Bloomberg Surveillance TV: August 10th, 2026

**SPEAKER_1** (0:02)
Bloomberg Audio Studios.

**SPEAKER_2** (0:04)
Podcasts, radio, news.

**Jonathan Ferro** (0:11)
This is the Bloomberg Surveillance podcast. I'm Jonathan Ferro along with Lisa Abramowitz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 AM Eastern.
Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business app.

**SPEAKER_2** (0:36)
We begin this hour with stocks and bonds kicking off the trading week. A little changed, Eric Johnston of Cantor Fitzgerald writing, equities will need to battle the negative seasonality over the next two months. We think stocks can power through these headwinds and will be led by the tech sector. Thank you so much for joining us, Eric. Now for more, Eric, I just want to start on all of this financing that is expected coming out. We're seeing this from Intel, we're seeing this now from Aquarium and Anthropic. At what point does it get concerning based on just the ability to monetize it in quick fashion?

**Eric Johnston** (1:07)
The amount of capital that is going to be required is clearly going to be enormous. We're going to see a big step up in CapEx next year to over a trillion dollars from the big four.
But the bottom line is that what they're starting to show is the ROI, and this is what the market has been looking for. We saw it from Microsoft and Amazon's earnings where cloud growth has accelerated. And so you're seeing margins expand and you're seeing rent prices for compute starting to move higher. And so part of this story is about the cash flows from these businesses increasing and likely reducing the need for as much capital markets as people expected before. And so I think that's incredibly important. Now, the reality is that equity and debt is going to be needed. And that's been part of the pressure that we've seen on treasuries, because the amount of paper that's going to need to come to the market from a corporate perspective is going to be very significant. But I think the key point is that you're going to see these cash flows from operations increase, and that will likely reduce the need for the capital markets.

**SPEAKER_2** (2:28)
Eric, I just wonder what some of these companies know that we don't. Why are they front loading all their capex now, unless it's a market that is frankly looking really good to them? In other words, they think it's only going to get more expensive for them to borrow, which means that yields are only going to get wider, which means that anyone who's buying in right now is probably going to lose money on a market value perspective, and the same sort of goes for the equity side of things. Why is it such a good time for the borrowers?

**Eric Johnston** (2:57)
Yeah, I mean, they're starting to finally explain how this capex is going to work, and talking about how very soon revenue growth is going to exceed capex growth. And also the fact that you brought the point about front loading capex. When they're building a data center, there are parts of the data center that have a 30 year life. There are other parts that have a much shorter life related to the chips. But the point is that the capex requirements early on are a lot more than what they are in two, three, four years from now. And so that's going to likely inflect their free cash flow. We're already seeing it from someone like Microsoft, where their free cash flow this quarter came in higher than what the market was expecting. I think that's a trend that is likely going to continue in the quarters to come. And so that's going to be a very favorable dynamic from a borrow perspective. I would also say that although the amount of supply is clearly very large, and that has been part of the problem around the backup in some of these spreads.
But the reality is that their balance sheets are still extraordinarily strong.
And a year from now and two years from now are also going to be extraordinarily strong, even with all the spending they're doing.

**Lisa Abramowicz** (4:23)
Eric, every earnings quarter, it feels like for these tech names, the bar gets higher that they have to clear. But you think this last season was an inflection point. Why?

**Eric Johnston** (4:33)
So part of it was how they actually handled the conference call in terms of really explaining the dynamics of the capex. The second thing is is that margins are starting to expand. And so because the demand for compute continues to outstrip supply, pricing is going higher, margins are going higher, and you're also seeing it in the revenue growth. So if you looked, whether it was Google, Microsoft or Amazon, they all came in higher than what the street was expecting, and the growth is accelerating. So you're seeing revenue growth for their cloud business, depending on who it is, between 40% and 70%.