White House Explores Opening Antitrust Probe on Homebuilders

Summary

Bloomberg Businessweek – February 6, 2026

Episode Title: White House Explores Opening Antitrust Probe on Homebuilders
Hosts: Carol Massar & Tim Stenovec

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Episode Overview

This episode dives into shifting dynamics in the U.S. economy, with a central focus on a Bloomberg exclusive: the Trump administration's exploration of an antitrust investigation into the U.S. homebuilding industry amidst the housing affordability crisis. Hosts Carol Massar and Tim Stenovec are joined by Bloomberg News real estate reporter Pat Clark and additional guests, including Fed Bank of Atlanta President Raphael Bostic, EY Chief Economist Gregory Daco, and Evercore ISI’s Mark Mahaney. They cover homebuilder antitrust concerns, the economic polarization beneath headline growth, massive AI-fueled capex by tech giants, and the evolving narratives of cryptocurrency.

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Key Segments & Insights

1. White House Antitrust Probe into Homebuilders

(01:47 - 05:15)

• Breaking News: The Trump administration is considering opening an antitrust probe into large U.S. homebuilders, aiming to address the housing affordability crisis.
• Details:
  • Attention centers on the Leading Builders of America, a homebuilder trade group, suspected of possible price coordination among members.
  • This concern plots parallels with OPEC and allegations that builders are "sitting on more lots than ever," as noted in the President's social media post last October.
  • Pat Clark (Bloomberg Real Estate Reporter):
    • “Are homebuilders coordinating through the trade group? ...You're not supposed to tell your competitors how you're setting prices.” (02:27)
    • “They haven't responded. They're keeping their heads down right now.” (03:38)
• Context: The administration seeks solutions to home affordability, though rapid progress is unrealistic given deep-rooted market issues.
  • "It took 15 years to get to this point. It took a pandemic... I don't think the standard should be getting to a solution overnight." – Pat Clark (04:40)

Notable Quote:

• "This is kind of what the bad side might look like." – Pat Clark, on builders' attempts to stay in the administration's good graces (04:15)

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2. US Economic Polarization & Fragility

(07:31 - 13:03 | 10:35 - 12:42)

• US Consumer Sentiment: Improved to a six-month high, especially among wealthier Americans, boosted by stock market gains.
• Fed's Position:
  • Raphael Bostic (Atlanta Fed President):
    • On combating inflation:
      "We really don't want to have inflation. Once inflation gets entrenched in people's minds, it changes how the economy evolves." (08:07)
    • On the "K-shaped" economy:
      "There are a lot of families that are precarious and are feeling very uncertain about their prospects for the future and the prospects for their children." (08:42)
    • On confidence in the Fed:
      "People tell me we're grateful for what you're doing... We want you to be as data-dependent and as open to information so you can make the best judgment." (09:40)
• Polarization vs. K-shape:
  • Gregory Daco (EY Chief Economist):
    • "It's not necessarily a K-shaped economy as much as it is a polarized economy within which you're still seeing strong averages, average consumer spending still doing well, average business investment still doing well, average GDP still doing well." (11:04)
    • "The income growth for consumers is relatively low... That explains why the personal saving rate has fallen." (12:10)

Memorable Moment:

• "People are dipping into their savings. They're using credit." – Gregory Daco (12:40)
• Caution on fiscal stimulus:
  "What is this money going to be used for? Is it going to be used for spending or reimbursing some of the credit, and replenishing savings?" (12:42)

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3. AI Investment Boom & Macro Risks

(13:03 - 18:02, 18:55 - 22:48, 25:16 - 26:42)

• Huge Tech CapEx: Amazon, Alphabet, Meta, and Microsoft project $650 billion in capital expenditures in 2026 on datacenters to drive AI initiatives.
  • Amazon alone plans $200B, $60B above analyst estimates for 2026.
• Risks of Overconcentration:
  • Gregory Daco:
    • "We should be very careful about the potential of an AI bust. This is a real downside risk and it's interconnected with other potential risks to the US Economy." (13:44)
    • "You're seeing a lot of growth that is reliant on a few actors in the economy. Wealthier individuals and larger firms, and smaller businesses and lower income families are increasingly struggling." (16:47)
  • Returns on AI Investment:
    • Mark Mahaney (Evercore ISI):
      "We're going through a free cash flow desert. These huge amounts of capex spend are challenging that free cash flow generation and investors are right to be concerned... What investors should also focus on is what are they seeing in terms of ROAI – like what kind of returns are we getting?" (20:52) "I just think that... these are their ability to educate themselves, train themselves, learn new skills. I think it's extraordinary what we're seeing. And so, yeah, I believe in the cycle." (23:22)
• Industry Winners & Losers:
  • Major tech companies have the scale and resources to benefit from the AI boom. Concerns loom for companies (e.g., travel sector) that may fail to adapt agentic AI solutions.
    • "Booking.com, Expedia, and Airbnb better be effectively and successfully investing in agentic travel... Because if they don't, then those are companies that... could be dramatically smaller, three to five years." – Mark Mahaney (26:53)

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4. Labor Market Health

(18:02 - 18:41)

• Gregory Daco (EY):
  • Labor market is “in balance, but it’s a fragile balance.”
  • "We've seen a historical negative shock to labor supply from reduced immigration. So we have a break even rate that's close to zero, but we are seeing labor demand being hesitant." (18:15)
  • Downward pressure on income may lead to softer consumer spending through the year.

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5. The Changing Crypto Narrative

(32:17 - 39:53)

• Recent Bitcoin Volatility: Bitcoin rebounded after a major selloff, but recent moves lack clear catalysts and point to a maturing, more fragmented market.
  • Stacey Marie Ishmael (Bloomberg Executive Editor, Crypto):
    • "So much of this asset class and this industry has been defined by narrative. And so many of the big spikes up have been driven by events... and we've really been lacking... positive events for the past several months." (33:41)
    • “People believe in the underlying technology... you have major Wall Street investment banks saying they're looking into things like tokenization and... putting assets on the blockchain.” (34:59)
    • Difference from past: now options go beyond just buying Bitcoin.
  • Correlations Emerging:
    • Some digital asset prices now increasingly tied to AI sector sentiment and tech stock moves.
      • "We've moved from an asset class that was positioned as not correlated with anything to an asset class that's actually increasingly correlated with lots of different kinds of things in interesting ways." (36:40)
  • On Bitcoin as 'digital gold':
    • “The idea of it being a safe haven asset has always been a little bit challenging... It's really tricky to maintain the idea of it being a safe haven asset when it has like such high beta performance when people are selling risk." (39:12)
    • Bitcoin is now more institutionalized, moving away from its anti-establishment roots.

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Memorable Quotes & Timestamps

• Pat Clark (02:27):
  "Are homebuilders coordinating through the trade group?... You're not supposed to tell your competitors how you're setting prices."
• Raphael Bostic (08:07):
  "Once inflation gets entrenched in people's minds, it changes how the economy evolves."
• Gregory Daco (11:04):
  "...not necessarily a K-shaped economy as much as it is a polarized economy..."
• Mark Mahaney (20:52):
  "We're going through a free cash flow desert. These huge amounts of capex spend are challenging that free cash flow generation and investors are right to be concerned."
• Stacey Marie Ishmael (34:59):
  "You have major Wall Street investment banks saying they're looking into things like tokenization and, you know, putting assets on the blockchain."
• Gregory Daco (12:40):
  "People are dipping into their savings. They're using credit."

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Timestamps for Major Themes

• White House Probing Homebuilders: 01:47 – 05:15
• Economic Polarization & Fed Confidence: 07:31 – 13:03
• AI CapEx Boom & Market Impacts: 13:03 – 26:42
• Crypto Volatility and Institutionalization: 32:17 – 39:53

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Summary Takeaways

• Housing Policy Uncertainty: The administration is actively probing potential anti-competitive behavior among homebuilders, with uncertain industry repercussions.
• Economic Growth Conceals Polarization: While headline growth and consumer sentiment are strong, deep divides exist between income groups and business sizes.
• Tech Titans’ AI Surge: Massive investments are raising the stakes (and risks), creating winners (big tech) and losers (unadapted sectors) while testing investor patience with sparse near-term free cash flow.
• Labor & Consumer Fragility: Labor market balance is delicate, and ongoing income stagnation poses threats to spending.
• Evolving Crypto Reality: As institutional adoption grows, crypto’s role, risks, and correlations are all shifting.
• Cautious Optimism Dominates: Guests broadly stress economic and market fragility beneath the optimism, urging careful differentiation between headline successes and underlying vulnerabilities.

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For listeners seeking a nuanced understanding of the U.S. economy’s complex crosscurrents—from homebuilders to megacap tech, the labor force, and crypto—this episode is a rich resource.

Transcript

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[Bloomberg Narrator]

Bloomberg Audio Studios Podcasts Radio National 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 Business Week Daily podcast with Carol Massar and Tim Stanweck on Bloomberg.

[Tim Stenovec]

Radio 12 shares of US homebuilders taking a hit earlier in today's session at their low today intraday low down about 1.4%. They've moved off that level just slightly lower as we speak in a Bloomberg exclusive. The Trump administration officials are exploring opening an antitrust investigation into US Homebuilders as the White House sharpens its focus on tackling the country's housing affordability crisis. This story definitely caught our attention.

[Carol Massar]

Yeah. With us is Bloomberg News real estate reporter Pat Clark. He joins us here in the Bloomberg businessweek studio. Congratulations on another exclusive when it comes to the white and housing affordability just this week. What can you tell us? What are these possible antitrust concerns?

[Odoo Representative]

Well, the thing that, you know, one thing that's caught the eye of administration officials is a trade group and they're concerned that, you know, are homebuilders coordinating through the trade group. And that's a thing that's been raised, at least internally. I think that's a common concern about trade groups across industries coordinating how? Well, you know, you're not supposed to talk about anything. We're gonna set our prices in this way. And you're not supposed to tell your competitors how you're setting prices. And, you know, I think it's a concern that can come up, which is like you have this trade group where everyone is getting together and talking to each other or they're talking to some centralized person in the trade group and information gets disseminated. And.

[Mark Mahaney]

You know, I don't.

[Odoo Representative]

This would not be. I'm not an antitrust expert, but my understanding is this would not be the first time that, you know, there was a probe of, you know, a trade group or some centralized body.

[Carol Massar]

The lending builders, leading builders of America is the trade group. What have they said? What have the home builders come out and said after this?

[Odoo Representative]

They haven't responded. They're keeping their heads down right now, or so it seems, I think. You know, I mean, all this goes back to October when the president put out on a social media post that homebuilders are. I mean, he likened them to OPEC and complained that builders are sitting on more lots than ever. And, you know, I mean, I think this is. If you go back to the story earlier this week about the builder's pitch for a Trump homes project in a way that's like trying to get on the administration's good side in hopes that, you know, they're not on the bad side. And this is kind of what the bad side might look like.

[Tim Stenovec]

Just last question, kudos to you. Two exclusives in terms of what the White House is working on, housing affordability. Having said that, you know, they are said to be trying to do anything. Is there any progress, any really move forward in terms of being able to make homes more affordable? Some would say there are different issues at play in order making this work. But in terms of what the White House might be able to do, listen.

[Odoo Representative]

I mean, I think this is where we are on home prices is it took 15 years to get to this point. It took a pandemic, you know, to get there in the end of an interest rate environment that had been in place for a decade or so. So, you know, I don't think the standard should be getting to, you know, a solution overnight.

[Carol Massar]

But.

[Odoo Representative]

But yeah, it's in something is, you know, people are talking about things. What happens.

[Tim Stenovec]

I don't know, is it really a priority for the White House?

[Mark Mahaney]

Just quickly seems like it.

[Carol Massar]

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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[Bloomberg Narrator]

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[Tim Stenovec]

We're going to stay on the domestic economic state because we did get some data earlier today.

[Carol Massar]

Yeah, that data showed that US Consumer sentiment unexpectedly improved to the highest in six months, largely propelled by wealthier Americans who benefited from stock market gains. Digging into the US Economic backdrop, Federal Reserve bank of Atlanta President Raphael Bostic reiterated it's important to keep interest rates at a level that restricts economic activity and returns inflation to 2%. He spoke about that and more in an exclusive interview with Bloomberg TV and radio's international economics and policy correspondent Michael McKee. That was earlier in Atlanta.

[Raphael Bostic]

In terms of inflation, you know, what I've learned is that we really don't want to have inflation. Once inflation gets entrenched in people's minds, it changes how the economy evolves. And it's one of the reasons why I think that we need to keep our policy in a restrictive posture so that we get inflation back to 2%. That's paramount. High prices and the prospect of rising prices really do have a lot of families on the edge. And I mean, you all have reported a lot about the K shaped economy. There are lots of families that are feeling very precarious right now and that's a source of concern.

[Mark Mahaney]

Do you think the economy is becoming more K shaped?

[Raphael Bostic]

You know, I don't know more. I mean, it's been that way for a while. Just before the pandemic, I had been talking about this and we were trying to find some metrics to really detail how there's a split. I used to call it the barbell economy, where either you're at the high end or at the low end. The case shape is the same thing. What I know is that there are a lot of families that are precarious and are feeling very uncertain about their prospects for the future and the prospects for their children for that matter. And that concern, I think does underlie a bit of the lower on the low consumer confidence that we continue to see being reported. And what we'll need to do is really give people reasons to be optimistic, show them where the new jobs are coming from and show them how they get the skills to compete for it.

[Odoo Representative]

Well, this week Treasury Secretary Bessen said the Fed has lost the confidence of the American people.

[Carol Massar]

Do you think you have lost the.

[Mark Mahaney]

Confidence of the American people in your district?

[Carol Massar]

Do you hear people raising questions about that?

[Raphael Bostic]

That's not been my experience as I go around the 6th district, people tell me we're grateful for what you're doing. You have a very hard job and we want you to be as data dependent and as open to information so you can make the best judgment that you, that you can. Look, the world is very complicated. It's actually more complicated today than it has been my whole time here. So what I think most people understand that and they know that we're doing the best job that we can under very difficult circumstances.

[Tim Stenovec]

All right. That of course, is Fed bank of Atlanta president Rafael Bostic in an exclusive interview with Bloomberg TV and radio's own Michael McKee earlier from Atlanta. Here to get into the economic macro situation, if you will, what faces the Fed and so much more. Some of the things we just talked about. And great to really have back with us. And it's not a jobs Friday, which I have to keep reminding everybody, which kind of blows my mind. Gregory Dacko, he is chief economist at ey. He is here in studio. Welcome back.

[Gregory Daco]

Pleasure to be here.

[Tim Stenovec]

There's so much right even there, you know, housing affordability and then kind of the bigger, broader of what the White House does to help the U.S. economy and more Americans. There's Raphael Bostic talking about Fed confidence, 2% inflation, important to make sure that we have inflation under control. What's important and a jobs Friday where it is in a jobs Friday. But we'll get that read. When you think about the US Economy, what is front and center for you?

[Gregory Daco]

Well, I think it's the paradox of having strong growth but underlying weakness across different sectors and across different stratas of the economy. I don't really like the K shaped format because it tends to signify that there are two groups of consumers, there are two groups of businesses. The reality is that there is polarization across the US Economy. Whether you're looking at certain income groups, not just the lowest income groups but the median income groups, they are increasingly struggling with high prices. When you look at business investment, there is polarization between those that are focused on AI investment and those that are not. There is polarization between large businesses and small businesses that are struggling more in the face of some of these policy headwinds. So it's not necessarily a K shaped economy as much as it is a polarized economy within which you're still seeing strong averages, average consumer spending still doing well, average business investment still doing well, average GDP still doing well.

[Carol Massar]

What's that masking, though? I think taking the average, taking the average is just that. It's the average. There are outliers.

[Odoo Representative]

Yeah.

[Carol Massar]

And so what's it masking?

[Gregory Daco]

It's masking an underlying fragility in the fact that you have these narrow pillars of growth that I've talked about in the past. And I think if you bring it back to income, which is really the fundamental pillar of economic activity, that is where there is pressure. The income growth for consumers is relatively low. We're talking about 1% growth for real disposable income growth, while consumer spending growth is at 2 1/2 percent. That explains why the personal saving rate has fallen 2 percentage point since April and the early implementation.

[Tim Stenovec]

There's nothing left to spend to save.

[Gregory Daco]

People are dipping into their savings. They're using credit. And that's why I'm a little bit more cautious than others when it comes to this notion that there will be a lot of fiscal stimulus during the tax refund season. Yes, tax refunds may be higher, but what is this money going to be used for? Is it going to be used for spending or reimbursing some of the credit and, and replenishing savings?

[Tim Stenovec]

Listen, we've talked with you too about the wealthier consumer. And you know, you get into the A pillars or the three A pillars. You know, we had consumer sentiment come out today, improved to the highest in six months, largely propelled by wealthier Americans who have benefited from stock market gains. So yay, Good. We know the wealthier consumer is very important to the US Economy. But I am curious what was going through your mind this week? We were kind of talking about it amongst ourselves with the trade a little bit in question and some nervousness around that. We saw that play out. That has been important to stock market wealth, especially among the affluent. So I'm just curious, should we be a little worried that this could come undone this year?

[Gregory Daco]

We should be very careful about the potential of an AI bust. This is a real downside risk and it's interconnected with other potential risks to the US Economy. We're seeing a great degree of focus on the fiscal situation. We're seeing a great degree of focus on. On pressures on the Fed. Why do these matter? Because they can suddenly lead to changes in financial asset prices. And we know how the financial market has been behaving over the course of the past 18 months. A lot of gains on the equity front, but also a lot of movements across different asset denominations. A lot of movements into gold when things are not going well. Not so much Treasuries and not so much the US dollar. So these are important Developments and everything happens together. And so if we are to see a little bit more of a downbeat sentiment in terms of the prospects for AI and importantly the return on investment, then that could metastasize into something that is worse for higher wealth individuals and their spending desires and spending capability. If you see a negative hit on financial markets, it could lead to some businesses pulling back on AI investment. We saw just today, the four largest hyperscalers are promising to invest a lot in the U.S. what if that does not materialize? Is there a downside risk there?

[Carol Massar]

Yeah, Amazon, just saying yesterday, $200 billion. It's 60 billion more than analysts thought they would spend in 2026. So when you say we have to be careful about an AI bust, how does that manifest? What exactly does that look like? Because as Carol was referring to, it's been kind of a complicated week when it comes to, to really just tracking what these companies have have done, or the stocks at least have done, because there's this concern about a SaaS apocalypse with the software as a service companies as a result of what Anthropics Claude was shown to do this week. And then there's also the concern about some of the hyperscalers and spending. So when you say AI bust, what does that look like?

[Gregory Daco]

Well, I think we're seeing a lot of pragmatism right now. We're seeing this notion of economics of necessity, what is necessary to drive growth, where are going to be the next avenues of growth? And I think not many people know, and very few actually know what the situation will be in a year's time, two years time, when it comes to which sectors will be leading the way. We're in the midst of a technological revolution. There are always going to be excesses in terms of upside risks that are taken and downside risk.

[Carol Massar]

So we're definitely in the midst of this.

[Gregory Daco]

We are in the midst of an AI technological revolution.

[Tim Stenovec]

And it's interesting because Amazon CEO Andy Jassy told investors he's confident the company is going to see a return on its massive investments in artificial intelligence. Listen, these guys have fiduciary responsibilities, right, when they make these spend. So I guess to some extent you've got to trust that whatever he's seeing, he feels comfortable enough to say that. Right. And doesn't want to put his company or his share price or any of this at risk. But it, but again, people will also say, well, these people are talking their books. I mean, like, this is a big thing for them. So it's a hard thing. To kind of weave through to figure out what's really going on.

[Gregory Daco]

You know, when I say narrow foundation to growth, one thing that I find really amazing is that the announced investment in CapEx from these four largest hyperscalers is worth about $250 billion. Assuming that materializes over the course of 2026, and assuming only a fourth leads to stronger economic activity domestically, so that three quarters are imported, not necessarily counted in GDP, that would lead to a lift of GDP of 0.2%. That's a significant boost from four companies. Right. So that is where the narrow foundation to growth is lying. You're seeing a lot of growth that is reliant on a few actors in the economy. Wealthier individuals and larger firms and smaller businesses and lower income families are increasingly struggling. And we. And where I start to worry a little bit is that we're seeing this bifurcation between the prospects for strong productivity growth, but not necessarily the accompanying income growth that usually accompanies a strong productivity cycle. And that's because of this polarized economy.

[Tim Stenovec]

That's a great point. Like where, okay, for more productive, where's the income to go?

[Gregory Daco]

Usually that's the story. You get more productivity and more real wage growth. You're not seeing that right now.

[Carol Massar]

Hey, just the last 40 seconds we have with you. On any normal Friday at this time we'd be talking about labor, how many jobs? Yeah. Well, what does your analysis tell you about the health of the labor market right now?

[Tim Stenovec]

And just have about 30 seconds.

[Gregory Daco]

It's in balance, but it's a fragile balance because we've seen a historical negative shock to labor supply from reduced immigration. So we have a break even rate that's close to zero. But we are seeing labor demand being hesitant. Business leaders that we speak to are very hesitant as to who they hire, what skills they hire for and at what salaries. And that is downward pressure on income which in turn will feed into softer consumer spending going into the rest of the year.

[Bloomberg Narrator]

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.

[Tim Stenovec]

Hey, one of the things we wanted to get to was one of the most read stories on the Bloomberg today for the biggest US Tech companies together have forecast capital expenditures that will reach about $650 billion this year, which is really kind of a mind boggling tide of cash earmarked for new data centers and all the gear that is housed within them. That is the Spending plan by Alphabet, Amazon, Metta and Microsoft all in pursuit of dominance in the still nascent market for AI tools is a boom without a parallel this century. No doubt about it, Tim.

[Carol Massar]

Yeah, it's a lot. Okay, It's a lot. Look, we're talking about Alphabet, Amazon, Metal Platforms and Microsoft. Each of these companies estimates for this year expected either near or to surpass their budgets for any of the past three years combined. The investors over the past two weeks have reacted to the news differently when it comes to earnings and quarterly updates from these companies. We've got a great voice voice joining us, Carol who studied these companies for a very long time, curious to see.

[Tim Stenovec]

What he has to say. Mark Mahaney is with us. Senior managing director and head of Internet research at Evercore ISI, author of Nothing But Net 10 Timeless Stock Picking Lessons from one of Wall Street's top tech analysts. He joins us from San Francisco. By the way, he's got an outperform on both on actually Alphabet, Meta and Amazon, all of them. Mark, how are you? Good to have you back.

[Mark Mahaney]

Good to see you Carol.

[Tim Stenovec]

Hey, one thing I got to ask you before we get into the individual companies, something like 50,000 on the Dow now does it mean anything to you when you think about the overall market trade?

[Mark Mahaney]

I'm sorry, I didn't. I was surprised by that number two.

[Gregory Daco]

That says a lot I guess if.

[Mark Mahaney]

I'm honest about it.

[Tim Stenovec]

No, fair enough. Which is what we want. We love the honesty. Hey, let's get to what is been a trade. Depending on the company reporting the AI spend and AI trade, some have been punished, some have been. Not any logic to it in your view?

[Mark Mahaney]

Yeah, I think so. We're going through a free cash flow desert. So there's no question that the level of investments is higher than we all thought, you know, a month ago at the beginning of the year and certainly a lot higher than we thought a year ago. I don't nobody that I know of and I didn't forecast this amount of CapEx spend by the by by the major hyperscalers, the four companies you mentioned earlier, Amazon, Meta, Google and and Microsoft. So I understand the market's hesitation and what it means is that free cash flow is going to be tested and Amazon's going to have negative free cash flow this year, first time since 2022. I think Google's going to be positive cash flow. I think Meta is But these huge amounts of capex spend are challenging that free cash flow generation and investors are right to be concerned. What investors should also though Focus on is what are they seeing in terms of roai, like what kind of returns are we getting? So you know, Google is ramping up its capex by 90 billion. That's actually the biggest dollar increase. But what they gave you this last quarter was an acceleration in search growth was that was the fastest that they've had in four years. What they also gave you was almost 50% growth in cloud revenue and 150% growth growth in cloud backlog that is all generated or in large part generated by AI. So there's an example here of a return. And by the way, Google had record high operating margins in the last quarter. Amazon just gave you 24% search. I'm sorry, cloud revenue growth, AWS revenue growth fastest in four years also with very consistent margins. And the backlog jumped by more than they've ever had in a single quarter, something like 40 billion. So I'd argue that there is an ROAI on these for these companies. I can make the same point about Meta and I think investors just need to be able to work through this free cash flow trough year. If I'm right that it's the trough year and you're going to have accelerating growth that'll take you into 27, I think that sets up these stocks given their current valuations very well.

[Carol Massar]

So Amazon right now is down just about 7% as we speak. You've got an outperform rating on the company, $285 price target. Andy Jassy said yesterday that the money would predominantly go to the company's. Most of it would be for AI workloads. He said, quote, I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole. We see this as an unusual opportunity and we're going to invest aggressively to be the leader. Is he right?

[Mark Mahaney]

Well, he's right that they're investing aggressively. He's right also that almost certainly this is a huge opportunity. I mean the market certainly thinks so. We wouldn't be going through SAS Mageddon or whatever, you know, this sell off in soft apocalypse software stocks. Yeah, Desk apocalypse. We wouldn't be going through that if the market didn't think that some of the innovations they're seeing out of OpenAI and Anthropic weren't potentially dramatically negative for these names. Now, the market may be overreacting, but the market is reacting. And then I just ask you all to step back a little bit here. Have we seen material improvements in the products and the services that we use? Because of Genai. I think if we're honest about it, the answer is yes. You know, how much search has improved, like as a product, as an experience, how much better it is. The things you can do now. This is like your Google Moment of 15 years ago. Like, what was life like before Google? It's kind of hard to remember. I think we're going to have that same moment. Like, what was life like before Generative AI when you can, you know, and we're just, we're still scratching the surface. Like, we haven't, we still haven't had the task, you know, we haven't circled to the task. Like, I'm, you know, great. You give me all this information about a Hawaiian vacation package, but then put it all together and book it for me too, like make that. And then, you know, I really want a personal digital assistant. I think we're all going to have one, you know, in three to five years. By the way, Gemini Personal intelligence has sort of become that for me already in a pretty short period of time. And the ability for this to improve people's productivities, you know, their lifestyles, if you will. I just think that these are their ability to educate themselves, train themselves, learn new skills. I think it's extraordinary what we're seeing. And so, yeah, I believe in the cycle. I'm sure there's going to be overbuilding during it, but I believe in this cycle. And I think there's a couple of companies that are really going to come out financially much better because of it. And I think these are three or the four of the companies that can do it.

[Tim Stenovec]

That's where I wanted to go, because reading in this kind of winner takes all or most winner takes most kind of view out there. And that's why these guys are all doing a mega capex spend. Metta, Microsoft, Amazon and Alphabet. Are they right about that? And I do wonder, like, will there be one leader or is it going to be enough that all four of these, Mark, are companies we will continue to talk about five years from now, three years from now, ten years from now?

[Mark Mahaney]

That's a tough question, Carol. I think we'll be talking about them. The question is whether they're going to be materially larger from here or not. The advantage that they have is that they already begin with these massive bases of users and businesses and applications. And so you're taking productivity enhancements, productivity, dramatic improvements to massive retail advertising platforms, entertainment platforms, and my guess is that these large platforms are going to be a lot better. They're going to be more efficient, they're going to have higher margins, they're going to have higher revenue bases than we would have thought three years ago. Yeah, the CapEx in 2026, the investments are greater than we were thought two years ago. If we're honest with ourselves. The revenue bases are also bigger than we thought. And the profit pools, not free cash flow yet, but I think that's going to snap back next year. Profit pools are going to be bigger than we would have thought two or three years ago.

[Carol Massar]

Mark, we've talked about, you know, where you're optimistic and some of the winners but, but where are you not optimistic when it comes to this spend who ends up losing as a result of this capex spend and of this investment?

[Mark Mahaney]

Well, companies that, you know, aren't able to make this. The shift. The one, the shift. The one company, the one set of companies I've wondered about are the travel companies. This is an information intensive transaction. I think it lends itself to an agentic solution. You know, somebody, I think the average person, you know would have spent three hours planning an annual summer family vacation. You know, I'll think about all the things that go into that decision and then the booking and then the checking and checking out alternatives and flights and blah, blah, blah. And I think this is wonderful opportunity for agentic solutions to really sharpen that, to make the whole planning booking process a lot better. Booking.com Expedia and Airbnb better be effectively and successfully investing in agentic travel and having their own agentic agents on their sites. Because if they don't, then those are companies that I think are going to be, could be dramatically smaller, three to five years.

[Carol Massar]

And you do cover those, you do cover those three companies too. So, you know, you know, what are they? Do you think they're doing a good job as of now?

[Mark Mahaney]

I think so, but I haven't seen the proof yet. By the way, nobody's really put together a great agentic travel experience yet. It's tbd. You know, look, you can use Chat, GPT and Gemini, but you know, you come up with great for travel planning but you can't, you can't. Like then you still got to go somewhere to do the booking. Somebody's going to put all that together. I just don't know who's going to do that first. But I think there's a decent chance that Expedia Booking will do it. Then I step back and think about valuations across these names and if you're telling me that I'm going to Get Expedia at 15 times earnings, Booking at 17 times earnings, Amazon and Meta at 20 times earnings. Hey, I'm in. I think those are very reasonable multiples. In fact, I think they're pretty dislocated. So you know, I think a lot of the fears already in these stocks.

[Tim Stenovec]

Yeah, I was just looking at Expedia. It's down about 17% year to date and you've got booking down about 18%. I'm not saying that there's a clear connection, but just, just putting that out there. Mark, mark, just got 30 seconds as we go through this. I mean there's going to be stops and starts, right. Because we are very early in when it comes to this spend and build out.

[Mark Mahaney]

Yeah, you're right. Yeah, we are still. We don't, we don't agentic commerce. There's some interesting examples. I love what I'm seeing out of Amazon with Rufus, but I want to see more Rufus out there and Rufus can still improve materially. So I think we're still early and, but I want to see people closing the loop, you know, in terms of the information and the transaction. You want, you want the Gentex task agents, they're not enough of those yet.

[Carol Massar]

Stay with us. More from Bloomberg Business Businessweek Daily. Coming up after this.

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[Bloomberg Narrator]

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

[Carol Massar]

We're talking about bitcoin. It's kind of a special edition of Drive to the Close because bitcoin reclaimed almost all losses registered during Thursday's crypto market meltdown. Largest since the collapse of FTX roiled the market just a little over three years ago. Yesterday we spoke to Nobel Laureate Paul Krugman about the sell off. Here's what he had to say.

[Gregory Daco]

A lot of people sold bitcoin as being the next gold. And it turns out that in the face of doubts about stability, doubts about politics, the next goal turns out to be gold, not bitcoin. I think it's a big wake up for people. Maybe this isn't actually going to be an enduring asset. If you ask when people make price forecasts for bitcoin, I always wonder on what basis. It's not like you could do a price earnings ratio on this thing because there's no earnings, no services. It's all just pure faith.

[Carol Massar]

A lot to unpack there. Nobel Laureate Paul Krugman on BusinessWeek yesterday. That was yesterday. This is today. We've got Bloomberg News Executive editor for crypto payments and Digital finance strategy. Stacey Marie Ishmael, actually. Yeah, you're everything. I'm just giving you new titles.

[Tim Stenovec]

Can we just make a crypto queen?

[Carol Massar]

We just want you to stay there. We just want you to stay criminal.

[Mark Mahaney]

Oh, sorry.

[Gregory Daco]

Okay.

[Tim Stenovec]

No, okay. Don't call her that.

[Carol Massar]

So, okay, that was yesterday. This is today. First things first. We saw the sell off. Why the recovery today there's a phrase.

[Tara Davis Woodhull]

That folks like using, which is dip buying, which we're, you know, essentially says bitcoin hit a threshold at which folks were like, okay, there's no way this is reasonable. But the problem for people who like to do fundamental analysis and just, you know, going back to what Krugman said is it's very hard to do fundamental analysis on an asset that, that's been defined by, like, momentum trading for so long. You know, our colleague Zeke on the investigations team put out a BusinessWeek newsletter saying, like, why did bitcoin fall? Because prices fell. And that can feel like a tautology. But so much of this asset class and this industry has been defined by narrative. And so many of the big spikes up have been driven by, like, events, right? So, you know, the introduction of crypto ETFs or the election of President Trump or then President Trump saying, we're going to have a bitcoin reserve. And we've really been lacking those kinds of narrative driven, like, positive events for the past several months.

[Tim Stenovec]

Does any of the trade that we're seeing as of late, Stacey, kind of say to you that, okay, because we've always said, like, what is it still? Does it help kind of tell the picture or maybe say, okay, it's just this thing that people like to play around with, like, you know, whether or not this is going to be so disruptive and really something bigger in terms of our financial system going forward rather than just a kind of a plaything.

[Tara Davis Woodhull]

So if you go back to 2024, a phrase that was very popular was people believe in the underlying technology, right? This idea of the blockchain and actually coming into 2026, that has really become actually mainstreamed in a very different kind of way. You have major Wall street investment banks saying they're looking into things like tokenization and, you know, putting assets on the blockchain. You have a number of different companies, including stripe, making big bets on stablecoins. You know, you have multiple different governments saying, this is something that we need to take seriously. So I think there's been this shift in the narrative that the only way to get exposure to this technology is bitcoin and now people have many other options and not all of those options are you can invest in them through like the straightforward mechanism of I'm going to hold a token. So I think some of this repricing actually reflects the sort of the changing maturity of the market itself. Right. You have more ways to play how you might feel about the prospects of this technology than merely buying and holding its largest, most liquid to.

[Tim Stenovec]

That actually makes a lot of sense.

[Carol Massar]

What, what surprised me about yesterday's move is if you think back to sort of the last big decline, it was this cross asset plunge in equities. We had the meltdown of ftx. So there was concern about this big player melting down. There was no external event yesterday that was really tied to the plunge is that. I know that's happened before in the history of bitcoin, but it's like that, that felt a little different because the size of the industry is so much bigger, the market cap of the asset is bigger. Why, why was there no sort of catalyst?

[Tara Davis Woodhull]

There's a few things that we're paying attention to. I would say there's been no single explicit catalyst. Yeah, but you know, there was a similar, a similar thing happened a few months back, October when it was like, oh, like normal Monday. And suddenly you're like, whoa, like why is the screen a sea of red? And at that point we heard, okay, so some people's positions got tripped and that started a chain of liquidations. Right. So like a price was activated and margins got called and people started selling to meet those margins. There have been other times when it's like, actually there are certain parts of digital assets that are like increasingly correlated with AI. And because you know, you've had companies that used to be, I'm a bitcoin miner now, they're like, I'm a data center provider and I'm striking deals with Google because the infrastructure that we have can also power the AI revolution. So when you have, you know, negative sentiment to AI because everybody's like, I need a gabillion dollars of Capex like, like that has a red across effect. So we've moved from an asset class that was positioned as not correlated with anything to an asset class that's actually increasingly correlated with lots of different kinds of things in interesting ways. At the same time that within the asset class itself, you've had this fragmentation into okay, the most liquid, traditional, token, Bitcoin and ether and ripple and so on. Then you have like the stablecoin play. Then you have the most speculative part of the market, the, you know, the meme coins, the doges, etc. And then you've got the products built on top of those things, like the ETFs, like the strategy, like other types of digital asset treasury. So I think what we're also seeing is having to be much more sophisticated about the, like, the niches that we're analyzing because it's no longer just one story that's driving everything.

[Tim Stenovec]

So a smarter market perhaps is where we're going.

[Tara Davis Woodhull]

I think that's the hope.

[Tim Stenovec]

Yeah. No, no, but like, we're kind of like understanding maybe where there is super potential.

[Tara Davis Woodhull]

Yeah, that's a growth. You know, the folks who I've spoken to who are the most, like the most bullish and optimistic are also the ones who are like, have a kind of like, sense of irony about it because they're like, you know, one of the reasons that stablecoins, etc. Are taking off is because the investment banks who are supposed to be the enemy. Right, right. If you, if you think of going back to like the white paper, like Bitcoin was invented in rejection of the sovereign states and the traditional financial system, that's really brought a totally different perspective on large chunks of what people are interested in.

[Carol Massar]

Did. Did. Has what Bitcoin has done over the last year killed the narrative that it.

[Tara Davis Woodhull]

Is digital gold according to the gold people? Yes.

[Tim Stenovec]

Well, they are gold.

[Tara Davis Woodhull]

You know, I think the, the idea of it being a safe haven asset has always been a little bit challenging because it's really tricky to maintain the idea of it being a safe haven asset when it has like such high beta performance when people are selling risk, you know, so it's like, okay, if, if people are selling risk assets and bitcoin is also going down, it's like that doesn't quite qualify as a haven, but I think ideologically what. What folks were really talking to is like they really wanted this to be something that was removed from other parts of the financial system. And really what we've seen over the past couple of years with, you know, all of these different exchanges and like the US really embracing crypto in a very different way is that it's almost become much more institutionalized.

[Bloomberg Narrator]

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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