If the government cannot do it, the IT industry can. Welcome to the Friday edition of a new alliance of AI companies comes together here with a promise to solve the data center energy issue as it becomes one of the biggest topics on the midterm campaign trail. I'm Joe Mathieu alongside Kailey Leinz in Washington. You made it to Friday. No shortage of AI news. We may have found a positive development.
We are looking forward to talking to the founder of Emerald AI about the notion it is actually have to be data centers create energy concerns for the communities around them. This is in keeping with what we saw in the House this week before they got out of town for the pre-midterm recess. They voted on the ratepayer protection pledge, the concern is about utility costs. There's the question of is there going to be accessibility to power to everyone?
This is a slightly more clever solution. We will be curious to learn about how they are going to do this. We go to the White House with Tyler Kendall as the president prepares for an important week in geopolitics. We will be talking about the president with -- the summit with President Xi.
That is after he returns from the United Nations General Assembly, putting geopolitics front and center. Ongoing hot wars in both the Middle East and between Russia and Ukraine. And trade wars to consider as well. The U.S. is at least going to hold off on tariffs until after the Trump-Xi summit is over. What happens once it is remains a question.
We thought we will be focused on trade and tariffs I suspect we will be but it's artificial intelligence that has crept to the top of the agenda.
And he keeps bringing itself to the back of the top of the agenda. Gavin Newsom wants to see kill switches for these companies. I feel like I heard about that idea before and we will get into all that. We begin with a check on the markets on this final day of the trading week. Charlie Pellett how is it looking?
Lower across the board. It takes AI to spell Kailey Leinz. All in the red with the S&P trading lower by 14. Bond yields are rising. Dow Industrials down 193, a drop of .4%. NASDAQ Composite down .1%. NASDAQ 100 Index just about flat on the day. Has been swinging between gains and losses, down by under .1%. The Philadelphia Stock Exchange Semiconductor Index up by 1.1%. The VIX right around 15. 10-Year currently yielding 4.99%. 30-Year, 5.33%. Gold up one dollar an ounce. Up by about 1/10 of 1%. Crude holding just below $101 per barrel. A barrel of Brent, $103.84. French President Emmanuel Macron says he will convene a meeting of the Group of Seven countries to discuss a potential release in strategic oil product stockpiles as soaring energy prices sap economic growth. Fuel prices in Europe surged today. WTI in the U.S. down .9%. A barrel of Brent down by .9%. Oil majors selling out. Exxon Mobil down .4%. Chevron down .4%. ConocoPhillips down by 1%. For on-demand news 24 hours a day subscribe to Bloomberg's News Now wherever you get your podcasts. I'm Charlie Pellett. That is a Bloomberg Business Flash.
Charlie Pellett, thank you so much as we look to close out a wild week that has been in the markets. It was just this week we got the Fed decision which feels like a lifetime ago. It was this week we came into the week with conversations around potentially the pacing of artificial intelligence. The heads of some of the biggest companies all having agreed this weekend that maybe necessary. President Trump fervently disagreeing with that over the course of the week, especially in light of the Anthropic former employee's talking about how it could lead to the extension of humanity. President Trump at many close to him have cast this notion as being a hoax, a conspiracy, Chinese psyop.
Do you have any concerns about AI leading to human extinction? No, I don't have any. I have concerns if we don't win the AI we will be in a bad position. We are leading China in AI. You have a lot of negative forces bringing it up that should not be bringing it up.
They are going to bring it up, at least the issue of AI and security next week when the president meets with President Xi. The summit in Washington. Whether this resolves in a framework or AI security agreement has to be yet to be seen and it's unclear what the president's goals are. It will be a who's who of AI executives as well, which is on brand for this White House. Sam, Jensen Huang, and it is being reported that Jamie Dimon will be there. I'm sure there will be a much longer list. Tyler Kendall will be on hand to cover it all on the heels of the United Nations General Assembly with the president will be as well at the start of next week. Tyler is our Washington correspondent and joins us live from the White House. What are the president's goals when it comes to President Xi? Do we have a sense of what the agenda will look like?
We have heard from a few analysts that if the U.S. and China are able to extend the trade truce, keep calm as it is, that would be an accomplishment of a goal. Including reporting from the Financial Times that the U.S. may only be looking to extend that truce by about six months amid what are high-end concerns with Beijing's loosening or lack of loosening of export curbs related to critical and rare earth minerals. There are a few points of contention that will probably come up, including front and center when it comes to artificial intelligence. This White House's main argument against a slowdown has to do with the competition with China. Heard from national security agencies alleging Chinese AI firms are essentially stealing American IP through distillation attacks. If we put the full picture together, there are so many different things this White House has to weigh when approaching this meeting with Chinese President Xi Jinping, including when it comes to those export curbs and not wanting to escalate on one front and have China retaliate on another. It's a balancing act next week but the fact that Xi Jinping is expected to be here just plays to the administration's broader goal of keeping relations with China, at least right now on balance.
As you talk about an extension of their trade truce, Bloomberg is reporting we will not see any tariff action until after the meeting is concluded.
It's unclear exactly the reason behind this potential postponing of what was expected to be higher tariffs. It could be perhaps a leverage tool for the White House as we go into the talks. A few points of context. These were planned tariffs over allegations of Chinese overcapacity as the country read a $1.2 trillion trade surplus. The tariff rate was supposed to come in at 7.5%. I bring that up because it would have brought the average affected U.S. tariff rate against Chinese goods under the second Trump administration to 20%, which is a relatively large number but it actually hits that cap that has been previously established with China under the current trade truce. It was not considered to be that major of an escalation in its raising questions about exactly why these tariffs were postponed. Will there be a different rate depending on how the conversations go? We may get more details on Monday. The Treasury Secretary is set to be with his Chinese counterpart over the weekend.
Tyler, thank you so much. Tyler Kendall with much more to discuss. It will be a busy one around here with UNGA at the start and the Xi summit. We will have it all covered. Tyler is on her way up to Turtle Bay shortly after the close of business today. Kailey mentioned one of the biggest and most important stories of the week when you talk about an unproductive Congress. They did pass the data center bill with an overwhelming vote in an effort to control the impact on people's utility bills. This thing does not really take effect for two years and is not going to do much between now and November.
It may be more signal than anything trying to show voters lawmakers are serious about making sure there are not detrimental effects on communities due to data centers while the House passed this with a bipartisan margin. If it passes the Senate, the timeline is another question and the timeline for it to have an impact is an open one. We are hearing consistently from lawmakers of both parties that if you want to have data centers built, you have to do it in a way in which is beneficial to communities. They bring their own water and power. This seems to be what everyone is coalescing around.
Which was not the way it went when data centers started popping up out of the earth. You are from Virginia and I live in Virginia. The data center capital of the world. We have learned a lot from this. This is a huge issue and there is a slightly more clever solution that did not come from Washington that we want to talk about. It involves a company called Emerald AI. NVIDIA and Google. I'm glad to say we are joined by this CEO and founder of Emerald AI, Varun Sivaram. Thank you for joining us here on Bloomberg TV and Radio.
I want to hear how you have managed to solve the problem. It's a more nuanced approach than what we heard from lawmakers and regulators in Washington.
Emerald AI aims to transform AI data centers into flexible allies of the power grid. The reason this works is if a data center can reduce its power consumption during the moments when the grid is really stressed out, a hot summer day in Phoenix, that data center can actually fit onto the existing power grid without having to build out expensive infrastructure that can have the effect of raising rates. Flexible AI data centers, all else equal, can keep rates low and affordable for local communities and they could help keep grids reliable all while helping America gain a technological edge in the race for AI innovation as more data centers are connected on the grid. It is a win-win-win.
What gives if you have to have flexibility? They have to bring it down. I imagine that means you are not necessarily powering all the computer you would otherwise.
Our company has worked with NVIDIA to enable a data center to slow down some of the computations it is running. You might have a fine tuning job you can slow down, pause, or take a job and move it from one location to another. You are talking to ChatGPT and suddenly you are getting your answer now from Virginia but from Chicago as we have demonstrated that two different Oracle data centers on NVIDIA chips. You can run a battery on site. The goal is there's actually a lot of power on today's power grid that we just cannot utilize. Today data centers require the use of power potentially 24/7. If they are flexible in what we call good citizens on the power grid, they can use 100 gigawatts that we otherwise cannot use on the power grid today. That helps with the affordability concerns and with the speed of power.
This sounds really smart but what about the existing data centers? Do you have to retrofit all of them to be part of this new model? This is simply about the next generation?
The way Emerald AI works is we work with existing data centers and with new data centers. NVIDIA is a big partner and investor in Emerald, as are 12 other Fortune 500 global companies. We have models where for an existing data center, our software can help an existing data center change how it consumes energy and we are building a new data center with NVIDIA and Digital Realty, the first power flexible AI data center factory. 100 megawatts in Manassas, Virginia that comes online later this year. New data centers can get faster connections to the grid and existing data centers can get more power more quickly.
We talk so much about taking data centers off the grid. Now we need them on the grid.
I spoke to the chair about this and the ways in which the grid needs to adapt to all this. Are you in conversations with regulators? You have talked about the partnership with NVIDIA on the industry side but what about your conversations on the government side?
There is a grand bargain to be had where data centers can work with regulators in the energy industry and say you can actually have it all, more data centers, more innovation, lower rates for communities and reliable grids, there's a bargain to be had. Let's connect these flexible data centers faster. We are so proud to have launched the AI Energy Management Alliance. Emerald, Google and NVIDIA are the founding members of the AEMA. We are joined by 20 launch partners. Anthropic, leading energy companies, Constellation. We are presenting a unified front. We are talking to the FERC commissioners, the administration to say here is this grand bargain. Let's make sure AI data centers can be good citizens. They should get faster and larger connections to the power grid.
What do you make of some of the AI stories we look up to today? You have been in this industry since it really started to kick up. I met you at the NVIDIA conference here about a year ago in Washington, D.C. We were talking about stories like these. Anthropic self-learning. Claude is doing 26% of its own research and development. Claude is also hacking ChatGPT. How do we control this technology?
The reason I got into the business is because I think energy has now become the defining issue for the AI revolution. If you look at China, China has plenty of energy. By 2030, 400 gigawatts of spare capacity for AI. United States does not. We want to connect 70 gigawatts of AI data centers over the next two years. We can only really plug in 30.
Do you worry about AI security interfering with your work on the energy side?
It is absolutely critical if the United States is going to compete, we need data centers here in this country. Those data centers, we want to make sure through this new alliance and through Emerald AI that the data centers are good citizens. The communities that host them deserve as much. If you are a community and have a data center coming to town, you want to be sure that data center is going to bend over backwards so I don't have blackouts or reliability issues and my bills can stay affordable, because if not, we start to face trade-offs. Data centers come to town and you might say do I have the space on the grid to bring in advanced manufacturing or hospitals? Now with flexible AI data centers you can have it all. That is not just Emerald AI saying this. It is now 20 leading companies breaking the same unified message of this grand bargain to regulators across the country.
As one of the stories Joe is referring to is that AI is improving without necessarily human direction. How much of this flexibility would be driven by automated decision-making? Is the technology that is actually being powered by these data centers also factoring into the way in which they are flexible?
How do we make these new devices, large data centers, flexible? This is not science fiction. This is proven. Google has done a gigawatt of demand response for its data centers. Emerald and NVIDIA have done six demonstrations in London, Phoenix, Virginia, and we now have this 100 megawatt facility, an online that can flex.
But are humans directing the flex?
In London, at halftime of the soccer game everybody watches -- football they call it. They turn on their tea kettles at halftime. There's a spike of a gigawatt of power under the grid at that moment. A poor lightning strike takes out a substation or a line. No human cannot quickly enough in order to modulate the power and the data center. We demonstrated that data center was able to autonomously reduce its power consumption but in a very special way. A way in which the computations would continue to run the mission-critical competitions run at the right performance level. We protected the AI, protected the grid, rates stayed low and communities have reliable electricity.
We ran out of time to ask you when you are going to run for office or go public.
Thank you for joining us. Varun Sivaram of Emerald AI here with us on Balance of Power.
It is 1:21 on Wall Street. NASDAQ 100 Index just turning positive. Little change. The rest of the market moving lower. All in the red. Last stretch of a very busy week for markets. Stocks falling as bond yields rose. The S&P stands at 7623. Dow Industrials down 210. NASDAQ Composite down 16. A drop of .1%. NASDAQ 100 Index positive, little changed, under .1%. The VIX right around 15. Two-Year, 4.74%. 10-Year 5% on bets at elevated energy cost can fuel inflation prompting reserve rate hikes. 30-Year, 5.33%. Gold at $4384. West Texas Intermediate. Brent, down by 1.2%. Bitcoin, major move, up 5.5%. $80,718. On Holdings, the French superstar as a partner in developing football products and representing the brand, mounting a bold challenge to Nike and Adidas dominance of the sport. On Holdings up by 1.3%. Nike shares lower by 1.6%. For on-demand news 24 hours a day subscribe to Bloomberg News Now wherever you get your podcasts. I'm Charlie Pellett. That is a Bloomberg Business Flash.
Charlie Pellett checking on the markets for us. Thank you so much. I'm Kailey Leinz alongside Joe Mathieu in Washington where we have spent all weekend, all month and this year talking about artificial intelligence and data centers and how government would like to see it regulated. At the federal level, still an open question as President Trump is arguing for one thing and many other lawmakers find themselves on the ballot saying another. At the state level we are seeing a lot of action. Today in Virginia Governor Abigail Spanberger signing an executive order she says is the most aggressive and comprehensive data center accountability framework in the nation. That heading about the same time that out in California Governor Newsom signed his own EO directing actions to address what he describes as dangerous AI incidents. He would like to see independent oversight of AI companies, safety checks, and the creation of an AI kill switch.
It seems like that is inevitable. Everyone has an idea on this. I think one of the first proposals came from California. Ted Lieu. Maybe he should call the governor and they can work on this together. John Kennedy of Louisiana and there are other legislative attempts to get their arms around this. It is something we want to talk about with our political panel. Rick Davis and Jeanne Sheehan Zaino are with us after a fascinating conversation with Varun. Let's play it to the panel now. Jeanne. Rick is the Republican strategist as well and partner at Stonecourt Capital. I would like to start with Rick as someone who works in the investment community. The pitch we heard from Varun on a new approach. Will an industry that solves this with a more clever approach than Washington can seem to come up with?
First of all I think that Washington has been pretty much checked out. They just did pass in the House the ratepayer protection bill but that is only a very small effort to try and create some solutions for it, especially AI data centers. States and corporations working together are really going to be the way this gets done. I can't imagine the federal government unleashing billions of dollars to upgrade the grid all of a sudden, which they have been working on for quite some time. Creating a new demand response that can flex the grid around the most high use areas and develop energy resources that can be spread across the country rather than isolated in our own communities. I really think this is one where we have to depend upon companies and states working together. As much as the president would like to have federal control over this, I don't think that is the solution.
It's interesting as the notion of data center flexibility is a data center in Arizona that is facing strain on the grid and can stand the capacity needed for the data center in Virginia. It seems like this is something that would cross state lines. Jeanne, as we consider this notion on a state-by-state basis, Spanberger does this, Newsom does this, if they going to have to be federal alignment at some point?
