00:00:02 · S0, S1, David Solomon, S3
[00:00:02] S0: Bloomberg Audio Studios. Podcasts. Radio. News. [00:00:08] S1: Joining us here on set is the Goldman Sachs chairman and CEO, David Solomon. [00:00:12] S0: David, good morning and very nice to see you. [00:00:14] S2: Good to see you guys, and it's nice to be back with you again here at the HKMA Summit. [00:00:17] S0: Yeah, it's been busy. [00:00:18] S1: You guys have been extremely busy, you and your team, underwriting all these deals. [00:00:22] S0: Give us a sense of momentum. [00:00:24] S1: What can we glean from what we've heard into the next couple of months? [00:00:28] S0: Sure. [00:00:28] S2: You know, certainly activity levels have been very, very high. And you guys highlighted that last week. We had a very, very busy week. You know, a combination of a handful of very significant financings coming together at the same time, both for SpaceX, for Meta, obviously announcements around the. [00:00:45] S0: Upcoming Anthropic IPO. [00:00:47] S2: You know, I'd say the capital markets remain very active while there's been a little bit more volatility in the short run and recalibration in certain parts of the market. I'd say investors are still very focused on the trajectory of AI demand, compute demand. And, you know, the capital markets are open and receiving. And so we found a very robust demand for these transactions. [00:01:10] S3: I think when you were on stage with Ted Pick from Morgan Stanley, he had a line about 10 to 15 trillion, right? [00:01:15] S1: Yeah, the spending, I think. [00:01:16] S0: The spending that he expects, maybe.
00:01:16 · S0, S3, David Solomon
[00:01:16] S0: The spending that he expects, maybe. [00:01:18] S3: I mean, how long do you think this sort of investment cycle can last still? [00:01:23] S2: Yeah, I think we're early in the build-out of the infrastructure to support this technology. But I'd also be the first to caution us all that You know, at the moment, there's an expectation that. [00:01:35] S0: It's going to be constant in a straight line. [00:01:37] S2: And if you look at any other technology super. [00:01:39] S0: Cycle, you know, it's never constant. There are recalibrations, there are stops and starts. [00:01:44] S2: You know, I think it's very hard to know how much will ultimately be spent to build this infrastructure all over the world. I think one of the things people don't talk about enough is that there are going to be new technologies and evolutions in technologies that will change the trajectory of all this. But I think one thing that's pretty clear is the demand for compute right now far exceeds the supply. And certainly in the next 12 to 24 months, there's going to be robust financing to meet some of that demand. [00:02:11] S0: I think it's a super exciting time.
00:02:11 · S0, David Solomon, S1
[00:02:11] S0: I think it's a super exciting time. [00:02:13] S2: I can't tell you that it'll go without bumps in the coming years. But I can say when you step back, And you look kind of five, 10 years from now, I'm very excited about how this technology can get deployed in the economy and really drive productivity gains that can be really, really fruitful. So investors see that they're looking to participate. I think one of the things investors are trying to do is run broad, diversified portfolios. Debt investors are obviously paid to not make mistakes. [00:02:41] S0: Sure. [00:02:41] S2: And so if they think the market's getting a little bit more challenging, they ask for higher returns because debt investors don't get to make mistakes. Equity investors take more risk because they look for upside. And I think there's still a lot of upside available as this technology gets built and deployed and. [00:02:56] S0: The application layer gets built over the next decade or two. [00:02:59] S1: The size of the deals has grown substantially, exponentially. Is there a theoretical ceiling or do you see the size of the deals being able to just continue growing? to become larger and larger from someone who puts these things together? [00:03:12] S0: I think the constraint.
00:03:12 · S0, David Solomon, S3
[00:03:12] S0: I think the constraint. [00:03:16] S2: Is not the amount of capital in the world and the size of these deals on a relative basis. Yes, there's no question these deals are bigger and the capitalization of these companies is larger than what we've seen in other tech super cycles, but we also operate in a market that's much, much larger where equity market cap has grown very substantially. Public equity market cap in the world is about $ 160 trillion. And so there's a lot of capital out there to support this growth. I think sometimes investors or the dialogue around this gets confused between risk reward and what's the appropriate pricing for certain kinds of risk and how that pricing parameter can change in the short run as the market moves around versus whether capital is available. But there's no question, you know, these numbers are big. And also capital, capital is competitive to some degree. [00:04:09] S0: Rates are higher. Governments around the world are issuing more debt. [00:04:13] S2: You know, that's a competitive factor in all this, but I don't think it affects availability. [00:04:17] S0: I think it affects cost. [00:04:19] S2: And if cost goes up too much, it changes the returns in some of these projects. And that will change the way some of this happens. [00:04:26] S0: And the way it's financed. [00:04:27] S3: And here in Asia, I mean, you guys have had a really record run. I think in terms of how much this region has contributed to your total revenue. I think it's making up 20% now, which has never really happened in the history of the firm.
00:04:27 · S3, S0, David Solomon, S1
[00:04:27] S3: And here in Asia, I mean, you guys have had a really record run. I think in terms of how much this region has contributed to your total revenue. I think it's making up 20% now, which has never really happened in the history of the firm. [00:04:39] S0: It's at the high end of the range. [00:04:40] S2: I mean, if you look over a long period of time, our business here has been kind of 15% to 20% of our global business. [00:04:46] S0: It moves up and down. [00:04:47] S3: Is that like a cyclical high, or do you think this is a structural shift in how Goldman makes its money now? [00:04:51] S2: I think Asia and the economies in Asia, particularly the Chinese economy, are very, very large economies. They're going to be an important part of the global ecosystem. Goldman Sachs is a big global firm. You know, we operate globally. And, you know, we are, you know, to some degree, you know, correlated to equity market cap growth and GDP growth around the world. [00:05:10] S0: And this part of the world is always going to play an important role in that. You know, I think the U.S. [00:05:14] S2: Is in a position of real preeminence in terms of its economic position and its innovation ecosystem. But China is super important and other economies over here are super important, too. And so Goldman Sachs will always have a significant footprint over here. [00:05:28] S0: Right. [00:05:28] S1: Just the outlook for next year, what specific verticals of your business here in the Asia-Pacific are you leaning into?
00:05:28 · S1, David Solomon, S0, S3
[00:05:28] S1: Just the outlook for next year, what specific verticals of your business here in the Asia-Pacific are you leaning into? [00:05:36] S2: Well, the thing that's clear in every part of our business is this technology super cycle is going to dominate capital markets activity and financing activity broadly until there's some shift in the direction of travel. So whether here in Asia or in the U.S. or even in Europe, it's a technology ecosystem that's really driving capital markets activity and financing activity. I'd say when you look at M & A activity around the world, you know, particularly in the U.S. and Europe, it's more shaped by a regulatory environment that's allowing deals at scale. I think everybody recognizes the importance of scale in almost any industry. And so you're seeing more broad consolidation across industries, and that's leading to more M & A activity broadly. And our firm has been a big beneficiary of being in the middle of that, given our leading franchise. [00:06:21] S0: In the M & A world. [00:06:23] S3: A lot of the growth that you've been seeing is undoubtedly from the capital markets sort of business. What about when it comes to asset wealth management? Is there more of a pivot now in terms of where you get your earnings growth now?