# Blackstone Hauls in $8.7 Billion for Energy Transition Fund

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 19 Oct 2026, 25 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/fe773039-b36c-4be4-afdf-b4e801112bb4/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Michael Ball - Paul Gulberg, Bloomberg Intelligence Senior Equity Analyst, discusses the latest at Blackstone. Blackstone Inc. has raised $8.7 billion for a fund dedicated to cleaner energy, Blackstone Energy Transition Partners V, which is about 55% larger than its predecessor. The strategy invests in a broad range of sectors within the energy industry but generally excludes oil companies, and has already deployed a quarter of its capital into six investments. The new fund has attracted nearly one-third of its money from new investors, with Blackstone committing $150 million to the fund, according to David Foley, global head of the firm’s energy transition business. -Alex Rajbhandari, Bloomberg US Insurance Reporter, discusses the Bloomberg Big Take story: “For Three Buffets, a $150 Billion Puzzle Over Father’s Riches.” Description: The fate of one of the world’s greatest fortunes will be decided — by three very different siblings, living three very different lives, who didn’t expect to be, or necessarily even want to be, the ones doing the deciding. Warren Buffett, chairman emeritus of Berkshire Hathaway Inc., is worth $150 billion, according to the Bloomberg Billionaires Index. Until recently, a longtime favorite of his, Bill Gates, was taking care of giving most of the money away through his behemoth global foundation. Then came the revelations about Gates’ relationship with Jeffrey Epstein, followed by his divorce from Melinda French Gates and the cleaving of the Gates fortune. After the separation, Buffett removed himself from the foundation’s board of directors, but kept sending them checks. This past July, he changed course. Without much warning, Susie, Howard and Peter became much bigger stewards of his fortune. -George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, discusses US airlines plan for 4Q capacity growth. According to Bloomberg Intelligence: US airlines' 4Q capacity growth appears too high to achieve the 25-30% higher fares needed to offset elevated fuel costs, constraining profit recovery. At capacity increases well above US GDP growth expectations of 2.1%, it's tough to see fares rise more than 20%, though plans will likely get reduced. -Ed Ludlow, Bloomberg Tech Host, discusses top tech stories. Anthropic PBC plans to put 5% of its shares into a new public benefit fund to address "the public good", including mitigating AI's impact on the job market. The new Anthropic Public Benefit Fund could allow the company to pursue its mission "in new ways", such as using some of the money to address "labor market impacts". Anthropic said the new fund will be a wholly owned LLC and will grow as the company grows, with none of the Anthropic equity held by the LLC used for lobbying or political giving. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios.
[0:04] Speaker 2: Podcasts.
[0:05] Speaker 3: Radio.
[0:06] Speaker 4: News.
[0:09] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[0:13] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[0:16] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[0:19] Speaker 5: you get your podcasts or watch us live on YouTube.
[0:24] Speaker 6: One of the stories I highlighted this morning was we
[0:27] Speaker 6: saw Blackstone raising an $ 8.
[0:29] Speaker 2: 7 billion deal. No big deal.
[0:31] Speaker 6: They're raising money left and right out there. But this
[0:34] Speaker 6: one was dedicated to cleaner energy. I kind of thought
[0:37] Speaker 6: that was kind of passe with this administration, this country,
[0:41] Speaker 6: but apparently not. Let's check in with Paul Goldberg. He's
[0:43] Speaker 6: the senior equity analyst for Bloomberg Intelligence. He covers all
[0:46] Speaker 6: these big private equity companies. So what's going on here
[0:49] Speaker 6: with Blackstone? Again, they're still raising money pretty well. Why
[0:53] Speaker 6: are they looking at cleaner energy here?
[0:55] Speaker 1: Thanks, Paul.
[0:56] Speaker 7: I don't think it's necessarily just the cleaner energy. It's
[0:59] Speaker 7: just energy in general. Energy and power is really the
[1:02] Speaker 7: two key driving forces behind the private markets these days.
[1:07] Speaker 7: So a lot of money going in. So it's clean energy.
[1:09] Speaker 7: But if you look at the investments that some of
[1:11] Speaker 7: these funds are making, It's a lot of the infrastructure
[1:14] Speaker 7: into transmission lines, into all sorts of supplies that go
[1:19] Speaker 7: into things like data centers and so on. So it's
[1:22] Speaker 7: much broader, even though the mandate talks about the cleaner energy.
[1:28] Speaker 2: But this is power. I guess we've all learned power, water.
[1:33] Speaker 6: For these data centers, to the extent they're going to
[1:35] Speaker 6: build them out like they say they are, You need
[1:38] Speaker 6: all that.
[1:38] Speaker 7: Stuff, right? You absolutely do. We actually published our private
[1:42] Speaker 7: credit survey this morning. So this is an equity fund,
[1:44] Speaker 7: but the survey is on the credit. And we asked
[1:47] Speaker 7: a lot of questions about the data center investors. One
[1:51] Speaker 7: of the number one areas where investors want to put
[1:54] Speaker 7: money is power. More than 50% of responders said power
[1:58] Speaker 7: is the area where they want to put money first
[2:00] Speaker 7: over the GPUs and all the other things that are
[2:02] Speaker 7: possible in real estate and so on.
[2:05] Speaker 1: So how does that look now?
[2:06] Speaker 8: All of this fund seems to be mostly domestic, but
[2:08] Speaker 8: as we're finding out, it's an international market for power,
[2:11] Speaker 8: and these guys now are being influenced by that. The
[2:13] Speaker 8: data centers, these guys is what I meant. Is this
[2:15] Speaker 8: sort of something where they're diverging outside the U.S., maybe
[2:17] Speaker 8: Canada and Mexico, other areas, to make more of a
[2:20] Speaker 8: longer power kind of channel?
[2:22] Speaker 7: They certainly do. I mean, a lot of these funds
[2:24] Speaker 7: are very often turned global. We've seen areas buying similar
[2:30] Speaker 7: assets in Australia, and a lot of the alternative managers
[2:33] Speaker 7: all over. We've seen deals done in Europe. Apollo funded
[2:37] Speaker 7: a lot of those, some of those transactions and so on.
[2:40] Speaker 7: So I think a lot of it turns global very quickly.
[2:43] Speaker 8: How crowded is this space now?
[2:45] Speaker 7: I think it is pretty crowded because there are a
[2:47] Speaker 7: lot of players. But so if we look at the
[2:51] Speaker 7: tech guys' estimates in terms of the infrastructure that's needed
[2:54] Speaker 7: for the data centers and so on, it is still
[2:58] Speaker 7: very vast. We're talking about trillions. Apollo actually made some
[3:03] Speaker 7: estimates a while back in terms of the markets. They
[3:06] Speaker 7: said $ 30 to $ 50 trillion of energy transition that's needed
[3:11] Speaker 7: over the cycle. This is like a big number.
[3:13] Speaker 8: It's like Fed numbers.
[3:14] Speaker 7: And that's just one part of it. The other part
[3:16] Speaker 7: is $ 30 trillion of power and utilities. So you look
[3:20] Speaker 7: at $ 60, $ 80 trillion of opportunity, and we're talking about
[3:24] Speaker 7: a $ 9 billion fund or trillion-dollar infrastructure.
[3:28] Speaker 1: So it's crowded, but there's a lot of opportunity.
[3:31] Speaker 2: Talk to us about the private credit business these days.
[3:34] Speaker 6: Is it still– can I go out there and raise
[3:36] Speaker 6: a gajillion-dollar fund if I'm a KKR or Blackstone? Is
[3:39] Speaker 6: there still as strong demand for private credit today as
[3:42] Speaker 6: there has been over the last 10 years?
[3:43] Speaker 3: It is.
[3:44] Speaker 6: It is.
[3:44] Speaker 7: Again, numbers from the survey, the respondents say growth rate
[3:48] Speaker 7: can be about 10%. And this is of three different categories,
[3:51] Speaker 7: between the asset managers who manage the money, between the
[3:55] Speaker 7: investors who put in the money, and the bankers who
[3:57] Speaker 7: are kind of working together, competing, and so on. So
[4:00] Speaker 7: on average, they said about 10% growth rate just for
[4:03] Speaker 7: the core private credit in terms of replacement of traditional.
[4:07] Speaker 7: It's about 15% potential, so a lot of opportunity there.
[4:11] Speaker 2: So just a red headline crossing the Bloomberg terminal, pretty interesting.
[4:14] Speaker 6: Saudi Arabia postpones the FII investment event, postponing it to
[4:19] Speaker 6: 2027 and reflecting kind of the turmoil we're seeing in
[4:22] Speaker 6: that part of the world.
[4:23] Speaker 2: So that speaks volumes, I think, as to what's going
[4:26] Speaker 2: on out there geopolitically.
[4:28] Speaker 8: Yeah, not fun times over there. That's the second or
[4:31] Speaker 8: third thing now they've had in two weeks they've had
[4:32] Speaker 8: to change.
[4:33] Speaker 9: Yep, absolutely.
[4:34] Speaker 6: So what's going on, just broadly defined with your big,
[4:37] Speaker 6: you cover all the cool names, the.
[4:39] Speaker 2: Blackstones, the KKRs and all that kind of stuff. Here's
[4:43] Speaker 2: the challenge.
[4:44] Speaker 6: This is what I was told when I first started
[4:46] Speaker 6: looking at private equity. It's easy to raise money. It's
[4:49] Speaker 6: really easy to invest it. It's really hard to monetize it.
[4:52] Speaker 6: How are they monetizing or not monetizing?
[4:53] Speaker 7: They're not having a very easy time, especially on the
[4:57] Speaker 7: equity side. So credit kind of matures, so you don't
[4:59] Speaker 7: really go around monetizing it. But on the equity side,
[5:03] Speaker 7: exits are difficult. So this energy, actually, this particular energy bucket,
[5:07] Speaker 7: energy transition at Blackstone, has been doing really well. That's
[5:10] Speaker 7: why they're raising the fund two years after they just
[5:12] Speaker 7: raised the predecessor at a 50% higher AUM.
[5:17] Speaker 2: You know what I don't like? And you can tell Mr. KKR, Mr.
[5:20] Speaker 2: Blackstone this. When KKR... sells a deal to a Blackstone.
[5:26] Speaker 2: There's my exit.
[5:27] Speaker 1: That's cheesy.
[5:28] Speaker 2: That's just like moving the deck chairs around.
[5:31] Speaker 7: In some cases, you can think about it this way,
[5:33] Speaker 7: but in other cases, their portfolios are so large, and
[5:37] Speaker 7: some of the M & As fit in better. So
[5:40] Speaker 7: some of these deals actually do make sense to extract
[5:43] Speaker 7: extra value out of the combinations.
[5:46] Speaker 8: Energy specifically, what's the preferred exit? Are we just not
[5:48] Speaker 8: even close to that, meaning you haven't seen a trend yet?
[5:51] Speaker 7: We haven't seen that much, but a lot of, I mean,
[5:54] Speaker 7: most of the exits are still in M & A sales.
[5:56] Speaker 7: It's not kind of IPOs. If you think of IPOs,
[5:58] Speaker 7: it's maybe 10 to 15% of the activity in general,
[6:03] Speaker 7: not just energy.
[6:04] Speaker 2: Paul, thanks so much. Appreciate it.
[6:05] Speaker 6: As always, here's another Bloomberg Intelligence analyst based in Princeton
[6:09] Speaker 6: in New York, which again, just like Jeff Langbaum, makes
[6:12] Speaker 6: me believe.
[6:13] Speaker 2: Somebody buying you a lunch or dinner today? Somebody is
[6:16] Speaker 2: buying me a dinner.
[6:17] Speaker 1: See?
[6:17] Speaker 2: That's my theory.
[6:18] Speaker 6: The only way you get these guys out of their
[6:20] Speaker 6: seats and Princeton, which is posh down there, great food.
[6:23] Speaker 2: They've got to come to New York and somebody's buying
[6:25] Speaker 2: them a lunch or dinner. So there you go. My
[6:26] Speaker 2: theory holds yet again. Stay with us. More from Bloomberg
[6:30] Speaker 2: Intelligence coming up after this.
[6:35] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[6:39] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[6:42] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[6:46] Speaker 5: you get your podcasts or watch us live on YouTube.
[6:50] Speaker 6: You know we love these big take stories, folks. They
[6:52] Speaker 6: come out every day from Bloomberg News, and they are awesome.
[6:55] Speaker 6: They're usually a great topic, very well resourced, it looks like.
[6:59] Speaker 6: Tons of reporting, deep dive stuff. And for me, lots
[7:03] Speaker 6: of cool graphics, funny pictures, that kind of stuff that
[7:06] Speaker 6: helps me understand what's going on.
[7:08] Speaker 2: And today's is a doozy.
[7:09] Speaker 6: I read it this morning at 4.40 in the morning,
[7:11] Speaker 6: driving up the parkway in the backseat.
[7:14] Speaker 2: Here we go. For the three Buffetts, a $ 150 billion
[7:17] Speaker 2: puzzle puzzle over Warren's riches.
[7:22] Speaker 6: What do they do with Warren Buffett's estate once he passes?
[7:26] Speaker 6: Alex Rajbandari, insurance reporter, Bloomberg News, joins us here.
[7:34] Speaker 2: He's in studio. It doesn't matter if I kill his
[7:36] Speaker 2: pronunciation here. Alex, this is a great story here.
[7:42] Speaker 6: Warren Buffett's estate, roughly, I don't know, that's a lot,
[7:45] Speaker 6: $ 150 billion.
[7:46] Speaker 2: I don't know. It was at one point he.
[7:50] Speaker 6: Was giving money to the Gates and the Gates Foundation.
[7:53] Speaker 6: And with the idea that Gates will give that money away.
[7:58] Speaker 6: So Warren doesn't really have to worry about that giving
[8:00] Speaker 6: it away part, which he has said.
[8:02] Speaker 2: Is that not happening anymore? Is that relationship not there?
[8:06] Speaker 9: What happened is in 2006, when Warren Buffett made his
[8:09] Speaker 9: first pledge to give the vast majority of his fortune
[8:12] Speaker 9: away to charity, he was partnering with the Gates Foundation.
[8:16] Speaker 9: They were getting the bulk of the money and.
[8:19] Speaker 2: His kids were.
[8:20] Speaker 9: who still had, each of them have a foundation that's
[8:24] Speaker 9: been set up by the parents. They were in charge
[8:27] Speaker 9: of disbursing part of that money, but like a very
[8:30] Speaker 9: small proportion of it. That's over because over the past month,
[8:36] Speaker 9: Buffett had decided not to give or to pause gifts
[8:40] Speaker 9: to the Gates Foundation. So now we know that his
[8:44] Speaker 9: net worth, which is $ 150 billion, will be in the
[8:48] Speaker 9: hands of his kids when the time comes and they
[8:51] Speaker 9: will be in charge of disbursing it and giving it away.
[8:54] Speaker 8: So what have the kids been doing with that money
[8:56] Speaker 8: that they already have foundations? So we have some track
[8:59] Speaker 8: record here. I mean, is this going to be a
[9:01] Speaker 8: tectonic shift where Gates has a certain favorite area where
[9:03] Speaker 8: he likes to do and focus with his foundation and
[9:07] Speaker 8: the kids are different or is.
[9:08] Speaker 1: It basically business as usual?
[9:09] Speaker 9: It's very different in a sense that each kid has
[9:11] Speaker 9: their own enthusiasm and priorities and interest in philanthropy, and
[9:17] Speaker 9: they're widely different. Take Howard Buffett, who has a police
[9:21] Speaker 9: training facility in Illinois, also funds a lot of the
[9:25] Speaker 9: effort in Ukraine and mining and food security. At the
[9:29] Speaker 9: same time, Susie Buffett is mostly focusing on Omaha, on
[9:32] Speaker 9: early childhood education. Peter Buffett is doing a lot of
[9:35] Speaker 9: work around marginalized communities, also kind of helping with the
[9:40] Speaker 9: town of Kingston where he lives to refurbish and recreate
[9:43] Speaker 9: a lot of momentum.
[9:44] Speaker 1: In the area.
[9:45] Speaker 9: So these are widely different perspectives on what philanthropy can be.
[9:51] Speaker 2: It's different also.
[9:52] Speaker 9: From what Gates was doing, which when he was getting
[9:55] Speaker 9: all the money from Buffett, they were like big ticket
[9:57] Speaker 9: ideas like controlling HIV, eradicating malaria. So it's definitely a
[10:02] Speaker 9: change in, you know, the picture of what's going to happen.
[10:04] Speaker 9: But to be clear, what the kids have been doing
[10:07] Speaker 9: so far is limited to compared to what they're going
[10:10] Speaker 9: to have to do. It's a drop in the ocean
[10:12] Speaker 9: compared to what they're going to have to do.
[10:14] Speaker 2: All right.
[10:14] Speaker 6: Reading the story, my takeaway was this is a disaster
[10:19] Speaker 6: waiting to happen.
[10:20] Speaker 2: These guys are not prepared to do anything on this scale.
[10:23] Speaker 6: Is there a plan? I mean, people of this size,
[10:27] Speaker 6: they have companies. Literally, their only job is to manage
[10:31] Speaker 6: this money and to give it away and to do
[10:33] Speaker 6: all that kind of stuff. And it seemed like Warren
[10:36] Speaker 6: had kind of offloaded that to Bill Gates and his infrastructure.
[10:40] Speaker 6: Is there any infrastructure for these three siblings to do
[10:42] Speaker 6: any of this effectively?
[10:44] Speaker 2: So, you know, there's a.
[10:45] Speaker 9: Belief in philanthropy that if you give a lot of
[10:48] Speaker 9: money to a small organization, you can overwhelm them. And
[10:51] Speaker 9: the three kids in different ways are kind of adepts
[10:54] Speaker 9: of that philosophy and they don't want to give like big,
[10:57] Speaker 9: like Mackenzie Scott is kind of re just rewriting the
[11:00] Speaker 9: rules of how you do philanthropy these days. They're not
[11:02] Speaker 9: in that vein. They won't make big, no strings attached, uh, checks. Uh,
[11:07] Speaker 9: so they focus on very specific areas that they are really, um,
[11:10] Speaker 9: you know, they like to work on with, Trusted allies,
[11:14] Speaker 9: people they've been working with forever. They do have small
[11:16] Speaker 9: crews compared to bigger organizations. So it's a big question
[11:20] Speaker 9: mark for sure as to what's going to happen. And
[11:22] Speaker 9: they don't really know themselves whether they're going to be
[11:25] Speaker 9: pulling resources together or doing coordination. We know they're talking
[11:29] Speaker 9: among each other to, you know, kind of exchanging ideas
[11:32] Speaker 9: of what they can do together.
[11:33] Speaker 2: But there's no plan that's shared.
[11:35] Speaker 9: Or like, you know.
[11:37] Speaker 2: They better come up with something fast. Warren Buffett's 96, right?
[11:40] Speaker 2: They're very much aware of that.
[11:41] Speaker 1: And then they're working on this.
[11:42] Speaker 9: Yeah.
[11:43] Speaker 1: There's still going to be three.
[11:44] Speaker 8: And so just to make this clear, they're going to
[11:45] Speaker 8: combine into one with this chunk of capital, or is
[11:47] Speaker 8: it going to still be three that get equally distributed?
[11:50] Speaker 9: So that's, I mean, Warren Buffett said that when he
[11:52] Speaker 9: passes away, uh, the fortune is going to be handled
[11:55] Speaker 9: by his three kids. Um, there are trustees that will
[11:58] Speaker 9: take over after that, but it's not clear really whether
[12:00] Speaker 9: they're going to do this with their own charities or
[12:02] Speaker 9: whether it's going to be like a common effort.
[12:03] Speaker 2: So did you go out to Omaha and meet with
[12:07] Speaker 2: principals here? And if so, what did you learn? I
[12:09] Speaker 2: went to Omaha.
[12:11] Speaker 9: It's interesting because, you know, the impact of the Buffett
[12:14] Speaker 9: family and the Sherwood Foundation, which is the one of
[12:17] Speaker 9: Susie Buffett, who's still in Omaha, is visible across the city.
[12:20] Speaker 9: They funded the museum, the science museum next to the riverfront.
[12:24] Speaker 9: There's a lot of places in the city where you
[12:26] Speaker 9: would see the name Sherwood Foundation. We went to a
[12:30] Speaker 9: restaurant that hires the formerly incarcerated, for instance. It's kind
[12:34] Speaker 9: of sprinkled all over the place. A lot of childhood
[12:37] Speaker 9: education programs that a lot of families in the area
[12:40] Speaker 9: depend on are financed by that foundation.
[12:44] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[12:51] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[12:55] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[12:58] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[13:01] Speaker 5: you get your podcasts or watch us live on YouTube.
[13:06] Speaker 2: Michael Ball sitting in for Scarlett Fu. I'm Paul Sweeney.
[13:08] Speaker 6: We're live here in our Bloomberg Interactive Broker Studio streaming.
[13:11] Speaker 2: Live on YouTube as well.
[13:13] Speaker 6: I just flew round trip back and forth to Paris.
[13:17] Speaker 6: Up until recently, I would say maybe 20% of the
[13:21] Speaker 6: cabin was kind of like business class.
[13:25] Speaker 2: Now, it's like 40%, I would think, on this big
[13:28] Speaker 2: plane I took back.
[13:29] Speaker 8: That's what we're being told, the pricing powers.
[13:31] Speaker 2: I don't know what's going on out there, but I
[13:32] Speaker 2: think that's good for airlines.
[13:33] Speaker 6: George Ferguson joins us here, Senior Aerospace Defense and Airlines
[13:36] Speaker 6: Analyst for Bloomberg Intelligence. George, talk to us about kind
[13:39] Speaker 6: of what's going on with the airline business in terms
[13:43] Speaker 6: of capacity these days. Because, again, I just went round
[13:46] Speaker 6: trip to Paris, and my bird was full to the
[13:49] Speaker 6: gills there.
[13:51] Speaker 4: Well, I think people always want to go to Paris,
[13:53] Speaker 4: especially in the fall when Paul Sweeney's gone. So it
[13:58] Speaker 4: doesn't surprise me. Look, we're starting to look at capacity
[14:03] Speaker 4: for 4Q. And what we're seeing is in the most
[14:07] Speaker 4: important markets, domestic and into Europe, we're still seeing some
[14:11] Speaker 4: pretty significant capacity increases. The United was like 8% in seats.
[14:17] Speaker 1: Delta was actually.
[14:19] Speaker 4: one-ish, two-ish percent in seats, so not bad. But American
[14:24] Speaker 4: was 6%. Even some of the low-cost carriers still adding
[14:29] Speaker 4: sort of mid-single digits. I mean, to me, when we
[14:32] Speaker 4: look at that, I don't really think that's a sustainable
[14:35] Speaker 4: schedule for 4Q. I'm kind of thinking that the airlines
[14:39] Speaker 4: haven't cut the capacity they need to if fuel prices
[14:43] Speaker 4: stay here. But I think if they try to fly
[14:46] Speaker 4: that schedule, again, with current fuel prices, I think fares
[14:50] Speaker 4: are declining. Again, they're focusing on catering to the well-heeled,
[14:56] Speaker 4: like the Sweeneys. And so you're going to see more
[15:01] Speaker 4: and more of these airplanes get re-racked for either business
[15:04] Speaker 4: class or premium, but you can't do that as much
[15:07] Speaker 4: in the domestic market.
[15:08] Speaker 1: Europe is a much more, I think, again, sort of
[15:13] Speaker 1: higher-end market.
[15:14] Speaker 4: So I think the airlines still have decisions to make
[15:18] Speaker 4: on 4Q, again, especially.
[15:21] Speaker 1: If fuel prices stay here, they won't be able to
[15:23] Speaker 1: pivot at.
[15:24] Speaker 4: All to the high-end traveler rolling out the domestic market,
[15:27] Speaker 4: which is their biggest market.
[15:29] Speaker 8: So, George, it doesn't sound like anyone's going to really
[15:31] Speaker 8: step in and offer these ex-spirit flyers kind of the
[15:35] Speaker 8: discounted routes they used to get. I know from personal experience,
[15:38] Speaker 8: a few routes are missing. Is that sort of the case?
[15:42] Speaker 4: I mean, I think we've seen some strong capacity growth
[15:47] Speaker 4: by Frontier, by JetBlue.
[15:49] Speaker 1: I mean, the prices aren't there anymore, right?
[15:52] Speaker 4: Just again, because of the fuel price increases. But when
[15:57] Speaker 4: you look at these other carriers, Frontier, JetBlue, they're not
[16:01] Speaker 4: making great returns either, not making great profitability. So I
[16:05] Speaker 4: think they're really pushing themselves to try to keep flying
[16:09] Speaker 4: this capacity forward. and pull in some of those spirit flyers.
[16:14] Speaker 4: The spirit flyers are the ones that are falling away
[16:17] Speaker 4: from the marketplace right now as interest rates rise, as
[16:20] Speaker 4: the cost of their groceries rise, as fuel prices stay high.
[16:25] Speaker 1: So I think that group is just sort of diminishing.
[16:28] Speaker 4: But those carriers are trying to give them a pretty
[16:30] Speaker 4: good deal. And if you look at profitability of the airlines,
[16:33] Speaker 4: I think they are giving them a good deal.
[16:36] Speaker 2: How successful, George, are the airlines in passing along these
[16:38] Speaker 2: higher fuel costs?
[16:41] Speaker 4: So, you know, they said they said, sorry, United Delta
[16:45] Speaker 4: said they could probably pass along all of the increase
[16:49] Speaker 4: needed to cover higher fuel costs by year end. You know,
[16:54] Speaker 4: I think today there may be in the 75 percent range.
[16:59] Speaker 4: Not bad, again, for the high end airlines. I don't
[17:02] Speaker 4: think they're going to get to 100 percent by year end. Again,
[17:05] Speaker 4: I think if fuel prices stay here, the market probably
[17:09] Speaker 4: has to shrink. And in a shrinking environment, you fly
[17:12] Speaker 4: less capacity, your costs rise besides fuel because you lose
[17:16] Speaker 4: some of your efficiencies. And I think it's going to
[17:19] Speaker 4: make it harder and harder for them to recover that
[17:22] Speaker 4: full cost.
[17:23] Speaker 1: Again, I think capacity needs to come out of the
[17:25] Speaker 1: marketplace if fuel prices stay here.
[17:29] Speaker 4: If the administration or if the world events occur such
[17:32] Speaker 4: that fuel prices drop back to, I Look, I think
[17:39] Speaker 4: there's plenty of demand out there that will return. And
[17:43] Speaker 4: I think the airlines will have a much better winter season.
[17:45] Speaker 4: But at these prices right now, I think capacity has
[17:47] Speaker 4: to come out of the system.
[17:49] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[17:56] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[18:00] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[18:03] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
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[18:11] Speaker 6: Let's get back to these markets here and take a
[18:13] Speaker 6: look at what's happening in the world of technology here.
[18:15] Speaker 6: Looks like some of these tech companies are doing a
[18:17] Speaker 6: little bit of public relations. Elon Musk pledged to distribute
[18:20] Speaker 6: a share of SpaceX to every kid in America. Anthropic
[18:23] Speaker 6: plans to put 5% of its shares in a new
[18:26] Speaker 6: public benefit fund to address, quote, the public good. Is
[18:29] Speaker 6: this a trend here? Ed Ludlow, Bloomberg Tech host. He's
[18:33] Speaker 6: out there in San Francisco, right in the heart of
[18:35] Speaker 6: Silicon Valley. Ed, what's going on with some of these
[18:38] Speaker 6: big technology companies, some of these big AI companies? It
[18:41] Speaker 6: seems like they're reading the tea leaves and they're saying, hey,
[18:43] Speaker 6: maybe the public sentiment isn't necessarily behind us here.
[18:47] Speaker 3: Well, I think Anthropic would say, we said this first,
[18:50] Speaker 3: you know, we did it first. When the company was founded,
[18:54] Speaker 3: you know, in those early days of Anthropic, which wasn't
[18:56] Speaker 3: too long ago, all of the co-founders had this pledge
[19:00] Speaker 3: of giving away 80%, 80% of their equity anyway. It
[19:04] Speaker 3: was kind of one of the founding principles of Anthropic
[19:07] Speaker 3: when it was set up. And it is a PBC.
[19:10] Speaker 3: With this mechanism, Anthropic is setting up an LLC, so
[19:14] Speaker 3: not a charity, but an LLC that It's 5% of
[19:17] Speaker 3: stock if approved by shareholders. And that's a really key point.
[19:21] Speaker 3: Because I think a lot of like investors, existing private
[19:25] Speaker 3: market investors, but also the IPO on the horizon, right, Paul?
[19:28] Speaker 3: Where's the stock coming from? They didn't say, right? They
[19:31] Speaker 3: didn't say they'd issue stock every time they did this
[19:34] Speaker 3: to fund the fund. Or are they just expecting that
[19:38] Speaker 3: the investor base goes along with this public benefit principle?
[19:41] Speaker 3: So they sell in order to fund it. We just
[19:43] Speaker 3: don't know the answers to that.
[19:45] Speaker 8: And is this going to go through things like Trump
[19:47] Speaker 8: accounts or like this just smells a little bit hard
[19:49] Speaker 8: to actually execute. And I understand this is being a
[19:52] Speaker 8: PR nightmare. So still light on details there I'm taking
[19:55] Speaker 8: from that.
[19:57] Speaker 3: On Anthropic, the fact that I emphasize it's an LLC
[20:00] Speaker 3: as the legal entity as opposed to a charity is
[20:02] Speaker 3: kind of interesting. The fund, again, is subject to shareholder ratification,
[20:08] Speaker 3: but it can distribute directly to individuals, according to the
[20:12] Speaker 3: communication from Anthropic. it can make charitable donations, not just
[20:16] Speaker 3: in the US, but internationally. Now, with Elon Musk, he
[20:19] Speaker 3: is pledged to give one SpaceX share, single share, to
[20:23] Speaker 3: every kid in America. Census data, there's like 72, 73
[20:26] Speaker 3: million kids. We have no idea how that would work.
[20:29] Speaker 3: But I reposted the Bloomberg tweet about that story, and
[20:33] Speaker 3: Brad Gerstner, who's one of the sort of co-founders of
[20:36] Speaker 3: the Trump Accounts Initiatives, replied to me saying true, and
[20:41] Speaker 3: then tagged at Trump accounts. So I guess that's the
[20:44] Speaker 3: mechanism that Elon Musk would use, but we just don't know.
[20:46] Speaker 3: All I have to go on is Brad Gerstner posting
[20:49] Speaker 3: at me on X.
[20:50] Speaker 2: That's a nice sign there. Talk to us about just
[20:54] Speaker 2: the IPOs of these AI companies. I'm waiting for Anthropic.
[20:58] Speaker 2: I'm waiting for Open. I don't know. Are these things
[21:00] Speaker 2: going to happen? Are they going to happen this year?
[21:03] Speaker 3: Paul, you know the answer I'm going to give you
[21:04] Speaker 3: because I've been waiting to speak. Everyone on staff, you're
[21:07] Speaker 3: the only guy that I think will get where I'm
[21:09] Speaker 3: at right now. The SEC's office hours are 6 a.m.
[21:13] Speaker 3: Eastern until 6.30 p.m.
[21:15] Speaker 2: Eastern.
[21:16] Speaker 3: And at some point, this Anthropic S1 will flip public.
[21:20] Speaker 3: And if they're going to go public by Thanksgiving, it's
[21:23] Speaker 3: going to have to happen by the middle of next week, probably,
[21:27] Speaker 3: based on the number of days you have to do
[21:28] Speaker 3: for full marketing, etc., So I've just sat here at
[21:31] Speaker 3: this desk from 6 a.m. Eastern until 6.30 p.m. Eastern
[21:35] Speaker 3: every weekday waiting for it to happen. And I think
[21:38] Speaker 3: that that is a bit of hyperbole, but it's how
[21:42] Speaker 3: the market is kind of acting in this moment as well.
[21:45] Speaker 8: Do you think this will be a positive or negative
[21:48] Speaker 8: for the general AI trade, which has now become, again,
[21:50] Speaker 8: an open source versus frontier? And obviously there's other considerations,
[21:54] Speaker 8: but that seemed to be last week's real vibes now.
[21:58] Speaker 3: Yes, when they held the Investor Day last Wednesday, the
[22:01] Speaker 3: number that everyone went with was the third quarter real
[22:04] Speaker 3: or actual revenue, $ 16.
[22:05] Speaker 2: 8 billion.
[22:08] Speaker 3: Which would mark decelerating growth from the prior quarter. Anthropic
[22:13] Speaker 3: was basically growing at 100% quarter on quarter, year on year,
[22:16] Speaker 3: and then it slowed down. And so the immediate reaction
[22:19] Speaker 3: was like, you don't want to be seeing that in
[22:21] Speaker 3: the frontier labs specifically, decelerating growth, dropping to that level.
[22:26] Speaker 3: But actually with a few days, people seem a lot
[22:28] Speaker 3: calmer about that now. They see the numbers as being
[22:31] Speaker 3: utterly impressive. There was a gap basis gross margin of 85%.
[22:37] Speaker 3: adjusted operating profit is positive for two consecutive quarters. A
[22:41] Speaker 3: lot of people are asking like, you guys are not
[22:43] Speaker 3: explaining very well how you're accounting for that. But remember,
[22:46] Speaker 3: this is all Bloomberg reporting on what Anthropic is telling
[22:49] Speaker 3: investors behind closed doors. So generally there's enthusiasm for the IPO.
[22:55] Speaker 3: And now really, Michael, it just becomes a question of
[22:58] Speaker 3: do they price it conservatively to leave some upside and
[23:01] Speaker 3: see like for investors to see a path to a
[23:04] Speaker 3: future greater valuation?
[23:06] Speaker 6: Well, it seems like the AI market, the investing market
[23:09] Speaker 6: has kind of changed in the last several weeks and
[23:11] Speaker 6: not for the better, I would say. Now there's the
[23:14] Speaker 6: fundamental questions of really what's the correct way to fund
[23:16] Speaker 6: this expansion? Does that, I would think that would be
[23:19] Speaker 6: somewhat of a headwind for somebody trying to go public
[23:22] Speaker 6: on the AI trade.
[23:24] Speaker 3: I mean, not every company is the same, but debt
[23:28] Speaker 3: is probably the common denominator, right? And so last week,
[23:31] Speaker 3: The anxiety in the market was specifically around CoreWeave. A neocloud,
[23:35] Speaker 3: a neocloud is just a fancy word for a company
[23:37] Speaker 3: that runs data centers for AI workloads. And the math
[23:41] Speaker 3: on that is really simple. So there's their debt load.
[23:43] Speaker 3: It's about $ 52 billion. But the main point that was
[23:47] Speaker 3: coming out of that is they're relying on debt to
[23:50] Speaker 3: fund data centers that they really need. The demand for
[23:54] Speaker 3: their compute is beyond their ability to supply. In the
[23:57] Speaker 3: medium term, the issue is that their interest obligations, what
[24:01] Speaker 3: they're paying on the debt... is running beyond their operating income.
[24:06] Speaker 3: And so it's very hard for investors to see how
[24:08] Speaker 3: that conversion of money into real data centers fixes that.
[24:13] Speaker 3: The economics aren't quite there. And that concern hasn't changed
[24:17] Speaker 3: over the weekend. Even with a good night's sleep, everyone's
[24:19] Speaker 3: still very worried about that issue.
[24:22] Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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