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Subject to change. Hello and welcome to World Business Report from the BBC World Service.
I am Rahul Tandon. We are now on day two of the Donald Trump administration.
We've got an important business announcement that has been made in the past few minutes.
Donald Trump at the White House has announced that up to $500 billion in private sector investment is going to take place to build artificial intelligence infrastructure across the US.
The project by OpenAI, SoftBank and Oracle has created a new joint venture called Stargate.
Gary Marcus is one of the world's leading experts on AI and the author of Taming Silicon Valley.
He spoke to me about this development from the World Economic Forum at Davos.
I mean this has already been underway.
I think it's an announcement of something that was anyway.
The big AI companies have these neural networks that need massive amounts of data and massive amounts of compute, and they need massive amounts of energy and lots of data centers.
And so the companies were going to build this anyway with or without Trump, but it's a way of them signaling that they're on board to work with Trump.
Sounds like most of the money or all of the money is private for now.
Another question is whether this is actually a good investment on the part of those companies, and I think that remains to be seen.
The total revenue from this approach, has probably been like $10 billion or something like that.
And they're putting in hundreds of billions.
So whether that ultimately earns back is an interesting question.
We don't really know yet.
But it's also a big statement from Donald Trump, isn't it?
Because he came to power talking quite a lot about rebuilding the US's manufacturing industry.
And one of the first big business announcements that he's going to make comes in the field of AI.
Like I said, I think this was going to happen anyway.
But you know, it's good timing for him.
It certainly looks good.
The companies need to build this infrastructure in order to do the so -called scaling that they're trying to do anyway.
And so it's a nice way of announcing what they were going to do.
There was a lot of focus on where some of the big tech billionaires were sat in relation to Donald Trump during his inauguration.
The fact that this is one of his first major business announcements, does that show how close this relationship now is?
It may well. I mean, you know, what the long term on all of this turns out to be is not totally clear.
And Trump has been known to change his mind on things.
But, you know, it is a strong signal that he's interested in AI.
The other strong signal he made was he repealed the White House executive order that Biden had introduced in 2023.
And that's a strong signal that he doesn't want to see much regulation around AI.
That probably makes those companies happy.
So, you know, it's a good relationship between them, whether that's good for the American people or not.
We'll see how these things play out.
Well, that is something that we have spoken to you quite a lot about in terms of AI and the regulation that may be needed, because there have been many, haven't they, who have talked about how potentially dangerous this could be for humanity.
Are we going to see a lot of that regulation removed, do you think?
Well, yesterday, what we saw was the White House executive order that introduced things like AI safety institutes was stricken down.
So the big question is whether they will replace that with something else, whether they'll continue the funding of those AI safety institutes, whether there'll be nothing.
You know, we just don't know yet.
All we know is the negative, which is that they closed down the thing that Biden's administration put together pretty carefully.
They have not yet, I think, commented publicly on whether they're going to replace it with something else.
And just in terms of what's actually happening here, there's been a lot of talk, hasn't there, about how AI is pushing America's infrastructure when it comes to data centres.
Is this sort of needed the announcement that's coming?
Is it needed? Whether we actually need the infrastructure depends on your theory about what's going to work for AI.
And my personal theory, and we've talked about this before, is that large language models are not the final answer to AI.
They're problematic because they're unreliable.
They're very easily misused to make misinformation.
They do these things called hallucinations where they make stuff up.
For my money, it's not the right way to grow AI.
But it's certainly the popular thing and the thing of the moment.
I think a more energetic bet on new kinds of research might actually be better in the long run.
The other thing that's interesting in playing all this is that China is basically caught up on the large language model front.
And so it's not clear that America can ever win the battle if that's where the battle for AI is.
And so this might be misplaced.
It might be putting a lot of energy towards what's the wrong answer.
Nobody knows for sure.
I'm skeptical that this is the right bet.
Gary Marcus with his thoughts there on the announcement by Donald Trump of that 500 billion dollar investment into AI.
Let's bring in Umar Moriarty, senior investment strategist at Centre Square.
And Umar, thanks for joining us on the programme.
No surprise that...
...language model front.
And so it's not clear that America can ever win the battle if that's where the battle for AI is.
And so this might be misplaced.
It might be putting a lot of energy towards what's the wrong answer.
Nobody knows for sure.
I'm sceptical that this is the right bet.
Gary Marcus with his thoughts there on the announcement by Donald Trump of that $500 billion investment into AI.
Let's bring in Umar Moriarty, senior investment strategist at Centre Square.
And Umar, thanks for joining us on the programme.
No surprise that Donald Trump in one of his first major announcements is talking about investment in AI because that's really driven the markets, hasn't it, over the last year?
Absolutely. We're seeing it really across the board in terms of market participation, in terms of that exuberance associated with AI and the deployment there.
I mean, here at Center Square, we're real estate investors, and we have definitely seen that excitement across the data center space, right?
When you're creating these large language models, all of this AI deployment, I mean, that computing is happening at the data center.
So we're seeing really, really strong demand out of a lot of the cloud providers, out of a lot of the different companies that are developing AI solutions for data center space.
And the other thing, too, is that we just don't have enough power to really accommodate for all this demand that we're seeing come through.
And so the fundamentals that we're seeing on the data center side associated with this demand is really, really strong.
It certainly is. Donald Trump still speaking at the moment after making that announcement, taking some questions on tariffs, another subject that I'm sure we'll be focusing on here on World Business Report in 2025.
We've also been talking quite a lot.
If you listen to our early programme with Will Bain about the issue of migration, President Trump had swiftly announced when he came to power those promises to tighten the US -Mexico border.
we wanted to look at the impact that's going to have on business communities.
We're going to go to Little Village known as the Mexico of the Midwest and the second busiest retail corridor in Chicago in a minute or two.
But firstly, here's Molly Ball, senior political reporter for The Wall Street Journal.
We broke the news last week that large -scale raids in Chicago were planned immediately.
Then senior officials walked that back saying they weren't ready to begin that process.
And Trump's boarders are, has said, that they're going to need a lot more funding from Congress if they want to carry out a lot of these deportations.
Laura Rees served in the Trump administration as acting deputy chief of staff of the Department of Homeland Security.
The Trump officials appointees have said that they are going to start with national security threats, serious criminals, murders, rapists, smugglers, traffickers, etc, as well as the over one through due process before an immigration judge.
But the judge ordered their removal and those aliens absconded and are still here with a final order of removal.
Those will be where the Trump administration starts.
Jennifer Aguilar is the executive director of the Little Village Chamber of Commerce and she joins us on World Business Report now.
Jennifer, thanks so much for joining us.
Firstly, just give us a little insight for those who haven't who haven't been fortunate enough to go to Chicago, about the Little Village.
What is it? How busy is it normally?
Yes. Little Village is a giant cultural hub here in the city of Chicago and the entire Midwest.
We have over a thousand businesses in a two mile corridor.
We have over 100 restaurants.
And just so you get a better idea, every weekday we see over 2 ,000 cars drive down our commercial corridor and during the weekend is about 2 ,500 vehicles every day.
So we are one of the busiest, most bustling cultural communities here in the city.
Well, you know what?
You've made me want to come to Chicago and go down to Little Mexico.
What is the situation, though, like now?
You talk about a very bustling business area.
Is it as bustling as it normally is?
Not today, not yesterday.
Ever since the news came out about possible raids, we have noticed the decrease in foot traffic and vehicles.
And we've heard reports from our business owners that they have seen about a 60 % decrease and in the amount of customers that they have.
Why is that the case?
We heard from Laura Rees there saying, and we don't know that this is going to happen to begin with, but if there are deportations, it will be of, as she said there, probably criminals, people with criminal records or people who are in the country illegally who have been told to leave.
That's not going to affect most of the people, is it, inside the little Mexico area, the Mexico, the Midwest?
I think most people are just afraid of being like a casualty, right?
There's also a statement that was made that if, yes, the goal is going to be to round up the criminals.
But if a person who is there like nearby and is undocumented, then they are going to be swept up and deported as well.
So I think that that is the fear of people that what is to who is to say, right?
We don't really know what to expect in our very concentrated neighborhood.
And a lot of the families here were first were in the front lines.
They were working in in retail, in manufacturing.
So they had to go to work.
So we foresee something similar.
Maybe this week some people are deciding to stay home, but it's really sustainable.
and a lot of them will have to return because they need to provide families.
Jennifer, it is a complicated subject, isn't it, migration into the U .S.?
Do you understand, though, why President Trump may take these actions against some people?
Because it has a lot of popular support across the U .S., doesn't it?
It does. It does. And I think that the majority of people can agree with, OK, if you take out criminals, you know, that's only going to mean that the security here in our country is going to improve.
Um, but I think there's a very fine line, um, because, I mean, under his definition, maybe, um, just being here, just being here and being a person that is undocumented is a crime of itself.
You don't have to commit a violent crime or do anything crazy.
Just being here without having the proper documents is a crime.
So what is really protecting this community who has nothing to fear because they haven't really committed a violent crime?
I take the point that you make there, Jennifer.
And thank you for joining us on the program and explaining how that is already having a big business impact on one of the most important commercial areas in Chicago.
If President Trump was to go ahead with his plans, and of course in his inaugural address, he did say, didn't he, that he would deport millions of criminal aliens out of the US.
Many of them, or some of them, could go back to Latin America.
How could it impact those economies?
Let's speak to Antonella Bandiera, Assistant Professor at the Department of Political Science at ITAM in Mexico City.
Thank you so much for joining us on the programme.
I'm sure it will have an economic impact.
What sort of countries could we see most of these people going back to in Latin America?
Hi, thank you for having me.
So, so far we have seen that Mexico has been, if we look at the past decades in terms of removals and returns, we have seen that Mexico has been one of the top destinations for removals.
But if we think about the size of the population, Central American countries, definitely.
So much for joining us on the programme.
I'm sure it will have an economic impact.
What sort of countries could we see most of these people going back to in Latin America?
Hi, thank you for having me.
So, so far we have seen that Mexico has been, if we look at the past decades, in terms of removals and returns, We had seen that Mexico has been one of the top destinations for removals.
But if we think about the size of the population, Central American countries definitely are smaller and so they are most exposed, right?
So they have received the largest shocks with respect to the size of the population.
Honduras and El Salvador have been the ones that have been the most affected.
And probably now we'll see a lot of Venezuelans and Haitians having trouble as well.
The difference there is that it is less clear that they can be deported back to those countries.
And do we have any evidence?
Have we seen anything like this before that lets us say, well, if they do go back, it has this sort of economic impact?
Yes, definitely. We have seen.
So although the idea that Trump is going to massively deport individuals sounds like something that's new and in his previous presidency, the COVID pandemic also had a lot to do with removals or rather the Title 42 that didn't prevent individuals from coming into the U .S.
to seek asylum, for example.
we have seen a lot of deportations in previous administrations.
So notably Clinton really stepped up with deportations starting in 1996.
We saw Bush deport a lot of people with different names.
So there was a little bit of a change in the way in which we called them.
We did. And what impact did that have economically?
So economically that had an impact.
So let me clarify this.
I think this had an economic impact, but it depended a little bit on who was deported.
So we've seen that in terms of security, and this was really bad for economic development because this provoked like an expansion in the gangs.
In terms of security, when the U .S.
started deporting people who belonged to gangs in the U .S., this had a very negative impact on a lot of variables.
But we also have like some mixed evidence in terms of the labour market.
We have seen that it can have a negative effect on wages of sectors exposed to like competition from the informal sectors, because there's a lot of arrivals and people who need to reintegrate and that provokes labour costs too cheap, too cheap a little bit.
on some of those Latin American economies that are already struggling.
You're with World Business Report from the BBC World Service.
Let us talk now about Donald Trump and his love of the markets.
He is still taking questions in the White House.
I'm sure many of those will be business related.
We wanted to look at how one market in particular is responding to his return to power, and that is the global bond market, which has been quite volatile.
And who better to speak to than Edward Iardini, the president of Iardini Research, who is one of the world's leading experts on bonds.
He started by telling me what one actually is.
Bonds, they are issued by governments, by corporations.
Households also issue them indirectly by borrowing in the mortgage market.
And so a lot of long -term debt has been issued, especially by the government.
The flip side, of course, is if whoever buys that debt is buying an asset That they're adding to their portfolio of these bond securities.
And the interest rate is the rate at which the lenders feel fairly comfortable that they're getting a good return on their money.
And at the same time, it's an interest rate that is affordable to the borrowers.
And when it comes to the regular functioning of the bond market, the interest rate magical equilibrium rate at which supply and demand for bonds for credit is equal.
But the problem becomes when the government borrows too much, when the result is also possibly inflation, and that's when you get what's called a disequilibrium.
Something's got to give.
In other words, bond investors just don't feel like they're going to get their money back entirely, maybe even not at all, if the government remains too lax in its borrowing and inflation becomes a problem.
And what we have seen over the past few years is that central banks are buying less bonds.
So does that mean that those individuals buying the bonds have greater power now?
Well, I think the fact that debt has increased so dramatically, particularly government debt, definitely demonstrates that the so -called bond vigilantes, the bond investors, have a lot more power because the government not only has to issue debt, but also has to refinance debt.
And if interest rates go up, the refinancing costs becomes a significant outlay for the government.
And so it becomes, frankly, a dangerous situation where the governments have to borrow more, not just for spending regular government outlays, but also they have to spend more on just paying off the interest on the previous debt.
It is an important market, isn't it?
The bond market, and it tells us a lot of government not only has to issue debt, but also has to refinance debt.
And if interest rates go up, the refinancing cost becomes a significant outlay for the government.
And so it becomes, frankly, a dangerous situation where the governments have to borrow more, not just for spending regular government outlays, but also they have to spend more on just paying off the interest on the previous debt.
It is an important market, isn't it?
The bond market. And it tells us a lot about the state of global finances.
What are the bond markets telling us about what the markets think of Donald Trump?
Well, I like to talk about the bond vigilantes in the sense that the bond market deems that the monetary and fiscal authorities aren't being disciplined.
They're not maintaining law and order, if you will, in the credit markets, if they're running policies that are unsustainable in terms of enabling larger and larger deficits, and the central bank does that, of course, by manipulating interest rates and keeping interest rates too low, if the bond vigilantes
feel that the government is out of control, then they basically mount up, they get on their horses and start writing like vigilantes with their rifles and ready to maintain law and order in the credit markets.
The way they do that, quite simply, is by just not buying the government securities, forcing yields up.
We saw that this year when we saw the bond yield at 3 .65 percent in the U .S.
market. And that was in mid -September.
And now it's at over 4 .5 percent.
So the bond vigilantes seem to be signaling that they're concerned.
They're not happy about where fiscal and monetary policies are headed.
So far, I would say that the jury is out.
It's been way too early.
I mean, clearly the bond market and stock markets have already discounted some of what they anticipated would occur with the new Trump administration.
But it's really too early to make a judgment on it.
So far, I think the bond vigilantes are on alert, but they are giving the administration a pass in the sense that the administration seems to be talking about being more disciplined on spending and maybe perhaps coming up with offsets to tax cuts.
Edward Yardini there on how the bond market's responding to Donald Trump coming to power.
Donald Trump still speaking, saying he would be open to Elon Musk purchasing TikTok.
Let's stay on a tech theme.
Netflix shares have soared as the company has reported surging revenue, topping 300 million subscribers and is still with us.
Showing there that that streaming global market is still growing.
in terms of the the net ads that they got for subscribers this past quarter of almost ninth quarter of almost 19 million well above what the buy side was expecting and it's well above interestingly their peak that they saw during covid of a little bit less than 16 million so they had a couple one -time
items that might have contributed to this in terms of their programming, including some live events such as the NFL Christmas game, but it seems like a really strong core out of Netflix and you can see the stock reacting as such.
You certainly can. Let us head to India now where there is a big battle going on about one of the world's most favoured drinks.
We're talking about cola.
BBC's Davina Gupta has been finding out more.
It's a sunny winter afternoon in Gurugram near Delhi And I'm at a birthday party of a three -year -old The terrace is decked with balloons, streamers and of course A white cream cake with red and yellow cars made of icing on it As people gather around to wish the birthday boy No celebration here is complete
without a staple on the drinks table Soft drinks from classic colas to fizzy fruit flavours.
They are more than just party essentials.
I love the face and also the fact that cola is so easily available in the market.
I can easily serve it to all my guests and it's also the choice of most of the people who come and attend these parties.
And this is just a glimpse of an estimated $5 billion soft drink market here in India.
For decades, this market has been dominated by two global brands which both started in the US, Coca -Cola and Pepsi.
Fast forward and the cola wars in India have taken an unexpected turn.
In 2022, Mukesh Ambani, Asia's richest man, decided to enter the field.
His company Reliance acquired CamperCola, a nostalgic brand from the 1970s, for 22 crores or 3 million US dollars.
Cola war meant only Coca -Cola versus Pepsi and vice versa, but it looks like there is a third player in the industry, which is Campo Cola.
Reliance has a fairly huge stake in the food and beverages industry.
They have a huge presence in terms of the retail formats.
So it makes sense that they have their own in -house cola brand instead of trying to sell Coca -Cola and Pepsi alone.
Reliance's strategy to disrupt the cola market is twofold First, they are undercutting competitors with predatory pricing At a Reliance retail store in Delhi, I saw this first -hand It's afternoon where customers are coming in to make purchases When they are buying more cola bottles for a get -together
or a party then they prefer camper cola So is camper cheaper then?
Yes, it is Campicola is 50 % cheaper than the other two brands.
The second strategy for Reliance to catch up is hyperlocalization.
The company has partnered with bottling plants like that of Godavit Consumer Products in the Western Indian state of Maharashtra.
Saloni Godavit is the chief operating officer here.
The transportation cost is a very big cost for these companies.
So they have to make multiple plants.
So they look for bottliers like ours.
you can have a benefit of at least 2 -3 % on an overall basis.
For now, as per reports, Campa Cola plans to reach 10 million mom -and -pop stores in the next 5 years.
That is over 80 % of India's small merchant base and most of them are in rural India.
So how is this new player going down with Coca -Cola and Pepsi?
Shiv Shivakumar was the CEO of Pepsi in India and shares his insights.
Colas used to be extremely cool as a category for young people in the 1990s and 2000s.
Today, the exact opposite has happened.
Colas are uncool today.
When a brand is uncool, then you go by price.
And that's where Kampa coming in has simply flattened the price table of the market.
So what is the future looking like?
I think they have to flog water and all value -added water.
One company, which is Coca -Cola, already has got into coffee.
Psycola has a foods range, so they could do better off to focus on that.
So where does it leave us?
For global businesses, it's a case study in local adaptation and resilience.
For India's growing population of 1 .4 billion people, it means more choices, competitive pricing, and even more aggressive advertising, vying for their attention.
Do you see around you that the demand for coal is decreasing in the US?
You know, as it relates to the demand for coal in particular, I'm not necessarily the person to comment on that.
But I will say that what we're seeing across the board from consumers here in the US is just a continued propensity to spend money.
And we're seeing consumption continuing, despite the fact that, you know, for the last two years, I think people have been waiting and watching for the consumer to kind of give in here.
But we're still seeing spending really strong across categories here in the US from consumers, whether it's food and beverage, which continues to be a category that gains here, as well as others as well.
Uma, thank you so much for joining us here on World Business Report.
That is it for this edition.
