[Joe Weisenthal]

Karen, what's the outlook in 2026? What are you seeing there at LinkedIn? Might we start to see a bit of a loosening up and more companies willing to, you know, expand the payrolls?

[Karen Kimbrough]

You know, look, what I'm seeing right now is I think that the optimism that we're seeing about the economy, the outlook from small businesses to say, look, I'm finding it actually pretty, you know, pretty easy right now to kind of continue doing my hiring. I hope that continues. I hope that small business optimism continues because that really is a backbone for the economy. I think the bigger companies are a lot more cautious. I think that's more of a wait and see. They have a big AI play for a lot of them. So I think it's they're going to be more cautious.

[Scarlett Fu]

Karen Kimbrough really appreciate your joining us, chief economist at LinkedIn in Sunnyvale, California. Stay with us.

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More from Bloomberg Businessweek Daily coming up after this.

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Hello, I'm Malcolm Gladwell, host of the podcast smart talks with IBM. I recently sat down with IBM's chairman and CEO Arvind Krishna and I asked him how can companies use AI to its fullest potential to create smarter business? My one advice to them Pick areas you can scale. Don't pick the shiny little toys on the side, for example, if anybody has more than 10% of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30% more productive today with the goal of being 70% more productive. Yeah. So we are not asking our clients to be the first experiment on it. We say you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process. Because the biggest change is not technology, is getting people to accept that there's a different way to do things. To listen to the full conversation, visit IBM.com smarttalks.

[Scarlett Fu]

You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. In the meantime, when you look at the overall business environment, there are headwinds and tailwinds galore.

[Dr. Rebecca Humkus]

Right.

[Scarlett Fu]

You have a massive AI spending build out. You have deal making, as evidenced by today's bid from Netflix for Warner Brothers Discovery assets. You also have the prospect of lower interest rates from the Federal Reserve as early as next week. Softer job market as well, with a lot of concerns, especially from consumers, that they might not be able to spend it the way they had been because they're not feeling as confident about their employment outlook. And then of course, there's tariffs too, which threatens to keep prices, if not higher than certainly elevated. So with all this in mind, let's bring in Dr. Rebecca Humkus. She is a lecturer at the London Business School and she's at the faculty at Duke corporate executive education. Dr. Rebecca Humkus is also author of Survive, Reset, Thrive, Leading Breakthrough Growth Strategy in volatile times. Dr. Humpkins, thank you for speaking with us.

[Dr. Rebecca Humkus]

Thank you so much for having me. It's my pleasure.

[Scarlett Fu]

So I guess the first point I want to tackle is this idea of AI. Whether we're in an AI bubble, and of course we won't know the answer until after the fact. But if AI and the excitement around it starts deflating, how much does that cast a pall over everything else that we have going on?

[Dr. Rebecca Humkus]

Yeah, the difficulty we have right now with is that AI investment was the primary driver of US GDP in quarter. It is the primary driver of all S and P earnings. And as you know very well, 10 companies in the S&P 500 are driving over 40% of the returns. This is incredible concentration. So if a few of these big AI hyperscalers have a bit of A hiccup. We could see a lot of the other market taken down with them. The challenge with any bubble is it's not black and white, as you know very well, Scarlett, There are shades of gray and that's what we're seeing right now. Every time we get a market earning, if it's great, we think, okay, well this is just more a narrative that we're in an AI bubble. If it's bad, we think the bubble is starting to burst. So we're going to see this constant swinging over the next couple of quarters every single time we get one of these earnings reports for that reason.

[Joe Weisenthal]

You know, Rebecca, we've been talking a lot about this K shaped economy and you say when it comes to people in leadership positions, to executives, they should be leaning into that, right? Like playing into the K shaped economy. What do you mean by that? What would that look like?

[Dr. Rebecca Humkus]

So we've now had several quarters of data and really a couple of years, we are very much into this K shaped economy. There is a small percentage of customers, you know, 10% of American consumers are driving half of spending. We've been saying this. We're actually already seeing this happen in the holiday shopping period. Now this lower income consumer is still spending, right? We had some good data over Black Friday that they're still spending, but it's a different type of spending. It is very value based, it is very purpose driven, it is incredibly researched. So influencers and AI engines have a role to play. But we're seeing more research and purpose driven than we have before. And it's now time for companies to say, okay, we're beyond the point that we can do more shrinkflation or one off promotions or even worse, wait and see. And we're still seeing this reaction from some of the big players. So my guidance is step up and play, right? This lower income consumer wants real innovation, they want value. And it's time for companies to reinvest and think about what does innovation for this economy and for this consumer look like.

[Scarlett Fu]

So for companies, does that mean the easy answer is to just make a play for the premium consumer?

[Dr. Rebecca Humkus]

You know, there's no easy answers. And a growth strategy, of course, and we are seeing some go that way. We're definitely seeing a very bifurcated economy and a bifurcated consumer. So if you have an offering for everybody, you essentially have an offering for nobody. Right now this is really the time where we want companies to really think about who their ideal consumer is. Now if it's in the luxury end, this is still A research driven and purpose based but there is a lot more froth in that aspect of the market. They could lean in there but then we're leaving out a large proportion of the American consumer that wants innovation. They still want to spend, they still want to gift this holiday period. That is a answer, but I definitely don't think it's the answer.

[Joe Weisenthal]

As we are about to close out this year and look ahead to 2026, how should it be executives, Rebecca, be thinking about the new year in terms of expanding payroll, R and D investing, etcetera, etcetera. Yeah.

[Dr. Rebecca Humkus]

The challenge is the macro data is very messy and it's very lagging. You know, given the government shutdown, we are really lacking that gold standard data. We really need to make decisions and we're going to see this reflected in the Fed meeting next week. Now both aspects of their dual mandate are moving in the wrong way but but not so dramatically so inflation is high but still within the tolerance level. The job market is cooling, but we're still roughly in that no fire, no hire narrative that we might start to see some of those fires happening. A lot of organizations as CEOs are looking to make their growth strategies for next year are facing this environment. The challenge that we have is we look at all of these data points to try to get a reading. Is it good or bad? That's not how we should be looking at data. As executives, we should be looking at data for insights. What does this data tell me about what my growth insights are and leading onto those? We unfortunately look at uncertainty and tend to frame it as negative or bad. And when things look gray, we assume it's going to be a downturn and start planning that way. That's not the view we should take. We want to perform in this world. It's about seeing uncertainty for what it is. A series of future events which may or may not occur. And whether or not those events are good or bad depends on what that organization is trying to do and how they're set up. So I do think on a macro level we're going to see a real more lean in into an AI investment. Many companies are really just starting to go off the curve there. R and D and innovation are looking a little bit mixed across different sectors depending on where you're set up right now. So I think we're going to see next year and that'll be interesting. We're going to start seeing it coming on through earnings from next summer as well.

[Scarlett Fu]

So Rebecca, what is the black swan or what's the one thing that you really worry about that keeps you up at night that you think executives, you know, would kind of freak out over if it were to happen?

[Dr. Rebecca Humkus]

Well, executives freak out over quite a lot of things, but I tend to be a pretty prominent bull and try to reframe everything for what that possible insight would be. There's a couple of things that we should be looking for though. This investment bubble right now is very much built on anticipated demand. If we get a few industry leaders, non tech come out and make pretty firm statements that they're pulling back from AI investment that would have real market implications, of course we're looking for that. We're also in an environment of extreme political and geopolitical uncertainty. Any big changes to more trade policy or regulatory policy that really upends industries, that could shake a lot too. Anything in the AI bubble, geopolitical uncertainty and the string policy uncertainty. If we could get a little bit more stability in the political landscape, that would actually do a lot to helping some of the economic uncertainty and the labor market. If you actually dig into the data that we're seeing from the recent job reports, a lot of this is saying I'm just waiting until I have a bit more certainty coming up. So again, there's lots of things that could happen. Those are the couple things I'm most looking out for.

[Scarlett Fu]

All right, thank you so much. Dr. Rebecca Humkus is a lecturer at the London Business School and faculty at Duke Corporate Executive Education. Alexis, we need to go back to the breaking news that we're telling everyone about just a few moments ago. Space X telling investors that it is aiming for a late 2026 IPO. This is according to the information SpaceX is molling IPO of the entire company. In fact according to that publication at.

[Joe Weisenthal]

An eye watering valuation of $800 billion, far surpassing OpenAI's record setting 500 billion. So we want to bring in Bloomberg Tech co host Ed Ludlow who's in San Francisco and on top of all of it for us about this SpaceX IPO deal. First off, Ed, I guess it was a question of just when, right? Not if it was going to happen.

[Ed Ludlow]

Yeah, I just want to correct and clarify some things for you guys. There are two distinct things here. There is a tender offer which is an indecis share sale where basically Space X does this annually or biannually. It allows employees and early investors to sell shares at a specific price and therefore valuation to give them some liquidity. Liquidity. So the Journal had reported that this tender was at a Share price that would give a valuation of $800 billion double what we believe the valuation to be earlier this year. I'm hearing that there is a tender underway. It could close by Monday. But actually the share price I was hearing is much nearer to $300 apiece, which would put the valuation nearer to $600 billion. So this is a kind of live situation. The IPO part of it is separate that, you know, in communications with investors, the company is saying that in the second half of next year, 2026, they'd look at an IPO. And the bit you're right about is that it would be the whole company. Previously we reported that one of the ideas was that Space X would spin off Starlink, its space based, Constellation based Internet service, rather than the whole company. But you know, that is contrary to what the information put out this morning.

[Scarlett Fu]

Right. Okay, thank you for clarifying that. There's a lot going here with SpaceX. We know investors are hungry for any information they can get on it because right now it's publicly, it's privately held and so you can't really get access to it. Having said all of that, Ed, Elon Musk would be the CEO of two publicly traded companies. If this happens, does his current contract or his current setup with Tesla allow for that?

[Ed Ludlow]

Yeah, I mean, as you know, Scarlett, we spoke to Tesla's board chair Robin Denholm about this exact idea twice. The board seems comfortable, based on the compensation agreement which has now been ratified by Tesla shareholders, that Musk continues on at the helm of other companies. And actually the board went a step further to say that there's value in Elon Musk having interaction with these companies because in the future they basically, basically believe they're highly analogous. You know, if you think about space based Internet and where this market's going right now, a very big concentration on the potential for space based data centers. They will see it as a kind of value add to have the relationship between the two companies. The technicalities of being the CEO of two public companies. No idea. You know, that will come out in the wash right when they talk to investors about it. But remember that Space X does have highly capable executive executives in President and CEO Gwynne Shotwell, who runs the place day to day, and then Brett Johnson, the CFO is the guy that does all the money talk with investors.

[Joe Weisenthal]

Anyway, I wonder if this is going to make Jeff Bezos want to take Blue Origin public.

[Scarlett Fu]

Oh, good question.

[Ed Ludlow]

It's a great question. I mean, like, look, it is an expensive endeavor to first get the company off the ground. Pardon the pun for launch companies, but at this point point the difference with Space X is that they have changed the economics of launch and then deployment of Starlink. The reason that we talked about at one time this was in 2024 spinning off Starlink as opposed to an IPO of the whole company is that a the revenues from Starling now eclipse launch. But b it's a much higher margin cash flow positive business. There isn't a lot of profit to be made in launching rockets into orbit. But also Musk has been quite transparent. It tops out there's only so much money you can make from doing that and so Blue Origin is much earlier in its life cycle getting the economics right of launch, but also the other things it wants to do beyond just putting things into orbit.

[Scarlett Fu]

All right, good stuff Ed. Always appreciate your hopping on. Ed Ludlow is Bloomberg Tech Co Host, speaking with us about this report. From the information that SpaceX is telling investors it is aiming for an ipo in late 2026.

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Hello. Hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example, if anybody has more than 10% of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30% more productive today with the goal of being 70% more productive.

[Joe Weisenthal]

Yeah.

[Dr. Rebecca Humkus]

Wow.

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[Scarlett Fu]

You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Joe Weisenthal]

Let's talk more about these markets with Eric Wiener, Bloomberg Senior Editor, Equities America, joining us here in our interactive Brokers studio. First of all, Happy Friday to you.

[Podcast Host]

Happy Friday to you as well.

[Joe Weisenthal]

What do you make of the market action this week ahead of, of course, next week with the Fed catalyst?

[Podcast Host]

So this week was kind of muted, all things considered it. And as you point out, the Fed, that often happens where right before a decision. What was interesting is looking at it from a sector level.

The sectors that would be considered growth did actually really well. You had well energy, did well because winter is coming. But you had tech do well, you had telecom doing well, you had discretionary doing well. And the sectors that didn't do well were the defensive sectors, utilities, where people go for derivative dividends. You also had health care falling. So people were buying into risk. They were playing into the AI trade. Salesforce did really well. So earnings still matter.

[Joe Weisenthal]

Right.

[Podcast Host]

But like, you're still, you're waiting on this sort of all systems go from the Fed. So if you look at the setup, we're kind of ready for, as Christine said, the Santa Claus rally to come. But, you know, there's a big caveat out there.

[Scarlett Fu]

Yeah.

[Dr. Rebecca Humkus]

Well, I mean, it seems like, you.

[Scarlett Fu]

Know, we've had pricing For a December.

[Dr. Rebecca Humkus]

Fed rate cut for a while now it's pretty much a done deal as.

[Scarlett Fu]

Far as markets are concerned.

[Dr. Rebecca Humkus]

What do you think we could get from the Fed that could derail this? Because, you know, it seems like we have healthy breath.

[Scarlett Fu]

We have a good, good kind of base of stock movers that could take.

[Dr. Rebecca Humkus]

The index there if we wanted. But is there something from the Fed that maybe markets haven't priced yet?

[Podcast Host]

Oh, absolutely. I mean, when you look at the, the action in the market relative to the Fed, the expectations for a rate cut came way down at a certain point. A few weeks ago when we were selling off, we were at like 30%, 40% on the, on expectations. So now we're at like 90. So that's where things start rising and a lot of that is priced in. So probably a bit of a sell the news event coming off of the Fed. You know, when they announce it, what people will be listening to is the, well I'm will be looking for is the cohesiveness of the group. So you know, last time when you heard a lot of Fed officials saying, you know, we should kind of dial things back, that's when people, people get nervous. Last time you had Powell coming out and talking about how everybody was expecting the Fed to cut this time and Powell kind of threw some cold water on it, that scares everybody. So it's those kinds of things where people are sort of reading into what the officials are saying. They're going to start looking at where they are on the dot plots where people are on expectations and you know, if there is broad agreement that there are going to be more rate cuts than the stock market will take off if there's disagreement on where things are going to go, we're back in that kind of holding pattern.

[Joe Weisenthal]

Today we got some more backward looking data with the PC, the Fed's preferred inflation gauge rising 0.2% in September. I guess that was in line with estimates. Does this do anything at all for the Fed at this point, especially given the fact that it's a September number?

[Podcast Host]

Yeah, that was what I was going to say. It's because we're still playing catch up. It's hard to know. It's also hard to know what, what they see. However, inflation is still rising and that's really the point. So as things keep climbing and prices keep climbing, that is one side of the equation. The other thing though is that we are seeing kind of jobs softening. You're seeing some signs of economic weakness, weakness. And that is going to be the pressure for them to cut because you kind of need to stimulate things and you need to it's not Even just that 125 basis point cut does a massive amount. It's just the symbol, the signal that it sends to the market, which is that, you know, we're here, we're going to be reactive, we're going to be responding to all this. And that that's where traders get enthusiastic.

[Dr. Rebecca Humkus]

Now, Eric, looking forward to 2026, you know, usually when we see a December rally, that's usually for followed by a pullback in January. And so now we're there. Right. Even though it's, it's a small rally, but it's still a rally nonetheless for December. Do you get the sense that maybe investors are starting to get ready for that January pullback at this point?

[Podcast Host]

Oh, I don't actually. Quite the opposite. I mean, it's been strange, but we've been talking to a lot of traders who are all bulled up. We've been talking to a lot of professional investors, hedge fund managers and portfolio managers who really want to own stocks there. The question is valuations. The question is where have, you know, the stocks gotten ahead of themselves? But there's a broad belief, and we're going to be writing a story about this this weekend across the globe. It's not just here, it's in Europe, it's in Asia that there's this enthusiasm for equities. I'm kind of surprised, but that is what we're hearing.

[Joe Weisenthal]

So, yeah, I mean, I'm glad you mentioned Europe because this really has been a global and international, but also a global rally. I mean, we've even seen emerging markets do quite well. Do you see that? I mean, I guess the question is, is there any reason why it wouldn't continue next year?

[Podcast Host]

Well, probably if, if the bull case plays out, you're probably not going to see European stocks and overseas stocks outperforming the US which we saw for a lot of this year, which is weird, particularly when things are moving up. But you could see a global lift. I mean, the idea that foreign stocks are priced cheaply is true. So if there is going to be growth overseas, if they are playing into the technology game here, if, if tariffs are not weighing on costs overseas the way that people feared, then there could be room or there, there appears to be room for people to step in and find some value.

[Scarlett Fu]

Yeah. And.

[Dr. Rebecca Humkus]

Well, maybe we finally get the year of value that a lot of investors in Europe have been hoping for for the past decades.

[Podcast Host]

Well, you know, Europe did Well, this year, you know, and that, that's always kind of a shock when they do as well or better than the US and there is some enthusiasm for what's going on there. It's not even necessarily a value play as much as it's like there's real growth in certain sectors there that people want to be in on.

[Dr. Rebecca Humkus]

Yeah, well, I mean, you know, look, we're heading into 2026, right?

[Scarlett Fu]

Probably investors are kind of thinking, what.

[Dr. Rebecca Humkus]

Happened to the Sell America trade? Right. Because that was something we were talking.

[Scarlett Fu]

About, what, in April.

[Dr. Rebecca Humkus]

What do you think? Where do investors stand now in terms.

[Scarlett Fu]

Of concerns over that?

[Dr. Rebecca Humkus]

Are those mostly gone at this point?

[Podcast Host]

Well, temporarily. I don't necessarily know. You see, we're still playing catch up with data and we don't know. There has been a sentiment change in the way that people are viewing the economy. I mean, obviously we got some good news on the economy today, but if you look at the University of Michigan number, it still is troublingly low. So you have a lot of people in the US who are very concerned about things. If we get a broad pullback in spending, so much of our economy and so much of the market is based upon people buying stuff. And if people just stop buying stuff or even slow down, say we're going to cut 25% off of our spending, the average family goes, you know, we're not going to do this trip or we're not going to buy steak this time, we're going to buy chicken or whatever it is. Those little decisions, each one of them, when you count it over a thousand times, 100,000 times, whatever, it really adds up. And that's where we don't know, we do not know where the American consumer is. And that it to me is kind of the big fear out there, which is if people pull back and you know, right now we're being lifted very heavily by wealthy people spending. If we pull back, it could get dicey.

[Joe Weisenthal]

Yeah. And we were hearing it time and time again from a bunch of different companies in different industries. Well, this week Kroger, Dollar General all talking about people becoming choosier. Kroger's gonna bring back the paper coupon. That's how that's where they're at at this point. And but each of them, I think the trend is from Walmart on down is that the higher income shopper is now coming in and making more trips to their store and buying more and more.

[Podcast Host]

So McDonald's does well and then McDonald's starts adding cheaper meals. When you start seeing that and you start seeing like people going, McDonald's is too expensive. That's when you begin to think, well, what is that going to mean for dining in general? What is that going to mean for what people are spending it? And beef heises prices are very high. So it's there's a lot of, there are a lot of balls in the air right now when it comes to that. And we just don't know because we haven't seen the numbers.

[Joe Weisenthal]

Eric Weiner, Senior Editor, Equities America at Bloomberg thanks so much guys for giving us your perspective today.

[Scarlett Fu]

This is the Bloomberg businessweek daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.

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