WEBVTT - Silicon Valley Bank Fallout, a Rally in Chip Stocks and Calls for a Pause in Artificial Intelligence 0:00:01.400 --> 0:00:04.160 From the heart of where Innovation of Money and Power 0:00:04.280 --> 0:00:09.040 COLI in Silicon Valley, NBR. This is Bloomberg Technology with 0:00:09.200 --> 0:00:26.480 Caroline Hide and Ed Ludlow Ed Lovelow here in San Francisco. 0:00:26.560 --> 0:00:29.800 Carola Hide off this week, this is Bloomberg Technology. Coming 0:00:29.880 --> 0:00:32.879 up on the program. The banking fallout continues. We'll bring 0:00:32.920 --> 0:00:37.080 you the details on spob's bankruptcy as hearings continue in Washington. 0:00:37.240 --> 0:00:40.720 What does it mean for Silicon Valley founders and vcs 0:00:40.760 --> 0:00:44.239 and more than a thousand tech heavyweight call for a 0:00:44.360 --> 0:00:48.440 pause on the artificial intelligence boom to implement safety protocols. 0:00:48.440 --> 0:00:51.880 We'll break down what's inside the petition, plus chip stocks 0:00:51.920 --> 0:00:55.520 getting a boost as analyst upgrade and video and Micron issues. 0:00:55.560 --> 0:00:59.080 An upbeat forecast will discuss what's driving momentum. But first 0:00:59.120 --> 0:01:01.200 let's going to take on the ARC. It's technology a 0:01:01.240 --> 0:01:04.280 big driver. We're fully in risk on mosing out performance 0:01:04.319 --> 0:01:07.640 in the NASA one hundred, but the Philadelphia Semiconductor Index 0:01:07.840 --> 0:01:11.400 in particular. Why a pretty bullish outlook for the fiscal 0:01:11.400 --> 0:01:13.360 third quarter from Micron, which we'll get into later in 0:01:13.360 --> 0:01:15.920 the show. Yields also coming back a little bit of 0:01:15.920 --> 0:01:18.520 the US ten yere at three point six percent. Bitcoin 0:01:18.640 --> 0:01:20.919 kind of caught up in this risk on rally above 0:01:20.959 --> 0:01:24.160 twenty eight thousand. It's highest level in dollar terms since 0:01:24.240 --> 0:01:26.680 June of last year. Look, it's been a good run 0:01:26.800 --> 0:01:29.279 for tech stocks in particular. Look at the NASA one hundred, 0:01:29.360 --> 0:01:33.200 very tech heavy index. We're heading for a pretty blockbusters 0:01:33.280 --> 0:01:35.800 quarter that's just gone. Of course, we're getting towards the 0:01:35.920 --> 0:01:38.039 end of the march, a few sessions left to go. 0:01:38.080 --> 0:01:40.200 As we bring up this Bloomberg terminal, please miss the 0:01:40.280 --> 0:01:42.920 director to visualize the point that I'm trying to make. 0:01:44.319 --> 0:01:46.759 Whether we continue that momentum is all about the FED. 0:01:46.800 --> 0:01:51.040 Remember that Thursday core PCE the Fed's main measure that 0:01:51.080 --> 0:01:53.000 they're looking to that will answer a lot of questions 0:01:53.040 --> 0:01:55.480 in terms of the direction of travel for rates. That's 0:01:55.480 --> 0:01:58.080 the macro picture. Here's the micro Kitty Greyfer, New York. 0:01:58.120 --> 0:01:59.840 What you got, hi? Add why I have a lot 0:02:00.160 --> 0:02:02.680 green behind me. Let's start with Micron, like you said, 0:02:02.720 --> 0:02:06.160 issuing an upbeat outlook for the fiscal third quarter. Sales 0:02:06.200 --> 0:02:09.720 expected about three point nine billion dollars, that is above 0:02:09.800 --> 0:02:12.480 the average analysts estimate. You could see Micron shares up 0:02:12.600 --> 0:02:16.200 about six percent almost six percent. Other chip stocks rising 0:02:16.240 --> 0:02:19.400 as well, including a video shares are hired by about 0:02:19.720 --> 0:02:22.720 two percent. You had Piper Sandler come out and raise 0:02:22.800 --> 0:02:26.280 their price target on this stock to three hundred dollars, 0:02:26.280 --> 0:02:29.440 so giving shares of boost. Moving on outside the chip space. 0:02:29.720 --> 0:02:34.560 Carnival also cruising today. They got an upgrade from Susquehanna 0:02:34.600 --> 0:02:37.640 ahead of get this wave season. Apparently that's when the 0:02:37.720 --> 0:02:41.640 cruise industries offers discounted rates. I didn't know that. Pretty interesting. 0:02:41.639 --> 0:02:45.400 Paychecks also rising as well, up about five point seven 0:02:45.520 --> 0:02:48.320 percent or so. But let's talk about the banks, because 0:02:48.360 --> 0:02:52.040 that was the big story today. What happened in Europe overnight. 0:02:52.080 --> 0:02:55.600 You have Sergio or Mandi coming back as UBS CEO 0:02:55.760 --> 0:02:59.720 starting in early April to oversee that acquisition of credit. 0:02:59.720 --> 0:03:02.120 See in this chart behind me shows that in the 0:03:02.160 --> 0:03:06.040 eight days since that acquisition was announced, we've seen shares 0:03:06.120 --> 0:03:10.480 rally getting another bounce today. Ed Katie gray Fell with 0:03:10.520 --> 0:03:12.760 the Movers will track those throughout the hour. Turning from 0:03:12.840 --> 0:03:15.639 UBS to the banking crisis here in the United States, 0:03:15.680 --> 0:03:17.920 you're going to be looking at live pictures of the 0:03:17.919 --> 0:03:22.160 House Financial Services Committee hearing day two of the Regulatory 0:03:22.400 --> 0:03:26.320 consideration of the biggest banking failure since the financial crisis. 0:03:26.360 --> 0:03:29.400 Here with the details. Bloomberg's Katanga Johnson out in dc 0:03:30.600 --> 0:03:35.680 FED supervision Chair Michael Barr basically acknowledging for a second 0:03:35.800 --> 0:03:38.800 day that there were lapses in oversight, Right, Katanga, of 0:03:38.800 --> 0:03:42.760 what happened with Silicon Valley Bank, we'll be heard today. Yes, 0:03:43.040 --> 0:03:47.000 was Bar acknowledging that there was a lack of oversight, 0:03:47.240 --> 0:03:50.600 not just from his particular office at the fair, but 0:03:50.760 --> 0:03:53.360 even from the supervisors who were on the ground, who 0:03:53.440 --> 0:03:56.640 knew months before he was made aware of the issues. 0:03:56.640 --> 0:03:59.320 And lawmakers on both sides of the hour. Will he 0:03:59.440 --> 0:04:02.480 drill down on the timing around when Barr was first 0:04:02.480 --> 0:04:05.280 alerted and how quickly he acted even once he learned 0:04:05.320 --> 0:04:09.920 of these lapses. You consider the questions from lawmakers right, 0:04:10.200 --> 0:04:15.600 senators yesterday, congressional representatives today. A lot of them focus 0:04:15.640 --> 0:04:19.320 on individual people, the pain that was suffered by depositors. 0:04:19.360 --> 0:04:22.080 You have to remember the customer based Katana, right, Many 0:04:22.120 --> 0:04:25.159 of these were vench capitalists and startup founders. So we 0:04:25.200 --> 0:04:27.440 actually have any answers of kind of what the next 0:04:27.480 --> 0:04:30.640 step is, either to prevent this in the future or 0:04:30.680 --> 0:04:33.440 some sort of restitutions what happened a few weeks ago. 0:04:35.279 --> 0:04:38.640 Regulators are really mulling whether there might be a need 0:04:38.640 --> 0:04:41.640 for them to drill down on existing rules and perhaps 0:04:41.800 --> 0:04:46.599 potentially pushing lawmakers to consider new rules around whether they 0:04:46.720 --> 0:04:49.520 should be able to mitigate some of the risks of 0:04:49.600 --> 0:04:52.920 this issue in the future. Bar in particular, really emphasize 0:04:52.960 --> 0:04:56.200 the fact that he's open to in reviewing his toolkit. 0:04:56.720 --> 0:05:02.039 Have regulators sort of were collaboratively in that way, but 0:05:02.120 --> 0:05:05.480 then also he's open to really having Congress or perhaps 0:05:06.160 --> 0:05:08.679 the government kind of bil the office really dig in 0:05:08.720 --> 0:05:11.960 to the ways in which the rule book can be enhanced. 0:05:13.000 --> 0:05:16.120 All right, bloom bes Katanga Johnson out in DC. Thank you. Look, 0:05:16.200 --> 0:05:19.520 let's talk about what the SVB bankruptcy means for those depositors, 0:05:19.560 --> 0:05:23.479 start up founders, vench capitalists, tech businesses of all sizes 0:05:23.480 --> 0:05:26.880 and bringing Gregory Jermaine, Professor of law at Syracuse University 0:05:26.920 --> 0:05:32.200 and also the director of the Bankruptcy Clinic. First of all, professor, 0:05:32.240 --> 0:05:35.040 welcome to the program. Your assessment of what you've heard 0:05:35.080 --> 0:05:38.679 over the last twenty four hours from both panels, Well, 0:05:39.320 --> 0:05:43.360 not very interesting, right, I mean, a lot of repetition 0:05:43.440 --> 0:05:46.960 of stuff we already knew a lot of political pasturing, 0:05:48.120 --> 0:05:55.280 but really no new information coming out of this of 0:05:55.320 --> 0:05:59.320 these hearings. The only thing i'd i'd say is that 0:05:59.440 --> 0:06:05.000 you know, every time someone asks an interesting question, the answers, well, 0:06:05.000 --> 0:06:07.200 our report is going to be out on May first. 0:06:07.360 --> 0:06:10.279 So until we get the report on May first, I 0:06:10.279 --> 0:06:12.680 don't think we're going to learn a lot more about 0:06:12.720 --> 0:06:18.160 what was going on in the regulatory environment. Yes, so 0:06:18.600 --> 0:06:22.159 that was kind of my general overview of listening to you. 0:06:22.320 --> 0:06:26.360 A few hours of the testimony, we broke the news 0:06:26.360 --> 0:06:29.120 of what was happening on Silicon Valley Bank on this 0:06:29.160 --> 0:06:32.400 program the friday it collapsed and into the Monday, the 0:06:32.520 --> 0:06:38.120 discussion among venture capitalists was that they wanted a reincarnated 0:06:38.200 --> 0:06:41.520 form of SVB to survive what ended up happening. Of course, 0:06:41.560 --> 0:06:43.440 his first Systems came in and took some of the 0:06:43.480 --> 0:06:46.960 deposit book, but not all of it. There were lots 0:06:46.960 --> 0:06:51.480 of questions in these hearings about why an outright savior 0:06:51.560 --> 0:06:54.320 didn't come in that first weekend. What's your assessment of 0:06:54.360 --> 0:07:00.320 that this law happens very fast these days, you know, 0:07:00.400 --> 0:07:02.960 I mean the run on the bank, you know that 0:07:03.600 --> 0:07:06.600 took place over a couple of days and and and 0:07:06.800 --> 0:07:09.760 everybody's panicked and you know, and trying to get a 0:07:09.800 --> 0:07:13.360 new institution to come in, uh and take this over 0:07:13.560 --> 0:07:16.640 is not an easy and an easy task, especially because 0:07:16.680 --> 0:07:19.920 I think the full scope of you know, what their 0:07:20.000 --> 0:07:23.000 what their loan book looks like, and what it's worth 0:07:23.560 --> 0:07:26.600 isn't known, and so the government kind of sold it 0:07:26.640 --> 0:07:31.760 with some backstops in place, uh to protect First citizens 0:07:31.920 --> 0:07:35.760 is the buyer um. So it's it's not easy to 0:07:36.240 --> 0:07:39.120 you know, to to to figure out what's going on 0:07:39.240 --> 0:07:42.320 in a huge institution like all of these large banks 0:07:42.320 --> 0:07:45.760 are today in such a short period of time and 0:07:45.800 --> 0:07:49.960 get someone to take it over. Well, here's the main point. 0:07:50.480 --> 0:07:53.680 They wanted it to survive and reincarnated form in some 0:07:53.760 --> 0:07:57.440 sense it is you know, many vcs point to SVB 0:07:58.320 --> 0:08:01.880 being a spiritual Paul Silicon Valley literally that you know, 0:08:01.920 --> 0:08:04.840 the first institution to write a check or bank a 0:08:04.960 --> 0:08:07.960 founder when others would in what is the risk here 0:08:08.280 --> 0:08:12.160 with First Citizens taking on some of the books, Well, 0:08:12.240 --> 0:08:15.280 I think for citizens wants the business. I mean they're 0:08:15.600 --> 0:08:18.480 they're taking over the branches, They're they're going to keep 0:08:18.520 --> 0:08:23.560 the employees that have all the relationships and so you know, 0:08:23.600 --> 0:08:26.640 I think they want to they want to keep it. Um, 0:08:26.720 --> 0:08:28.960 So my guess is that they're going to be working 0:08:29.080 --> 0:08:33.079 very hard over the next year or so to to 0:08:33.280 --> 0:08:36.000 try to shore up trust within the community. But you know, 0:08:36.040 --> 0:08:38.120 the handover is going to take a period of time 0:08:38.720 --> 0:08:41.560 and uh, and I expect they're going to be some 0:08:41.600 --> 0:08:44.560 bumps in the road for a short while as they 0:08:44.600 --> 0:08:48.719 as they ramp up to taking over all these assets 0:08:48.840 --> 0:08:53.640 and providing better supervision than Silicon Valley Bank did of 0:08:54.240 --> 0:08:59.680 the situation. But yeah, well I just want to jump in, Hey, 0:08:59.880 --> 0:09:02.520 you are an expert in the field of bankruptcy. You've 0:09:02.559 --> 0:09:06.760 looked closely at the situation as it unfolded its Silicon 0:09:06.840 --> 0:09:10.360 Valley Bank. How do we fix it? What happened? How 0:09:10.360 --> 0:09:14.560 do we prevent it from happening again? Well, I don't 0:09:14.600 --> 0:09:20.400 think there's other than providing a government backstop against all deposits, 0:09:20.440 --> 0:09:24.640 which could be extremely expensive to the public. You know, 0:09:24.720 --> 0:09:28.000 there's there's always going to be the possibility of bank runs, 0:09:28.520 --> 0:09:32.480 even just rumors. Banks are subject to, you know, rumors 0:09:32.559 --> 0:09:36.760 spreading so quickly that people get scared. Even we've had 0:09:36.800 --> 0:09:40.160 bank runs of ensured deposits, which you know makes no 0:09:40.240 --> 0:09:43.480 sense they're not at risk, but people get nervous because 0:09:43.960 --> 0:09:45.679 you know, they don't trust that they're going to be 0:09:45.720 --> 0:09:49.480 able to get their money out. And so the banking 0:09:49.520 --> 0:09:53.280 system is based on confidence, and when confidence breaks down, 0:09:54.320 --> 0:09:59.800 the system, the system is starts to starts to shake apart. 0:10:00.640 --> 0:10:05.160 And so the government's real job here is to provide 0:10:05.160 --> 0:10:09.400 as much confidence as they can that the banking systems slovent. 0:10:10.640 --> 0:10:14.120 Gregory Jermaine of Syracuse University, thank you for your insight. 0:10:14.160 --> 0:10:16.760 We'll keep on tracking the story. Now, all of the 0:10:16.840 --> 0:10:20.560 TERMO in Silicon Valley maybe having a chilling effect on deals. 0:10:20.679 --> 0:10:24.000 Goldman Sachs just lost three partners in the investment bank 0:10:24.240 --> 0:10:27.200 who exiting the Wall Street firm amid a slump in 0:10:27.280 --> 0:10:31.079 deal making specifically focused on tech. Wall Streets saw a 0:10:31.160 --> 0:10:34.040 hit to their compensation last year as that drop in 0:10:34.080 --> 0:10:37.040 deal making took its toll. Some Goldment banking partners face 0:10:37.120 --> 0:10:39.520 pay cuts of more than fifty percent. But these are 0:10:39.559 --> 0:10:43.880 three high profile bankers that Bloomboa's reporting have left really 0:10:43.920 --> 0:10:46.520 focused on the tech sector, and we'll continue to track 0:10:46.559 --> 0:10:58.720 where they've gone. Onto time for talking tech first, CrowdStrike 0:10:58.840 --> 0:11:02.160 investing ten million dollars in abnormal Security, a startup that 0:11:02.280 --> 0:11:06.160 helps businesses cope with compromised emails after highlighting the attack 0:11:06.200 --> 0:11:08.800 method as a fast growing threats the largest amount of 0:11:08.840 --> 0:11:11.760 cash the cybersecurity firms ever funded through its venture arm, 0:11:11.920 --> 0:11:15.200 the CrowdStrike Falcon fun. The two companies also will work 0:11:15.240 --> 0:11:18.319 together as part of a close partnership. Let's turn to 0:11:18.440 --> 0:11:21.000 Chips and Videos, seeing its price target raised that Piper 0:11:21.040 --> 0:11:23.800 Sandler from two seven five to three hundred dollars. The 0:11:23.840 --> 0:11:26.520 analyst they're saying the company has the ability to create 0:11:26.640 --> 0:11:30.960 new and lucrative market opportunities with its software footprint, which 0:11:31.040 --> 0:11:33.760 is still in the early stages of growth and adoption, 0:11:33.800 --> 0:11:37.200 and rounding it out. Also with Micron receiving a price 0:11:37.240 --> 0:11:40.880 target upgrade at Susquehanna Financial, boosting its target from sixty 0:11:40.880 --> 0:11:43.240 five dollars to ninety dollars, the analysts saying they think 0:11:43.440 --> 0:11:47.560 the May orter represents the worst case operating losses, but 0:11:47.640 --> 0:11:51.080 believes the near to medium term risk raw profile's attractive 0:11:51.520 --> 0:11:54.760 given the updated price target. Now, let's stick with Micron 0:11:55.240 --> 0:11:58.080 giving an upbeat forecast for the fiscal third quarter, sending 0:11:58.080 --> 0:12:01.000 shares higher. Bloomboz and King on set with me in 0:12:01.040 --> 0:12:04.400 San Francisco. This was interesting because what they're saying is 0:12:04.880 --> 0:12:08.880 our customers have been working through inventories, but there are 0:12:08.920 --> 0:12:13.760 signs that that kind of glots or downturned that people 0:12:13.800 --> 0:12:16.679 are calling it. There might be a different trajectory on 0:12:16.720 --> 0:12:18.920 the other side. Yeah, I think the way to sort 0:12:18.960 --> 0:12:21.880 of look at this, to frame this is things aren't 0:12:21.920 --> 0:12:24.800 going to get that much worse. You've got to bear 0:12:24.800 --> 0:12:26.920 in mind this is a company that is on course 0:12:27.000 --> 0:12:31.080 to have its worst ever net loss in terms of revenue. 0:12:31.160 --> 0:12:34.080 It's half the size of where it was last year. 0:12:34.480 --> 0:12:37.560 So this isn't a victory parade by any stretch. But 0:12:38.120 --> 0:12:40.440 if you believe that the chip industry is on this 0:12:40.559 --> 0:12:43.240 long term growth path, then you're looking for points like 0:12:43.360 --> 0:12:46.120 this where things aren't going to get that much worse. 0:12:46.640 --> 0:12:50.000 The editors of Bloomberg Opinion wrote an editorial in the 0:12:50.040 --> 0:12:53.360 last twenty four hours about the Chips Act and the 0:12:53.480 --> 0:12:55.640 money that is being lined up from the public sector 0:12:55.720 --> 0:12:59.280 to onshore manufacturing capacity in this country. The conclusion that 0:12:59.320 --> 0:13:03.280 they reach is that actually it's a plan that's racing 0:13:03.320 --> 0:13:05.760 towards failure. They talk about red tape, they talk about 0:13:05.760 --> 0:13:09.640 the time it actually takes to set up a manufacturing 0:13:09.679 --> 0:13:13.720 facility from scratch when it comes to chip fabrication. Ironically, 0:13:15.120 --> 0:13:18.320 when you spoke to the Micron CEO last night, he 0:13:18.520 --> 0:13:21.280 is kind of asking for the opposite to increase capacity. 0:13:21.360 --> 0:13:24.960 He's saying, we and our peers need to cut down 0:13:25.240 --> 0:13:27.560 our production right now. Explain that one to us. Yeah, 0:13:27.559 --> 0:13:30.080 I mean there's a couple of really really important things 0:13:30.120 --> 0:13:32.800 at play here. The chip industry is as old as 0:13:32.800 --> 0:13:35.880 I am, which is pretty old. Right throughout its history, 0:13:36.080 --> 0:13:40.360 your words, economic forces have determined whether you build a plant, 0:13:40.360 --> 0:13:42.360 whether it makes sense to build a plant, whether you 0:13:42.400 --> 0:13:46.120 put capacity online. Now we've got government saying, hey, here's 0:13:46.120 --> 0:13:48.400 a check, build a plant here, that's what we want. 0:13:48.440 --> 0:13:52.000 So the concern there is that we'll have this systemic overbuild. 0:13:52.920 --> 0:13:55.319 Micron was saying was a bit more short term, which 0:13:55.360 --> 0:13:57.680 is saying, look, we can all get back to profitability. 0:13:57.720 --> 0:14:00.520 We can all make money if we all up putting 0:14:00.600 --> 0:14:03.280 less to looking into the front of these production lines. 0:14:03.559 --> 0:14:06.760 That's a great idea, and it's certainly there some evidence 0:14:06.760 --> 0:14:10.520 that that has happened. But really the sort of the 0:14:10.520 --> 0:14:13.320 thing that wasn't said directly was that Samsung the biggest 0:14:13.400 --> 0:14:16.400 part of the memory ship industry hasn't been doing that, 0:14:16.720 --> 0:14:19.600 so the outlook for profitability there is still a little 0:14:19.600 --> 0:14:22.440 bit dim outlook for prosability. I'm looking at the shares. 0:14:22.800 --> 0:14:25.280 We're higher by around five and a half percent, so 0:14:25.400 --> 0:14:29.320 positive reaction. This kind of terminal chart tells the story though, 0:14:29.400 --> 0:14:31.840 if you look at this sort of deficit that Micron 0:14:31.880 --> 0:14:34.960 faces this year, this is a big hit to profit, 0:14:35.000 --> 0:14:38.040 a big loss going back to the eighties. Why has 0:14:38.080 --> 0:14:41.160 that happened? It's a memory thip industry. This is the 0:14:41.160 --> 0:14:44.840 most brutal PRAM and nand exactly the storage basically in 0:14:45.120 --> 0:14:48.760 your mobile devices, in your computers. The problem that Micron 0:14:48.840 --> 0:14:51.000 has and all of the other membership makers have is 0:14:51.040 --> 0:14:54.680 it's a commodity, right. You can buy these things in 0:14:54.720 --> 0:14:57.600 these exchanges. You know what the price is. What happens 0:14:57.600 --> 0:14:59.640 when you have a glut is you end up making 0:14:59.720 --> 0:15:01.960 chick and then you have to go out and sell 0:15:02.000 --> 0:15:03.960 them for less than it costs you to make them. 0:15:04.040 --> 0:15:06.200 And that's where Micron is. Yeah, I mean that chart 0:15:06.240 --> 0:15:08.680 says it all really that, you know, the leg's kind 0:15:08.680 --> 0:15:11.280 of taken out from under them just very quick finally, 0:15:11.320 --> 0:15:15.800 and we've just got a few seconds. End markets basically 0:15:15.800 --> 0:15:18.640 this is about smartphones. The data center business bottomed out 0:15:18.680 --> 0:15:21.800 in fiscal second quarter. What did the broad hopes for 0:15:21.840 --> 0:15:23.960 the smartphone market in the second half of this year. Yeah, 0:15:24.000 --> 0:15:26.040 that basically that it's not as bad as it was. 0:15:26.080 --> 0:15:29.200 And Micron gave us a picture that said, maybe smartphones 0:15:29.200 --> 0:15:31.840 aren't going to collapse as badly as we'd feared, and 0:15:31.880 --> 0:15:34.720 also maybe PCs won't be as badly as we'd feel 0:15:35.320 --> 0:15:38.960 we've had Micron. Everyone is over the moon with Nvidia. 0:15:39.200 --> 0:15:42.400 Nvidia can do no wrong as far as sell side 0:15:42.400 --> 0:15:45.600 and this at least are concerned. Why do people think 0:15:45.760 --> 0:15:48.560 that Nvidia is going to be the main beneficiary from 0:15:48.640 --> 0:15:52.080 investment in artificial intelligence because so far they have been 0:15:52.480 --> 0:15:55.040 so far they've they've mechanically how does that work? What 0:15:55.160 --> 0:15:59.120 is it that's exciting? Well, the workloads that you need 0:15:59.200 --> 0:16:03.040 to run and system to have these recommendation engines basically 0:16:03.960 --> 0:16:09.119 reward the ability to do multitasking, to do parallel processing 0:16:09.520 --> 0:16:12.840 in Video's processors do that arguably better than anybody else. 0:16:12.840 --> 0:16:15.160 And it's sold that story very well. All right, Bloomberg 0:16:15.200 --> 0:16:17.800 zan King not quite as old as the chip industry, 0:16:17.800 --> 0:16:19.640 but he's covered it a long time and we're grateful 0:16:20.000 --> 0:16:22.480 to have him. Now, coming up, we're watching shares Valley 0:16:22.480 --> 0:16:25.520 Barber surge for the second day after news that the 0:16:25.560 --> 0:16:28.360 company is splitting up up one point eight percent on 0:16:28.360 --> 0:16:31.120 the USADRS. Right now, we're bringing the details of that 0:16:31.160 --> 0:16:44.000 plan next. This is Bloomberg. Ali Barber's massive overhaul plan 0:16:44.120 --> 0:16:47.960 boosted Chinese tech stocks overnight, with investors betting the sectors 0:16:48.000 --> 0:16:52.400 in for an overdue reevaluation. Is the regulatory environment improved? 0:16:52.400 --> 0:16:55.800 Shares Valley Barber surge earlier by the most since November 0:16:56.040 --> 0:16:58.120 out in Hong Kong after the news that the company 0:16:58.280 --> 0:17:01.160 will be splitting it's too hundred and fifty billion dollar 0:17:01.240 --> 0:17:05.600 empire into six business units. Bring bags Isabel lead back 0:17:05.680 --> 0:17:07.880 twenty four hours ago is about we were talking about 0:17:07.920 --> 0:17:11.399 the kind of fresh news this is happening al in Asia. 0:17:11.440 --> 0:17:13.760 They've had time to digest what's going on. And also 0:17:14.119 --> 0:17:16.880 we're hearing about development of how they'll present that plan 0:17:17.040 --> 0:17:19.720 right exactly. And it's interesting actually because this is the 0:17:19.760 --> 0:17:23.800 second rally in two days, and it really just means 0:17:23.800 --> 0:17:26.159 investors are liking what they see because to your point, 0:17:26.200 --> 0:17:29.560 Ali Baba, it's a two hundred twenty billion dollars empires 0:17:29.560 --> 0:17:31.919 will be split into six and analysts really like this 0:17:32.119 --> 0:17:34.920 for two reasons. In fact, overnight some analysts have upgraded 0:17:34.960 --> 0:17:37.760 Ali Baba from AD to buy. So the first reason 0:17:38.160 --> 0:17:40.320 is it'll just allow Ali Baba to be more nimble 0:17:40.400 --> 0:17:43.119 because China has cracked down on these two big detect 0:17:43.359 --> 0:17:45.720 two big to failed tech companies, and Ali Baba was 0:17:45.760 --> 0:17:48.120 one of them. So now with the six units, there'll 0:17:48.160 --> 0:17:50.560 be a little bit more flexible in adjusting that a 0:17:50.640 --> 0:17:54.280 regulatory landscape, and a lot of analysts are really liking that. 0:17:54.359 --> 0:17:56.880 And the second reason is it will unlock up valuations 0:17:56.920 --> 0:18:00.520 because these six units were given the discretion into raise 0:18:00.600 --> 0:18:03.240 funds however they see so ipo is one of them, 0:18:03.240 --> 0:18:05.080 and we know that the ipo industry has been kind 0:18:05.119 --> 0:18:07.600 of lackluster these days, so that will also help revive 0:18:07.800 --> 0:18:11.119 the IPO market. If you go on tli V, go 0:18:11.280 --> 0:18:13.399 on the Bloomberg terminal, I know that we're going to 0:18:13.440 --> 0:18:18.240 be covering Ali Baba briefing on their plan to kind 0:18:18.280 --> 0:18:21.879 of walk investors through how this would look. Remind us 0:18:21.880 --> 0:18:24.680 of what the business of Ali Baba looks like these days, 0:18:24.760 --> 0:18:26.840 you know, we think of it on the Bloomberg Technology Show. 0:18:26.840 --> 0:18:29.200 It's kind of an e commerce giant. It's much more 0:18:29.240 --> 0:18:32.520 complicated than that. It definitely is. It's so sprawling, which 0:18:32.560 --> 0:18:34.919 makes it a bit more complex. So a lot of 0:18:34.960 --> 0:18:37.320 traders have been trading Ali Baba like a utility, when 0:18:37.359 --> 0:18:39.159 in fact it's more than that, and in fact, compared 0:18:39.200 --> 0:18:42.080 to its rivals like ten Cent, Ali Baba is way cheaper, 0:18:42.119 --> 0:18:44.280 which is why some of the analysts are saying this 0:18:44.359 --> 0:18:47.920 will help Ali Baba kind of reshape its image, break 0:18:47.960 --> 0:18:51.200 it up into six and if among those is ten cents, 0:18:51.240 --> 0:18:54.000 so this can also this breakup can be a blueprint 0:18:54.080 --> 0:18:56.840 not only for China actually, but for the broader industry 0:18:56.840 --> 0:18:59.040 here broader world. Rather here in the US, we also 0:18:59.080 --> 0:19:01.520 have two big to fail companies that US regulators have 0:19:01.640 --> 0:19:04.399 been scrutinizing. But back to China, ten Cent is one 0:19:04.440 --> 0:19:06.639 of them. And it's hard to imagine that this happened 0:19:06.640 --> 0:19:10.800 without the permission or the blessing of the Chinese government. 0:19:10.840 --> 0:19:12.480 So a lot of people are also saying that this 0:19:12.600 --> 0:19:15.560 might be a signal that, you know, the crackdown in 0:19:15.560 --> 0:19:18.080 the past two years, it's done and dusted. And I 0:19:18.119 --> 0:19:20.600 also will bring up that jackmar returned at least to 0:19:20.600 --> 0:19:23.440 the public knowledge on Monday, so one can just back lit. 0:19:23.480 --> 0:19:27.399 Whether that's coincidence or that's planned, who knows. We're showing 0:19:27.440 --> 0:19:31.679 a chart of Vali Barber's share performance relative to its valuation, 0:19:31.800 --> 0:19:36.280 essentially earnings per share EPs. Unsurprisingly, looking at the Bloomberg 0:19:36.280 --> 0:19:38.960 a number of analysts upbrading price targets, but also looking 0:19:39.000 --> 0:19:42.159 at the bonds trading volumes very high. A lot of 0:19:42.160 --> 0:19:46.640 interest in Ali Baba right now. What happens next? Right? 0:19:46.720 --> 0:19:49.919 Does this happen overnight? Is the investor community bracing for 0:19:49.960 --> 0:19:52.520 an instant split in instant IPO or is this something 0:19:52.520 --> 0:19:55.040 that is going to be protracted. I think now investors 0:19:55.080 --> 0:19:57.320 are just really on a weight and ce mode. But again, 0:19:57.720 --> 0:19:59.960 this likely happened with a blessing of the Chinese government. 0:20:00.080 --> 0:20:02.000 I think more than Ali Baba, they're looking to see 0:20:02.000 --> 0:20:05.280 whether this will affect other companies. So Ali Baba isn't 0:20:05.280 --> 0:20:07.640 the only big company out there. There's also ant There's 0:20:07.640 --> 0:20:11.680 also ten Cent JDS, so it'll be kind of Ali Baba. 0:20:11.680 --> 0:20:13.119 I don't want to call it guinea pig. It's the 0:20:13.119 --> 0:20:15.080 only thing I could think of right now, the only word, 0:20:15.080 --> 0:20:19.600 But it's the pioneer. There's the first company in China 0:20:19.640 --> 0:20:21.840 to do this at least in recent memory, so it'll 0:20:21.840 --> 0:20:24.040 really be a blueprint, and that's what investors are seeing. 0:20:24.040 --> 0:20:27.320 How this will affect the broader industry in China. All right, 0:20:27.359 --> 0:20:29.760 Bloomberg's Isabel Lee on the China Tech Beat, Thank you 0:20:29.840 --> 0:20:40.960 so much. Welcome back to Bloomberg Technology. I'med Lovelow in 0:20:40.960 --> 0:20:45.440 San Francisco. It's going viral art fish intelligence experts, industry 0:20:45.520 --> 0:20:48.639 leaders and research is including Elon Musk and Apple co 0:20:48.760 --> 0:20:52.000 founder Steve Wozniak, calling on developers to hit the pause 0:20:52.040 --> 0:20:55.920 button on training powerful AI models. More than eleven hundred 0:20:55.960 --> 0:20:58.560 people in the industry signed a petition calling for a 0:20:58.680 --> 0:21:02.000 six month break from training AI systems that are more 0:21:02.040 --> 0:21:06.600 powerful than the latest iteration behind open aiyes Chat GPT. 0:21:06.800 --> 0:21:09.719 The idea is to allow for the development of shared 0:21:09.880 --> 0:21:14.160 safety protocols. Joining me on set to discuss technologist Sarah Gaw, 0:21:14.240 --> 0:21:17.520 a former general partner at Greylock now founder of early 0:21:17.600 --> 0:21:23.240 stage AI focus VC firm Conviction. I'm really happy that 0:21:23.280 --> 0:21:28.120 you're here. Thanks. You know this space many signatories to this. 0:21:28.880 --> 0:21:32.520 They're basically saying we've come quite far. Stop we need 0:21:32.560 --> 0:21:37.800 to rethink the parameters around this your immediate reaction to that. Yeah, 0:21:37.920 --> 0:21:41.199 so I would start with, like, AI is just an 0:21:41.240 --> 0:21:43.880 advanced form of computing. So it's like saying we're going 0:21:43.920 --> 0:21:47.800 to stop development on computing until we can guarantee sort 0:21:47.800 --> 0:21:51.640 of a writing code perspective from a layman's perspective, Yeah, 0:21:51.680 --> 0:21:54.359 just from it's a general technology that's a tool that 0:21:54.359 --> 0:21:57.680 can be used for like huge value creation and also 0:21:57.760 --> 0:22:01.639 buy bad actors. Right, But you draw comparison to computing 0:22:01.720 --> 0:22:03.679 or the Internet. The move is not to call a 0:22:03.760 --> 0:22:07.760 moratorium on the Internet. It's to develop like safety protocols 0:22:08.000 --> 0:22:11.719 and be transparent about access. So you're somebody that's investing 0:22:11.880 --> 0:22:14.800 actively in AI related startups will get to that in 0:22:14.800 --> 0:22:19.879 a second. How realistic is it to ask founders like 0:22:19.920 --> 0:22:23.040 the ones that you back to just stop. How does 0:22:23.040 --> 0:22:25.760 that even work? Yeah, So there's certainly a question on 0:22:26.400 --> 0:22:31.520 enforcement here, right, because most of the research that would 0:22:31.520 --> 0:22:35.960 be related to developing a model more capable than something 0:22:35.960 --> 0:22:38.840 like GPT four is very expensive to do. So the 0:22:38.920 --> 0:22:42.080 number of labs that are capable of it, of funding 0:22:42.080 --> 0:22:44.679 an effort like that is very few, and you know 0:22:44.720 --> 0:22:48.320 they're staffed with teams that are very focused on alignment 0:22:48.400 --> 0:22:52.560 and responsible development. But if a set of like largely 0:22:52.600 --> 0:22:56.320 these signatories do not belong to those labs, and so 0:22:56.640 --> 0:22:58.919 it's not as if you have people generally at the 0:22:58.920 --> 0:23:01.480 City of the Art calling moratorium. You have people who 0:23:01.840 --> 0:23:04.520 are not part of those state of the art adverts. Right, 0:23:04.520 --> 0:23:07.000