BlackRock Nears $40 Billion Data Center Deal in Bet on AI

Summary

Bloomberg Intelligence Podcast Summary

Episode: BlackRock Nears $40 Billion Data Center Deal in Bet on AI
Date: October 3, 2025
Hosts: Scarlet Fu & Paul Sweeney
Guests: Ed Ludlow (Bloomberg Tech), Sid Phillip (Bloomberg News Aviation), Jody Laurie (Bloomberg Intelligence Credit Analyst), Lindsey Dutch (Bloomberg Intelligence Consumer Hardlines)

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Brief Overview

This episode explores major market shifts in infrastructure, manufacturing, and consumer sectors. The headline topic is BlackRock’s near-$40 billion data center deal, seen as a monumental bet on the future of AI and its physical requirements. Additional segments address the state of Boeing and Airbus in aviation, the evolving cruise industry, and key risks facing toy makers as the holiday season approaches.

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Key Discussion Points & Insights

1. BlackRock’s $40 Billion Data Center Deal & the AI Infrastructure Boom

[01:49 – 05:14]

Background & Context

• BlackRock’s Global Infrastructure Partners (GIP) is reportedly acquiring Aligned, a major data center developer.
• MGX, a UAE-backed investment fund, is also providing equity financing.
• The build-out of AI is creating demand far beyond just microchips—physical infrastructure like data centers, energy, cooling, and real estate are central to supporting the AI boom.

Insights & Analysis

• Ed Ludlow explained that the data center market is rapidly expanding, with expected demand for chips alone at $4 trillion—but including real estate and supporting systems, that figure could reach $7 trillion.
• Private equity and global sovereign wealth funds are moving in to secure their roles as owners and managers of the very infrastructure underpinning the next wave of technological growth.
• Investors are seeking not just the technology, but the “metal, concrete, the sand, the water, the cooling” (Ed Ludlow, [02:10]), marking a shift towards infrastructure as a core asset class.

Notable Quotes

• Ed Ludlow [02:10]:
  “Aligned... builds data centers, the actual buildings, you know, the metal, the concrete, the sand, the water, the cooling... manages basically a portfolio of them.”
• Ed Ludlow [02:59]:
  “If you start to think about the concrete, labor, building materials, energy supply, utilities, water, cooling systems, you can expand that number out to $7 trillion.”

Memorable Moments

• Paul Sweeney’s skepticism about valuations:
  “$40 billion for a real estate company, is that what we’re talking about?” ([03:43])
• Discussion about whether the current AI boom is a bubble:
  Ed references Jeff Bezos’ comment: “Boom is a bubble... a bubble that will pay off.” ([04:29]–[04:38])

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2. Boeing 777X Delays Worsen; Aviation Duopoly Stumbles

[07:31 – 12:29]

Boeing’s Ongoing Challenges

• Boeing’s 777X, slated for 2020, now won’t enter service until at least 2027.
• This delay means billions in lost cash flow, postponed earnings, and potentially another major charge at the next earnings call.
• Impacted airlines include Lufthansa, Emirates, and Qatar Airways, which rely on large, fuel-efficient jets for long-haul routes.

Broader Industry Context

• Both Boeing and Airbus are beset by delays—Boeing’s due to certification processes, Airbus due to production bottlenecks.
• Neither can meet current demand; customers wait for years, and there’s no viable competitor in large commercial jets.
• Comac (China) and Embraer (Brazil) are referenced, but aren’t yet threats in the main market segments.

Notable Quotes

• Sid Phillip [08:33]:
  “The 777X is a brand new aircraft that's meant to replace the older A380 and the 747... airlines that do long haul services carrying lots and lots of people, those are the ones that are really affected.”
• Sid Phillip [11:34]:
  “The only options for airlines if they want an aircraft are either Boeing or Airbus. And they're both struggling with order books sold out until the end of the decade.”

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3. Cruise Industry Outlook: Shifting Tides for Carnival and Competitors

[14:45 – 21:53]

Current Performance & Headwinds

• Carnival stock is up 16% YTD, but alternative data suggests moderation ahead as consumer wallets tighten moving into 2026.
• Returning cruisers remain strong, but there’s concern about future onboard spending and the effect of inflation.

Capital Structure & Growth Strategy

• Cruise lines are now balancing between launching new ships (which generate advance bookings and cash) versus paying down debt.
• Carnival was upgraded to investment grade by Fitch, indicating balance sheet improvements, but sector-wide growth may slow.

Customer Acquisition & Market Segmentation

• Customer acquisition costs vary by brand; high-end entrants like Ritz Carlton and Four Seasons target luxury travelers with small yachts.
• Shift towards “Vegas at sea” experiences like swim-up bars, exclusive islands, and more onboard spending opportunities.

Onboard Spending Models

• Cruise lines are experimenting with lower upfront fares to fill ships, compensating through higher-margin onboard spending.
• Risk that customers, especially those feeling economic pressure, may resist costly add-ons, leading to a potential inflection point.

Notable Quotes

• Jody Laurie [15:13]:
  “We are seeing that returning cruisers are still booking pretty strong... but I kind of question what that actual onboard spend is going to look like in 26 as the consumer feels their wallet a little bit more strained.”
• Jody Laurie [20:33]:
  “For the brand name ship[s]... they might be reducing the amount that they gain in terms of ticket price... so that they can get people on the ship and then charge them in onboard spending... it's pretty attractive.”

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4. Toy Makers Face a Risky 2025 Holiday Season

[24:08 – 29:38]

Demand Uncertainty & Supply Chain Risks

• The toy industry is facing an uncertain holiday season, largely because major retailers delayed orders due to tariff uncertainty and economic headwinds.
• This may limit “hot toy” reorders, raising the risk of shortages on popular items.
• Shifts in logistics mean toy makers are now importing, storing, and distributing inventory themselves, increasing complexity and uncertainty.

The Impact of Tariffs & Supply Chain Diversification

• Tariffs are prompting toy companies like Mattel and Hasbro to diversify manufacturing outside of China, but ~80% of global toys are still China-made.
• Both companies estimate tariffs will cost ~$100 million in 2025, likely persisting through at least 2026.

Retail Landscape Changes

• With the closure of the "de minimis" exemption, shoppers will face tariffs on goods bought directly from overseas, likely shifting demand back to domestic retailers.
• Despite changes, big-box stores like Walmart and Target remain the main channels for toy sales.

Notable Quotes

• Lindsey Dutch [24:41]:
  “This was supposed to be an up year for toys, but... big retailers... held back on placing their orders... because of that delay... the opportunity for reorders for some of those hot holiday toy items is limited.”
• Lindsey Dutch [28:24]:
  “Hasbro and Mattel have said that tariffs will be about $100 million in '25 in terms of costs... and that that cost could be about the same or more in at least '26.”

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Memorable Moments

• Paul Sweeney’s skepticism about bubble-like investments in data center real estate ([03:41])
• Debate over whether new ship launches or debt repayment is smarter for cruise liner financial health ([16:08])
• Confirmation of Carnival’s investment grade upgrade as a pivotal financial milestone ([16:56])
• The scenario of standing in line at stores due to potential toy shortages, reminiscent of past holiday rushes ([25:58])

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Timestamps for Key Segments

| Segment | Time | |-------------------------------------------|----------------| | BlackRock’s Data Center Deal / AI Infra | 01:49 – 05:14 | | Boeing 777X Delays & Aviation Outlook | 07:31 – 12:29 | | Cruise Industry: Carnival & Competitors | 14:45 – 21:53 | | Toy Industry: Holiday Risks & Tariffs | 24:08 – 29:38 |

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Overall Tone

The episode is dynamic, informative, and at times skeptical—mirroring the market’s own ambivalence about current megatrends and economic headwinds. The hosts and guests blend grounded analysis with a touch of humor and real-world examples, engaging listeners while cutting through the hype.

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Conclusion

This episode underscores how surging investment in physical infrastructure—fueled by AI, lingering manufacturing slowdowns, and ongoing consumer behavior shifts—are reshaping major swathes of the global economy. From data centers to luxury cruises and toys, operational risks, financial pressures, and shifting demand patterns remain front and center for business leaders and investors alike.

Transcript

[Scarlet Fu]

The FIFA World Cup 26 is coming to North America. Get closer to where business meets the beautiful game with a hospitality package featuring premium seats and entertainment. Get closer to wins on and off the pitch. Register [e-mail] Interest the Chase Inc. Business Premier card is a painful card with flexibility made for business owners who make things happen. Earn a total of 2.5% cash back on every purchase of $5,000 or more, plus earn unlimited 2% cash back on every other purchase, giving you unlim unlimited earned potential to invest cash back into your business. Inc. Business Premier is part of a suite of credit cards from Chase for Business designed to meet your needs every step along the way. Learn [e-mail] businesscard Chase for Business make more of what's yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC a great presentation can.

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[Podcast Host]

Bloomberg Audio Studios podcasts Radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Scarlet Fu]

All right, we've been touting his presence all week. Ed Ludlow, Bloomberg Tech co host, is here in New York for the week. He's about to take off, but he did agree to speak with us before he does so to about the stampede into data centers. BlackRock's global infrastructure partners, the latest to to move in that direction.

[Ed Ludlow]

This is a really important piece of reporting because it will help a lot of investors and readers understand all the other stuff that's going into this movement outside of just the chips and the compute. BlackRock's GIP partners, Jeep Global Image was a big player. So what we're reporting, citing sources, is that they would acquire Aligned, which is basically a company that builds data centers, the actual buildings, you know, the metal, the concrete, the sand, the water, the cooling, and then decides on their locations and manages basically a portfolio of them. What's interesting is you see a familiar name, mgx, the investment vehicle backed by The UAE and its other sovereign wealth funds. Right. So the idea here is that BlackRock's GIP acquires it and in parallel a separate equity investment from mgx. And what is this signal? It's this idea that we know about, the compute demand. So we're basically thinking that there's going to be $4 trillion worth of demand for the chips and the server designs. But if you start to think about the concrete labor, building materials, energy supply, utilities, water, cooling systems, you can expand that number out to 7 trillion. And this is some really big names making moves to make sure they have the name that can build the actual things and then manage them, you know, as a piece of real estate and as an asset class.

[Paul Sweeney]

I suppose, you know, I'm looking for tops in this gi, in this whole AI story. Where's the top? And I'm always like, man, when private equity gets in.

[Scarlet Fu]

That was a big sigh, Paul.

[Paul Sweeney]

Yeah, I don't know. I mean, $40 billion for a real estate company, Is that what we're talking about?

[Ed Ludlow]

I, you know, I also want to be honest with you guys in the audience. Like, like real estate is, I'm not so okay with real estate. It's not a world that I cover because I know we've been talking about San Francisco, right? Yes. So let me, let me make a sort of weird parallel example. The OpenAI story we did this week on the $500 billion valuation on, on in San Francisco right now, everyone's like, this is going to, is going to create a huge bubble in the housing market. Why? Because you have about several hundred newly minted millionaires from that transaction. Seriously?

[Jody Laurie]

Wow.

[Ed Ludlow]

So, so like there's a capital flow to individuals and companies. Did you guys see the story that's also out this morning about Jeff Bezos of all people saying that the spending.

[Paul Sweeney]

Boom is a bubble is, oh, really interesting. And his company is one of the major spenders.

[Ed Ludlow]

Thank you.

[Scarlet Fu]

But he says it's a bubble that.

[Ed Ludlow]

Will pay off, the bubble that will pay off. And so like right now, the equation for public market investors and debt market investors, and I think the debt part is really important, is they do want to see the evidence that top line growth is materializing, particularly in software companies. If you are a venture capitalist, you don't care. Like that's not how that works. Growth at all costs is okay. And so when we think about OpenAI, anthropic perplexity, all these names that we love to talk about, you know, it's the money plowing in. There's less Focus on the money coming in out the other side.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence Coming up after this.

[Scarlet Fu]

The FIFA World Cup 26 is coming to North America next summer. It's the ultimate celebration of sports and culture and an opportunity to elevate your company. Get closer to where business meets the beautiful game with a premium hospitality package. Build partnerships in the best seats and suites. Achieve goals over world class food and beverage. Get closer to wins on and off the pitch. Register [e-mail] Interest the Chase Inc. Business Premier card is made for business owners who make things happen. Designed for high spend and limitless cash back, Inc. Business Premier is a painful card with built in flexibility. Get the buying power you need to make large purchases, cover unexpected expenses and help your business grow. Earn a total of 2.5% cash back on every purchase of $5,000 or more plus earn unlimited 2% cash back on every other purchase, giving you unlimited earned potential to invest cash back into your business. From innovation and technology to everyday expenses, Inc. Business Premier is the only business credit card with 2.5% cash back on every purchase of $5,000 or more and is part of a suite of credit cards from Chase for Business designed to meet your needs every step along the way. Learn [e-mail] businesscard Chase for Business make more of what's Yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC.

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[Scarlet Fu]

Oh no.

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[Sid Phillip]

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[Podcast Host]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Paul Sweeney]

Boeing back in the news and after a string of some real positive news items over the past six to 12 months, got a little bit of setback here on a Triple seven plan here. So let's check in with Sid Phillip, Deputy Team Leader for Global Aviation at Bloomberg News. Sid, what's going on with BOEING and the 777 aircraft?

[Sid Phillip]

Good morning. So the 777 aircraft has been long delayed. So the aircraft was meant to enter service in 2020. And the latest we heard from Boeing was entry into service in 2026. Now we understand that's going to go to 2027. And that sort of means that for Boeing, it's a massive impact on cash because this aircraft has been years in development and Boeing is looking to sort of convert all those orders into cash flow. And so that just postpones it. And we understand that Boeing is going to be having to take a multibillion dollar charge and on this program at the next earnings because of the delay and essentially the fact that they can't get cash in through the door for those aircraft.

[Scarlet Fu]

So this is essentially a profit warning from Boeing before its latest results said which companies, which airliners are most affected by the delay of this Triple 7.

[Sid Phillip]

So the Triple 7X is a brand new aircraft that's meant to replace the older A380. And the 747 is the biggest aircraft that Boeing has worked on. And essentially this would replace those aircraft. And so the airlines like Lufthansa, we've seen Emirates place that the biggest customer for this, Qatar Airways, has ordered some. And so essentially the airlines that do long haul services carrying lots and lots of people, those are the ones that are really affected. And essentially that delays the retirements of all the aircraft and the introduction of more sort of fuel efficient, brand new aircraft.

[Paul Sweeney]

Sid, I guess this just once more revives kind of the concern about the engineering and production capabilities of Boeing that were highlighted over the last several years. I don't know, is that fair, do you think, or if they kind of put a lot of that behind them here?

[Sid Phillip]

They have put a lot behind them. And the indication from Boeing, I mean, the CEO Kerry Otberg sort of flagged these issues and he sort of said that this was more a paperwork issue rather than an engineering setback issue. But at the same time, this aircraft has been long delayed. I mean, it was slated to enter into service in 2020. And so it's already five years late, and now it's possibly going to be seven years late. And so it does sort of talk about the certification delays that Boeing's got to get through, including on the 737 Max, where the Max 7 and the Max 10, which are the smallest and the largest variants of the max, have still to be certified. And that is again, a very important sort of source of cash for Boeing. And so it is one of the challenges that Kelly Orthberg has to get through as Boeing sort of goes into the next phase of growth and essentially turns the corner on its various challenges it's had in the last couple of years.

[Scarlet Fu]

So put this into context for us. Where does Airbus stand with the release of its latest versions of its airliners? If Airbus is also being held up by different reasons, then maybe this isn't so bad for Boeing.

[Sid Phillip]

Yeah, so Airbus has a different problem. They have issues with production and so they're unable to produce enough planes. And so while Airbus doesn't have any aircraft currently in certification, I mean the latest aircraft, the A321XLR, has entered into service. They have a different issue. They have issues with supply of parts and they can't make those planes fast enough to get them to customers. So the customer is really sort of struggling on both ends because on one end, if you've got an Airbus order book, you're waiting on dilly delayed aircraft. If you're a Boeing customer, you're waiting on aircraft that are still to be certified. In both cases, you can't have those planes in your fleet and flying around for you and making money for you. So for the airline, regardless of whether it's a certification delay or whether it's a production delay, it is a delay.

[Scarlet Fu]

It is a delay. And we keep talking about this duopoly between Boeing and Airbus, but is there any other aircraft manufacturer that could kind of fill the hole in the meantime for these airliners?

[Sid Phillip]

Unfortunately not. I mean the duopoly is here to stay for the conceivable future. And comac, the Chinese aircraft manufacturer is talking about building. I mean they are building their competitor to the 737 and the A320, but they're building in very small numbers and it's going to be a very long time before they're able to scale up and match the production cadence that Boeing and Airbus have. And they don't have a widebody aircraft. And similarly, Brazil's embryo builds smaller regional jets and so they aren't really a competitor. So at the moment the only options for airlines if they want an aircraft are either Boeing or Airbus. And they're both struggling with order books sold out until the end of the decade. And essentially it's going to be a tough struggle for them.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

[Scarlet Fu]

The Chase Inc. Business Premier card is made for business owners who make things happen. Designed for high spend and limitless cash back ink, Business Premier is a painful card with built in flexibility. Get the buying power you need to make large purchases, cover unexpected expenses and help your business grow. Earn a total of 2.5% cash back on every purchase of $5,000 or more, plus earn unlimited 2% cash back on every other purchase, giving you unlimited earned potential to invest cash back into your business. From innovation and technology to everyday expenses, Inc. Business Premier is the only business credit card with 2.5 cash back on every purchase of $5,000 or more and is part of a suite of credit cards from Chase for Business designed to meet your needs every step along the way. Learn [e-mail] businesscard Chase for Business make more of what's yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC.

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[Scarlet Fu]

Oh no.

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[Sid Phillip]

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[Podcast Host]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Scarlet Fu]

Carnival Cruise Line the stock is up 16% so far this year. Just a bit of the ahead of the S&P 500. But if you look at other measures there might be some concern. And so let's do that right now with Jodi Laurie. She is Bloomberg Intelligence Credit Analyst on the outlook for this industry. And Jody, you're looking at some alternative data, and the alternative data suggests maybe there's a bit of moderation coming for Carnival and its competitors.

[Jody Laurie]

Yes, Scarlet, so so we use ALTD Go and we look at the cruise lines and one of the things we like to focus on is new versus returning cruisers, and that data is sort of indicative of how much adaptability there is in the sector. Now if you remember, cruise lines are only 2 to 3% of the total leisure sector, and so it's still a Relatively small percentage, but as you noted in the introduction, people book out way earlier. So you get insight into the psyche of the consumer going into next year and the following year based on how they're booking. We are seeing that returning cruisers are still booking pretty strong. We're seeing that pre cruise onboard spending is still strong. But I kind of question what that actual onboard spend is going to look like in 26 as the consumer feels their wallet a little bit more strained as inflation sort of really dips into not just the lowest income consumer, but more of the middle market consumer.

[Paul Sweeney]

Jody, as a credit analyst, would you rather see one of your cruise companies build a new ship, put a new ship in the water or pay back debt?

[Jody Laurie]

What I rather see, so I don't think that that's a one or the other situation. You know, obviously while they were working through all of their balance sheet upheaval over the past few years, paying down debt was definitely more favorable. But I think that the companies can kind of both because what new ships do is they provide additional cash in the door through onboard, through bookings, advanced bookings. And so what that means is that they don't necessarily have to rely on the debt markets to fill those cash gaps the same way that they do when say they're not able to cruise. Now something to note about Carnival and the cruise lines in general is from a capital structure standpoint and from a credit perspective, they've actually done pretty well. And Carnival actually just finally got upgraded to investment grade this week by Fitch. So it's actually been a pretty strong tailwind for the company. From the credit perspective that will likely feed into the relative value of the bonds. But in terms of that growth story, that large momentum, that might be stalling a little bit.

[Scarlet Fu]

So cruise operators want to get a Paul Sweeney or Lisa Mateo to become a cruiser and not just a cruiser for the first time, but to become returning cruisers. How expensive is it for them to acquire these kinds of customers?

[Jody Laurie]

How expensive is it for them to acquire these customers? I think it really depends. It depends on the cruise line itself. And I think what's so interesting is that we are seeing much of a differentiation in terms of the different brands to the point that we're now seeing Four Seasons and Ritz Carlton come into the space in the form of really high end luxury yachts. We're seeing biking continue there position as very kid unfriendly. Mostly just older couples wanting to go on ships and having everything included. And Royal Caribbean is finally entering into that space. So when that happens, I'M a little curious to see who decides to go to Celebrity Over Viking and if that creates some sort of cannibalism in the sector. It's more. What's interesting is when you think about it in comparison to Vegas, where you see that slowdown in Vegas and the fact that a lot of the cruise lines have been structuring their new island locations as this alternative to Vegas. It has a very Vegas vibe. To the swim up bar, to all the sort of activities you can do. All this sort of a la carte situations. Yeah, I mean that's, that's really where a lot of the cruise lines are spending their money. And whether customers are going to see that as a better alternative to Vegas remains to be seen.

[Paul Sweeney]

All right. Last month, I don't know if I told you this, Judy. I was cruising the Amalfi coast and I did.

[Scarlet Fu]

So you do cruise?

[Paul Sweeney]

No, I was just.

[Sid Phillip]

We took a.

[Paul Sweeney]

But what I did see is the Ritz yacht.

[Scarlet Fu]

And it intrigued you.

[Paul Sweeney]

It was amazing. So, Jody, talk to us about that. What would make, you know, a hotel company go into the cruise business? Because that looked pretty cool, that boat.

[Jody Laurie]

Yeah. And they only have a few ships. We're talking three ships at the moment. And for Marriott, I think they're sort of dipping their toe in the water, no pun intended, just to kind of see the appetite because there is a certain customer, if you talk the high, high end customer. They don't want to be on a big ship. They don't want to be on the gigantic icon class ship. That is not their speed. Even the smaller ships are still a little bit too much for them. I mean, why should they participate with the plebes? But they don't want to have to own a yach themselves. So it's a nice middle ground for them. So I do think that there is a little bit of an opportunity there. I'm not so sure it's going to get super large in terms of the number of ships that they have, but it definitely creates a different situation.

[Scarlet Fu]

Yeah, the intimacy, the exclusivity is what makes it appealing. Especially to someone like Paul, who was nodding along as you were describing all that you talked earlier about onboard spending. Talk to us about the economics of having everything included so you pay one price and like all your needs are met versus a la carte pricing where they're really trying to get you to spend more and splurge for different things, whether it's extra drinks or excursions that you tack onto the cruise itself.

[Jody Laurie]

And that Scarlet dips into A lot of the data that we looked at through Alt D and by that I mean is that we looked at ticket versus onboard spending data and what we're seeing is for the brand name ship so meaning the Royal Caribbean, the Carnival, the Norwegian, the brands, those in particular might be reducing the amount that they gain in terms of ticket price, meaning the amount that they generate in revenue so that they can get people on the ship and then charge them an onboard spending and onboard spending they actually they they benefit a little bit from in terms of cash flows from a margin perspective, it's pretty attractive and anytime you could get somebody to open their wallet and spend money is attractive. Now the, the big sort of risk of that is, you know, if you, if you appeal to a customer that might feel a little bit more strained, they'll be fine spending the ticket price, but they might not want to spend as much on every single excursion that comes their way. They might go for the sort of base ship opportunity that's becoming less and less attractive. The companies are making it so that that main dining hall experience isn't what you want to do. And so we might be at a little bit of an impasse when you have customers getting on the ship saying I don't want to spend so much, but the cruise line saying well if you really want the good experience, you have to spend right. So we'll see how that plays out into 26.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

[Scarlet Fu]

The Chase Inc. Business Premier card is made for business owners who make things happen. Designed for high spend and limitless cash back, Inc. Business Premier is a painful card with built in flexibility. Get the buying power you need to make large purchases, cover unexpected expenses and help your business grow. Earn a total of 2.5% cash back on every purchase of $5,000 or more plus earn unlimited 2% cash back on every other purchase, giving you unlimited earned potential to invest cash back into your business. From innovation and technology to everyday expenses, Inc. Business Premier is the only business credit card with 2.5% cash back on every purchase of $5,000 or more and is part of a suite of credit cards from Chase for Business designed to meet your needs every step along the way. Learn [e-mail] businesscard Chase for Business make more of what's yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC.

[Verizon Business Representative]

Did my card go through?

[Scarlet Fu]

Oh no.

[Verizon Business Representative]

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[Scarlet Fu]

There we go.

[Verizon Business Representative]

Get the Internet you need at the price you want. Verizon Business Starting Price for LTE Business Internet 25 Mbps Unlimited Data Plan with select Verizon Business Smartphone plan. Savings terms apply.

[Karen Moscow]

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[Podcast Host]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts us or watch us live on YouTube.

[Paul Sweeney]

This we're getting right smacked into it, getting into the holiday shopping season. I know it's only the beginning of October, but we're starting to see it and the question is, what's it going to be like in there, particularly for the toy part of the market? Lindsey Dutch joins us. She's Bloomberg Intelligence Consumer Hardlines senior analyst. And here we go. Toy makers face demand, uncertainty and risks ahead of holiday buying. Lindsay, talk to us about kind of the toy business as we go into this all important holiday shopping season.

[Jody Laurie]

Hi Paul.

[Lindsey Dutch]

Thanks for having me. I think the outlook for toys is really interesting and I'm really excited to hear more from management teams when we get the third quarter earnings in late October. The demand picture looks very uncertain. This was supposed to be an up year for toys, but you know, tariffs and just broader economic uncertainty has really weighed on the sector. But I think the bigger issue in particular this year is, you know, because of the tariff announcements in April and lots of uncertainty, big retailers, you're talking Walmart, Target basically held back on placing their orders, which they would normally place for holiday in the second quarter, where they did place the orders, they're receiving them in the third quarter. So, so we did, you know, get that back. But because of that delay and because these retailers are really looking to sell through their inventory, I think that the opportunity for reorders for some of those like hot holiday toy items is limited. And that's really going to weigh this year on those toy makers.

[Scarlet Fu]

Is there going to be a shortage of toys that people want to buy? Is that going to be a problem in 2025?

[Lindsey Dutch]

I mean, that could be a Possibility if something is really, really hot, we could go back to those days where you're like standing at the store or early on a Black Friday morning to get the, you know, one of 20 that Wal Mart has. There's a possibility for that because I don't really think that there's going to be a lot of reordering. I do think the toy makers are trying to prepare, they are taking on inventory. Because the other thing that Walmart and Target did is because of the tariffs. They would have typically imported, you know, in their contract with Mattel or Hasbro, they would have imported the product like direct to their own warehouse. But they, they kind of switched their plan a little bit and it's really the toy makers that are importing it to the US and sort of replenishing the Walmart or Target warehouse from like domestically. So there's also a shift in sort of how the order is being placed. And so it just is creating a really uncertain environment in the back half.

[Scarlet Fu]

Lindsey, what about the closing of the de minimis exemption? You know, before this a lot of Americans were buying directly from websites overseas and just getting stuff shipped to them from China, from the uk, from other parts of the world. And now that their consumers will be taxed on it, they face a tariff. That avenue might have been closed off. So that leaves them going to the traditional distributors as a result. How do you see that playing out?

[Lindsey Dutch]

Yeah, I think that could have an effect. I mean when you think about these big toy makers, Hasbro, Mattel, even Spin Master, which is a little bit on the smaller side, you know, a lot of their product is flowing through big box national retailers. So it might not have a huge impact on, on them specifically. We could see the consumer, you know, switch avenues a little bit. But Walmart, Target are still, and those big national retailers are still huge. And where people do go to shop for, for toys, I mean, we still also have Toys R Us trying to make a comeback and Macy's stores and Kohl's also being a bigger push into toys. So you could see a little bit of shift in I guess where the consumer shops, but we don't see that having a major impact on these companies.

[Paul Sweeney]

And are the toy makers viewing tariffs as a one time thing they have to deal with or are they thinking that it might be something longer term?

[Lindsey Dutch]

They have been working to diversify supply chains for some time now. It's kind of wild to think about, but when we came into this year, Hasbro and Mattel were 40 to 50% of their toys manufactured in China. That was actually almost half of the broader industry average. And you know, when you think about toys in General, upwards of 80 to 85% were made in China. There's been a lot of diversification, acceleration of diversification efforts happening this year. You know, redistribution of sourcing, you know, how they're sourcing US Sold product. There's also been changes in pricing and, you know, are we going to be able to sell this product in the US or not because of of tariffs? So there's been a lot of change this year. We don't have disclosure on exact numbers anymore. But I think that, you know, the companies will continue to try to sort of maximize their efforts. But Hasbro and Mattel have said that tariffs will be about $100 million in 25 in terms of costs. That's even with price increases going into effect and that that cost could be about the same or more in at least 26.

[Podcast Host]

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[Scarlet Fu]

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[Karen Moscow]

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[Scarlet Fu]

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[Karen Moscow]

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