BlackRock CEO Larry Fink: I'm very bullish on the markets over the next 12 months

I believe the role of financing infrastructure around technology, whether it's financing data centers or financing the purchase of chips, as I said earlier, I think we're going to have markets investing in compute, we're going to have a futures market, this is going to be the next revolution in finance. And it happens because of the strength of the United States capital markets having the ability to finance these new technologies. So the United States and other places in the world can be leaders in the new technology. You know, you mentioned 50 years, so I am curious, I mean, have you ever seen anything quite like this, Larry, we've got what were the most profitable companies the world has ever seen. Yes. Making a choice to incinerate, wrong word, to decide not to have any free cash flow anymore, to not return capital to shareholders, because they have to be part of this headlong race to make sure they are not left behind in the AI future. When I listen to myself say that, there's some worrisome aspects to that, are there not? I mean, I've spoken to some of the leaders this week and last week in that sector. Their biggest worry right now, supply is not keeping up with demand. And you see that showing up in the value of the memory stocks. Okay, we have more demand for memory than we have supply. Obviously, they've been able to do big price increases. I don't know how sustainable that is. Maybe in three, four years, we'll have enough supply. But you know, and so what we see as a big investor in data centers, the demand for compute is not slowing down, it's growing faster. The problem we have as a country, we're not investing fast enough. So I have an opposite. So you're just not even, we need to do even more. I mean, a trillion dollar cap expense from six companies, not enough. I believe it's, well, not just there, we're not investing in our grids fast enough. We do not have enough adequate supply of power. And that's what is creating some of the issues at certain state levels that they're worried about electricity prices for the consumer, which is a legitimate issue. But other states that have more power and more capability of delivering power, and delivering power that is not going to raise the price to the consumer are going to be the big winners for growth. So in the last quarter, we, you know, we contracted close to one gigawatt of power in Pennsylvania. Okay. We're financing another big data center in another state. And in my conversation with every hyperscaler, demand is exceeding supply. And yes, you're right. These large companies used to be balance sheet light, and now their business has changed. And that is, but that's the role of the capital markets. And I promise you, these are going to be great investments for individuals. If we can- But you've got to know that the underlying business model ultimately that we get to is going to generate enough revenue and profit to be able to pay for all the data centers. They're not cheap. Yeah. They're 50, 60 billion dollars for a one gigawatt. What I worry about, Dave, is not the demand side. I worry about, can all the society benefit from AI? Because right now, compute is so expensive. My question to everybody in the hyperscaler business is not whether they have enough demand, is how quickly can they bring down the cost of compute? I'm not worried about BlackRock paying for the AI. And I think we have been a huge investor in it. And our systematic equity team has really benefited with the flows and the return. But I worry about the small and medium businesses. How are they going to be able to compete in this new AI technology world? So the biggest question I ask behind the scenes is, how quickly can we bring down the cost of compute? And, okay, they tell me it's like a Moore's law and how quickly they can develop faster and faster analytics to have faster compute. But unless we develop better technology and better systems in our grid to provide more power, more consistent power, I believe the United States must be power agnostic. We should not care if it comes from solar or hydrocarbons. We have to be there. But we need to be manufacturing the solar panels in the United States, building the battery storage. At least we can do the battery storage here. So those are my worries. My worry about is not a bubble. My worry about we're not, we don't have the ability to build fast enough. And then I go watch China. China's building 100 gigawatts of nuclear, they're building, oh, close to 100 gigawatts of solar. Okay, they are getting set up for this AI revolution and the need for power. We're not doing this enough. And I actually get frightened when I see states saying we're going to do a moratorium. That's not the answer. The answer is, how do we get, how do we deliver more power quickly? Let's, why don't we, why don't we all start focusing on how do we deliver more power so we don't raise electricity prices, but we can be the center of the AI revolution? Can I ask you about leverage? Every morning we come in here, we check the COSPI, which was up six, six, 9% swings. The South Korean president said the market there, she thinks is quite unstable. A lot of it's leveraged ETFs and two big names, which we don't really do. Right. Do you worry about that though? Is it a global risk factor? No, I, I, I really don't worry about, there's, there's not that much leverage in this compared to 2008, 2009. Now when, maybe the Korean market has that embedded leverage in it. There is no question, as I said it in earlier times that I was here, I was always worried about the leveraging in Bitcoin and crypto. There was too much leverage players in it. That's why we had the washout and I think there's more stability at these levels here. But no, we don't see that much implicit leverage. For the scale of the capital markets today, the leverage is not as large. I mean, that, that doesn't mean there's not pockets, but no, I, I, as I said in my prepared remarks this morning, I'm very bullish on the markets over the next 12 months. I think the technological revolution is going to power better margins for more companies. I mean, think about BlackRock, we've raised our margins increased by 260 base points over the last 12 months. A lot of it is using more and more technology. Can you keep those margins going? You said you don't see 45 to 46% margins as a ceiling. You pointed back to 2021. Your business though is very different than it was in 21. I'm sort of curious, what's the mechanism that gets you back above 47%? Continuing driving more growth in our private markets area, which we, we see incredible momentum, continue to drive opportunities in retirement, which I believe these are all going to be creating a better margin and just making sure that we're utilizing technology as fast as we can to do more with less. I mean, our headcount, David, is unchanged and our, our, you know, we're up a trillion dollars in assets. Okay. That's, that's what you're, you're seeing. We're able to use technology to process more trades, to process more activities. So we're able to do that. We're able to leverage our human capital using technology, working alongside of that. We're using the amount of code we're writing alongside our coders with AI is accelerated dramatically. So we're able to do more and more and more. And as the ability of AI and compute, as I talked about earlier, becomes faster and cheaper, that will drive even higher margins for not just for BlackRock, for other firms.