PIMCO's Manny Roman on the Next Stage of the AI Revolution

Manny Roman, CEO at Pacific Investment Management Co. (Pimco), discusses investing in the next stages of AI, testing private markets, and the longevity of US exceptionalism.

The full impact of US President Donald Trump’s tariff policies has yet to be seen, and that question may weigh down prospects for the US stock market depending on how it plays out, according to Emmanuel Roman, chief executive officer of Pacific Investment Management Co.

While there are bright spots in the economy, such as the data center boom, “if you look outside the hyperscalers, life in industrial America isn’t great,” he said Monday in a Bloomberg TV interview.

“The top line is not growing, and one of the questions we don’t know is the impact of tariffs and what will happen in corporate America in terms of how they’re going to deal with either passing on prices or the diminishing margin and so on,” Roman said. “There’s a whole leg of the equation we haven’t really seen.”

Pimco expects the US stock market to return about 6% over the next three years, according to Roman.

He also pointed to risks in the private markets, referring to past upheaval that emerged suddenly during seemingly placid periods, like the savings and loan crisis in the 1980s and ‘90s and hedge fund Long Term Capital Management’s collapse in 1998.

“We’ve been in a period where things are expensive for a long time,” he said, pointing to 2005 and 2006, just before the global financial crisis, when stocks remained pricey and continued to surge. “Then something breaks, and then all of a sudden you have a lot of work to be done.”

In terms of where to invest, Newport Beach, California-based Pimco has been touting opportunities in asset-based finance. It recently beat out peers to lead a $26 billion debt deal to finance Facebook parent Meta Platforms Inc.’s plans to build a data center in Louisiana.

Pimco paired up with alternative asset manager Blue Owl Capital Inc. to get the deal over the line, which marked one of the largest private financings to date.

“There’s an enormous need for funding and equity in data centers,” Roman said. “It’s very, very big, and there will be plenty of financing deals to be done and plenty of construction to be done. And it’s true in the US, but it’s true in other parts of the world.”

The Meta deal marked an important win for Pimco, which has been trying to diversify beyond its background in publicly traded debt. Money managers have been looking for different ways to capitalize on the multitrillion-dollar opportunity to finance data centers and expand their revenue and fee streams.

Pimco is also bullish on natural gas, due to the need for energy to power data centers, according to Roman. He also said the opportunity set in fixed income is “very big, and the opportunity to add alpha is quite high.”

Fed Picks

The US Federal Reserve cut its benchmark interest rate by a quarter of a percentage point on Sept. 17, and Roman said central banks around the world, including the UK, are making similar moves. But if the next round of US inflation data comes in high, “it would be very difficult” for the Fed to cut again at the next meeting, he said.

Roman also expressed confidence in the institution, at a time when Trump has publicly criticized Fed Chair Jerome Powell and called for the central bank to cut rates. Market participants including Citadel founder Ken Griffin have urged Trump to let the Fed make decisions independently.

“Every single Fed chair has been to some degree a political appointee,” Roman said. “We have a lot of trust in the Fed in terms of them doing the right thing.”

Powell’s term is ending in May, and the shortlist to replace him includes Fed Governor Christopher Waller, former Fed official Kevin Warsh and National Economic Council Director Kevin Hassett.

Roman added that the US has had a long line of strong Fed chairs going back decades, “and I see no reason why that will change.”

Pimco is one of the world’s largest bond managers, with total assets of more than $2 trillion.

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