WEBVTT - Apple's Tough Start in China and TikTok's Bill 0:00:01.400 --> 0:00:02.120 From Mahart. 0:00:02.279 --> 0:00:06.720 We're Innovation, Money and Power Collie in Silicon Vallet NBN. 0:00:07.040 --> 0:00:11.080 This is Bloomberg Technology with Caroline Hyde and Ed lud Love. 0:00:24.680 --> 0:00:28.040 I'm Caroline Hyder Bloomberg's World headquarters in New York, and I'm. 0:00:28.040 --> 0:00:31.200 Ed Lodlow in San Francisco. This is Bloomberg Technology coming up. 0:00:31.280 --> 0:00:34.760 Apple faces its worst start to the year in China 0:00:34.880 --> 0:00:37.960 that since the COVID pandemic, as new reports shows sales 0:00:38.000 --> 0:00:39.960 fell by nineteen percent in the first quarter. 0:00:40.760 --> 0:00:43.160 Plus the Senate is set to consider the ninety five 0:00:43.200 --> 0:00:46.360 billion dollar aid package that could lead to a nationwide 0:00:46.360 --> 0:00:48.559 ban on TikTok if not divested. 0:00:48.600 --> 0:00:50.639 We'll go on the ground to Washington and we. 0:00:50.600 --> 0:00:53.000 Put your head to Tesla earnings after the Bella's investors 0:00:53.040 --> 0:00:55.200 brace for Musk to nix the roll out of a 0:00:55.240 --> 0:00:59.200 cheaper model and refocus on developing a robotax shares already 0:00:59.240 --> 0:01:02.640 suffering their long routes is twenty twenty two. We'll discussed 0:01:02.680 --> 0:01:05.119 that and so much more throughout this hour. But even 0:01:05.160 --> 0:01:08.319 as we sit with much anticipation of the earnings to come, 0:01:08.560 --> 0:01:11.240 we managed to see some risk appetite in the market today. 0:01:11.560 --> 0:01:13.600 Maybe the bad news is good news from a macro 0:01:13.720 --> 0:01:16.720 perspective today, maybe some of that business activity actually cooling 0:01:16.760 --> 0:01:20.240 off more than the market anticipated means well we decide 0:01:20.280 --> 0:01:22.120 to go into equities as we think the Federals of 0:01:22.240 --> 0:01:25.000 maybe has more space to be cutting in the second 0:01:25.040 --> 0:01:27.440 half of the year. Now's THATAK currently off up one 0:01:27.520 --> 0:01:29.480 and a half percent, but remember we've been beaten up, 0:01:29.560 --> 0:01:31.880 particularly at the end of last week two year yield 0:01:32.040 --> 0:01:34.920 big auction sixty nine billion dollars worth record amount coming 0:01:34.959 --> 0:01:37.959 to the market, yet still yields managing to be falling today. 0:01:38.200 --> 0:01:39.920 That's so as we see money move into some of 0:01:39.959 --> 0:01:42.679 the havens we're seeing four point ninety three there are thereabouts, 0:01:42.680 --> 0:01:44.920 so interesting that we've got equities rallying and indeed Bob 0:01:44.920 --> 0:01:47.960 Market's rallying on this particular day. Stocks six hundred over 0:01:48.000 --> 0:01:50.440 in Europe also having a stellar run. On the moment, 0:01:50.520 --> 0:01:54.040 we're up a percentage point, notably UK call out for 0:01:54.080 --> 0:01:56.680 them the footsy one hundred crentyet a new record high. 0:01:56.800 --> 0:01:58.400 And that's actually as we see some of the haven 0:01:58.440 --> 0:02:01.800 stocks there actually do well amid some of the geopolitical tensions. 0:02:02.040 --> 0:02:04.640 We have a look overall at money moving into both 0:02:04.760 --> 0:02:07.520 risk asset classes, and indeed it's a good old bitcoin, 0:02:07.640 --> 0:02:10.040 but four ten percent at the moment, we're currently at 0:02:10.080 --> 0:02:12.320 sixty eight hundred and forty nine, so well off. The 0:02:12.400 --> 0:02:15.960 highs are still money coming in despite a relatively strong dollar. 0:02:16.040 --> 0:02:16.120 Ed. 0:02:16.120 --> 0:02:17.640 What for you've got coming up on the micro. 0:02:17.600 --> 0:02:20.680 Are earnings and a lot of individual individual tech names. 0:02:20.680 --> 0:02:22.720 Tesla's getting a boost ahead of earnings. After the bell, 0:02:22.800 --> 0:02:26.000 we will play Oh get ready to play Tesla Bingo. 0:02:26.120 --> 0:02:27.520 Tune in at the end of the show to find 0:02:27.520 --> 0:02:30.600 out what I'm talking about. Spotify swing to profit, strong 0:02:30.639 --> 0:02:33.720 sub subscriber growth, Bloomberg's actually Carmen's going to join us. 0:02:33.720 --> 0:02:35.160 This is a name that a lot of people watching. 0:02:35.200 --> 0:02:37.000 Look at the big jump in the shares and then 0:02:37.040 --> 0:02:40.960 Adobe's higher. It's the one year anniversary since Firefly was released. 0:02:41.000 --> 0:02:44.640 I think there's big questions about particularly text to video generation. 0:02:44.960 --> 0:02:47.840 We have a key interview with an Adobe executive. Then 0:02:47.880 --> 0:02:51.160 there's Apple, so Apple's interesting. We're now higher, maybe four 0:02:51.200 --> 0:02:54.320 tens one percent in the session. We had open lower, 0:02:54.680 --> 0:02:57.079 but basically we're trading at the same level on Apple 0:02:57.120 --> 0:02:59.920 we were one year ago. It has been a difficult start. 0:02:59.680 --> 0:03:00.000 To the year. 0:03:00.520 --> 0:03:05.600 Concern principally about China. Third party data Counterpoint Research shows 0:03:05.639 --> 0:03:09.200 that iPhone sales in China down nineteen percent one nine. 0:03:09.520 --> 0:03:13.080 More interesting, perhaps, is the other data outside of Apple 0:03:13.320 --> 0:03:17.440 showing domestic handset makers gaining market share. Apple has fallen 0:03:17.480 --> 0:03:20.800 to third and it's on par with Huawei, which is 0:03:20.880 --> 0:03:23.880 kind of resurgent at the higher end of the smartphone market. 0:03:24.960 --> 0:03:26.960 The data doesn't seem to be worrying. 0:03:26.680 --> 0:03:27.280 Anyone right now. 0:03:27.360 --> 0:03:29.919 We continue to push higher in the session, but big 0:03:30.000 --> 0:03:33.880 picture ahead of earnings later on next week, Apple in focus. 0:03:33.960 --> 0:03:37.320 Let's talk to none other than Bloomberg's chief Apple correspondent, 0:03:37.400 --> 0:03:41.240 Mark German. We stress third party data. It is not 0:03:41.320 --> 0:03:43.960 Apple telling us this, but there's a bit of concern 0:03:44.000 --> 0:03:46.760 that China is still the key battleground and the iPhone 0:03:47.000 --> 0:03:48.080 is losing ground mark. 0:03:50.280 --> 0:03:53.160 This is exactly what Wall Street and investors have been 0:03:53.200 --> 0:03:57.360 bracing for another big decline in China. As you know, 0:03:57.440 --> 0:04:00.720 Apple had its biggest decline in a cup of years 0:04:01.520 --> 0:04:05.000 last quarter related to overall China sales, and now it 0:04:05.040 --> 0:04:07.240 looks like you're going to see another decline in China 0:04:07.760 --> 0:04:10.920 given this data from Counterpoint Research. Now, as I typically say, 0:04:11.560 --> 0:04:14.560 these data points are typically not exactly on the money, 0:04:15.000 --> 0:04:17.760 but they're usually directionally correct. So if they're telling us 0:04:17.760 --> 0:04:20.040 that iPhone sales in China are down by a fifth, 0:04:20.720 --> 0:04:22.920 I would believe that iPhone sales in China are down 0:04:23.000 --> 0:04:27.120 quite considerably, not maybe as bad as nineteen percent, but 0:04:27.240 --> 0:04:30.119 in all likelihood they're going to be down, bringing down 0:04:30.560 --> 0:04:32.680 of the overall picture in China. Now, why is that 0:04:32.720 --> 0:04:36.240 partcurely interesting? Because even though China had about a two 0:04:36.279 --> 0:04:39.720 billion dollar decline in the prior quarter, Tim Cook on 0:04:39.760 --> 0:04:41.960 the earnings call said, that's not because of the iPhone, 0:04:42.000 --> 0:04:45.159 it's because of Apple's other products that they sell in China. Well, 0:04:45.160 --> 0:04:48.159 this timearound, it's likely because the iPhone. If these numbers 0:04:48.160 --> 0:04:49.600 are to be believed to be. 0:04:49.240 --> 0:04:53.240 Believed, let's talk about other products. Because we've kind of 0:04:53.320 --> 0:04:56.640 got signaling on all of this before IDC another third 0:04:56.680 --> 0:04:59.880 party data giving us a similar picture. What's new on 0:05:00.160 --> 0:05:00.880 day mark? Is it? 0:05:01.320 --> 0:05:01.599 Well? 0:05:01.600 --> 0:05:03.480 May seventh, we've got a new event and it's all 0:05:03.480 --> 0:05:05.680 around those new iPads. 0:05:06.040 --> 0:05:09.039 Yeah, as I've been saying on here and on power 0:05:09.080 --> 0:05:11.800 on the last several weeks, Apple is set to launch 0:05:11.880 --> 0:05:15.679 its biggest free damp to the iPad in over five years. 0:05:15.760 --> 0:05:17.960 You're going to see new versions of the iPad air 0:05:18.080 --> 0:05:21.280 in the iPad pro introduced on May seventh. They're going 0:05:21.320 --> 0:05:23.880 to play a video on their website. They're trying something 0:05:23.920 --> 0:05:27.120 new here, a video starting time of seven am versus 0:05:27.160 --> 0:05:31.240 the usual ten am, and they're announcing this video well 0:05:31.279 --> 0:05:35.360 in advance. They've been trying some different things lately. Their 0:05:35.440 --> 0:05:38.320 usual cadence is to announce these things seven days in advance, 0:05:38.360 --> 0:05:41.080 So now we're getting a full two weeks, which is 0:05:41.160 --> 0:05:43.480 quite interesting. Maybe they want a little bit more momentum 0:05:43.520 --> 0:05:46.239 leading into that they're trying to see for these smaller 0:05:46.320 --> 0:05:49.960 scale launches if more advanced notice brings in more people. 0:05:50.360 --> 0:05:52.360 So this is certainly going to look out for new 0:05:52.400 --> 0:05:56.880 iPad pro, new iPad Air, new Apple pencil, new Magic keyboards, 0:05:56.920 --> 0:05:59.800 all coming about one month before they announced their new 0:05:59.800 --> 0:06:03.640 AA initiatives at the Worldwide Developers Conference in early June. 0:06:03.760 --> 0:06:05.480 So this is going to be significant. 0:06:05.480 --> 0:06:08.120 In the hope, if you're on Wall Street or a 0:06:08.200 --> 0:06:11.279 shareholder of the company, is that this is going to 0:06:11.320 --> 0:06:14.400 boost iPad sales, which have been down quite considerably the 0:06:14.440 --> 0:06:17.360 last several quarters due to a lack of any updates 0:06:17.400 --> 0:06:19.520 across twenty twenty three. 0:06:19.240 --> 0:06:21.800 And they're in lines a lot of the issue, a 0:06:21.880 --> 0:06:24.960 lack of update and certainly weakness in China. Mark German 0:06:25.080 --> 0:06:28.960 always telling us as telling us at first reappreciate it. Meanwhile, 0:06:29.160 --> 0:06:31.800 let's continue the conversation now on basically where you should 0:06:31.800 --> 0:06:36.240 sit with Apple when you're an investor, Ioka, you're Yoshi Yoka. Sorry, 0:06:36.400 --> 0:06:38.360 get my words out today, portfolio manager over at Wealth 0:06:38.440 --> 0:06:41.680 Enhancement Group in the house with us, Ioka. When you're 0:06:41.680 --> 0:06:43.760 looking at Apple, when you've seen some of the weakness, 0:06:43.839 --> 0:06:49.039 the worries about product updates, about perhaps behind the curve 0:06:49.080 --> 0:06:51.359 when it comes to AI, is this still such a 0:06:51.400 --> 0:06:54.360 solid name that you cannot avoid but to remain allocated 0:06:54.400 --> 0:06:56.040 to it, would you start to take some risk off? 0:06:56.440 --> 0:06:58.920 It's a great question, Caroline. So you know, when we 0:06:58.960 --> 0:07:01.440 look at Apple, it is a great company. It's got 0:07:01.480 --> 0:07:04.880 a high quality balance sheet. There's so much cash on 0:07:04.960 --> 0:07:07.200 their balance sheet and that allows them. 0:07:07.120 --> 0:07:08.320 To buy back a lot of stock. 0:07:08.680 --> 0:07:10.560 It's a big position within the S and P five 0:07:10.600 --> 0:07:13.400 hundred index, so it is difficult to not own it. 0:07:13.600 --> 0:07:15.640 And yet we do start to see some of these 0:07:15.680 --> 0:07:19.360 issues with Apple in terms of innovation and then being 0:07:19.400 --> 0:07:22.480 able to really bring new products that can continue to 0:07:22.560 --> 0:07:25.160 grow at the pace that they have been growing over. 0:07:25.000 --> 0:07:26.680 The last several years. And I think this is some 0:07:26.760 --> 0:07:29.960 of the tension we're seeing across the so called Magnificent seven, 0:07:30.160 --> 0:07:33.480 those that are deemed less than magnificent for some still 0:07:33.480 --> 0:07:36.200 managing to do very well. When we're worried about a 0:07:36.280 --> 0:07:38.360 Tesla and Apple, which in many ways have very similar 0:07:38.400 --> 0:07:43.160 issues China weakness, competition coming from China, worries about ultimately 0:07:43.240 --> 0:07:46.560 a lack of an update from a product, is it more. Therefore, 0:07:46.560 --> 0:07:50.440 you have to look at valuations rather than trying to 0:07:50.440 --> 0:07:52.440 see a narrative as to when you get the next product. 0:07:52.600 --> 0:07:55.320 I think it's the combination of both valuation and then 0:07:55.480 --> 0:07:59.160 just future growth. I think both Apple and Tesla are 0:07:59.200 --> 0:08:02.960 suffering from, you know, the issues that you talked about, 0:08:03.160 --> 0:08:06.600 and that's dampening their overall growth going forward, and so 0:08:07.000 --> 0:08:10.520 valuation for that lower growth is a little bit higher 0:08:10.520 --> 0:08:11.520 than everybody would like to. 0:08:11.520 --> 0:08:17.640 Pay the OCO. If the megacaps don't beat, what happens. 0:08:18.200 --> 0:08:19.920 You know, I think there could be a little bit 0:08:19.960 --> 0:08:22.960 of another sort of sell off in the market. We 0:08:23.000 --> 0:08:25.800 saw it last week and a half, you know. Ever 0:08:25.840 --> 0:08:28.960 since the inflation print, and I think we do need 0:08:29.000 --> 0:08:35.400 to see a lot of these larger names Microsoft, Amazon, Google, Meta. 0:08:35.760 --> 0:08:38.160 They need to come out and show us that they 0:08:38.200 --> 0:08:40.720 can continue to grow at the pace that they can grow, 0:08:40.960 --> 0:08:43.880 and show that free cash flow growth so that people 0:08:43.920 --> 0:08:46.680 can continue to rely on them for that quality growth. 0:08:48.760 --> 0:08:49.640 Do you get this sense here? 0:08:49.640 --> 0:08:52.840 Okay, this is the quarter where we look past the 0:08:52.880 --> 0:08:56.360 AI height and we start again to look at fundamentals. 0:08:56.440 --> 0:08:59.480 Did you have earnings growth? How is your free cash flow? 0:09:00.400 --> 0:09:01.400 Boring things like that? 0:09:02.240 --> 0:09:03.760 You know, I think it's going to be a combination 0:09:03.880 --> 0:09:06.280 of both ed in terms of you know, you have 0:09:06.360 --> 0:09:09.600 to produce those numbers. Those fundamentals are going to matter, 0:09:10.000 --> 0:09:13.040 but everybody wants to look at the future and say, well, 0:09:13.160 --> 0:09:17.280 can you continue to produce those quality numbers that we've seen. 0:09:17.600 --> 0:09:21.040 So AI continues to be, you know, a tailwind that 0:09:21.080 --> 0:09:26.000 everybody wants to see production out of and further continuance 0:09:26.160 --> 0:09:28.520 of that revenue and earnings growth. 0:09:29.640 --> 0:09:33.720 When you are seeing such a run up in big 0:09:33.760 --> 0:09:36.560 tech of late, how much you thinking about the macro, 0:09:37.080 --> 0:09:39.000 thinking about the data that we got today. 0:09:39.280 --> 0:09:39.439 Oh? 0:09:39.520 --> 0:09:42.520 Absolutely, I think the macro always contributes to the overall 0:09:42.760 --> 0:09:46.679 market narrative. You know, the larger cap names just tend 0:09:46.760 --> 0:09:49.320 to be at the very top of the funnel, per se, 0:09:50.080 --> 0:09:53.520 and they are technically those long duration assets that everybody 0:09:53.600 --> 0:09:57.080 likes to talk about and are most impacted by higher 0:09:57.120 --> 0:10:01.520 interest rates, and so they are a a crucial part 0:10:01.679 --> 0:10:03.679 of how we look at the overall macro as well 0:10:03.720 --> 0:10:04.959 as the individual stocks. 0:10:05.960 --> 0:10:08.360 Let's do a case study, which is Spotify. It's an 0:10:08.520 --> 0:10:13.400 interesting subscriber and ad based platform, profit and user growth. 0:10:13.400 --> 0:10:14.920 What does that tell you? 0:10:14.920 --> 0:10:17.439 You know, Spotify has been on quite a tear over 0:10:17.480 --> 0:10:21.800 the last year. They've really focused on managing costs and 0:10:22.000 --> 0:10:25.280 you know, as you know everybody's seen with the results, 0:10:25.440 --> 0:10:29.080 those gross margin numbers were really eye popping, you know, 0:10:29.240 --> 0:10:33.559 seeing those. The guidance for gross margin to continue higher 0:10:33.600 --> 0:10:36.880 at twenty eight percent next quarter is definitely something that 0:10:36.920 --> 0:10:40.520 we can continue to see with Spotify really, you know, 0:10:41.240 --> 0:10:45.360 generating that revenue and the earnings growth and managing the 0:10:45.400 --> 0:10:46.800 costs while they do that. 0:10:48.160 --> 0:10:50.680 The stock on track for its biggest jump since October 0:10:50.679 --> 0:10:55.120 twenty nineteen. Are you Yoshioka, portfolio manager a wealth enhancement group. 0:10:55.200 --> 0:11:00.000 Thank you. 0:11:02.760 --> 0:11:05.360 Let's get back to Spotify earnings now. After the audio 0:11:05.360 --> 0:11:08.920 streaming giants swung to profit in the first quarter. Bloomberg's 0:11:08.920 --> 0:11:12.120 actually Carmens here with the details swung to profit and 0:11:12.200 --> 0:11:13.320 subscriber growth? 0:11:13.480 --> 0:11:15.120 What were behind those two things? 0:11:17.400 --> 0:11:20.680 Over the past year, Spotify has really changed its business 0:11:20.760 --> 0:11:23.320 today and its earnings called Daniel like the CEO, called 0:11:23.320 --> 0:11:27.280 it the new Spotify. They reduced their costs significantly, particularly 0:11:27.320 --> 0:11:30.040 in their podcast business, which had been weighing on margins, 0:11:30.440 --> 0:11:33.120 and they've reduced their costs. They unfortunately did have to 0:11:33.120 --> 0:11:35.800 reduce their headcount quite a bit, but we're seeing that 0:11:35.880 --> 0:11:37.920 play out in that first quarter earnings for sure. 0:11:38.679 --> 0:11:42.720 I mean, phenomenal move in shares Ashley, and yet still 0:11:43.240 --> 0:11:46.440 some of the forecasts maybe behind where the market and anticipated. 0:11:46.559 --> 0:11:49.079 Is this just such a feel good factor around profitability? 0:11:49.120 --> 0:11:53.760 Finally, Yeah, I think the investors are really thrilled to 0:11:53.760 --> 0:11:56.880 see that they're still growing their user base and their subscribers, 0:11:57.040 --> 0:11:59.800 that profitability, and I mean it's worth noting that this 0:11:59.840 --> 0:12:02.920 is happening while they've reduced the number of people working 0:12:02.920 --> 0:12:05.920 from them, as well as increasing prices around the world 0:12:06.120 --> 0:12:08.800 with more price increases to come. So I think investors 0:12:08.840 --> 0:12:10.839 are just feeling like there's a lot of opportunity here. 0:12:10.880 --> 0:12:13.199 For them to continue growing and squeezing more revenue out 0:12:13.200 --> 0:12:14.240 of their users. 0:12:15.000 --> 0:12:18.280 Something that happened in the current period was Taylor Swift happened? 0:12:18.400 --> 0:12:20.680 I know, I listened to the entire thing on Friday. 0:12:21.080 --> 0:12:22.000 Did they talk about that? 0:12:23.960 --> 0:12:24.679 They did not. 0:12:24.960 --> 0:12:28.439 They did not talk about Taylor Swift, though I wish. 0:12:28.600 --> 0:12:31.240 But more what they perhaps are talking about is their 0:12:31.280 --> 0:12:35.320 focus on audio from the book's perspective. Sure, they've been 0:12:35.520 --> 0:12:38.200 pulling back in podcasting, but they still kept their heavy hitters. 0:12:38.240 --> 0:12:40.760 I think of Joe Rogan. But what then of the 0:12:40.800 --> 0:12:44.080 ability to charge more for audiobooks in full Ashley That 0:12:44.080 --> 0:12:44.920 seems to be working. 0:12:46.559 --> 0:12:49.880 Yes, so we had reported this last week, but Daniel 0:12:49.960 --> 0:12:52.640 Eck also mentioned this on the call today that basically, 0:12:52.880 --> 0:12:55.720 you know, they introduced fifteen hours of audiobook listening to 0:12:55.720 --> 0:12:58.800 subscribers in certain parts of the world, and of those 0:12:58.920 --> 0:13:01.880 users who have had the ability to play audiobooks, twenty 0:13:01.920 --> 0:13:04.520 five percent of them have taken advantage of their offering. 0:13:04.840 --> 0:13:07.400 So what they're really seeing is adoption and what they 0:13:07.480 --> 0:13:10.040 can do with that adoption. I mean, they could charge more, 0:13:10.360 --> 0:13:13.240 they can break out this audiobooks only tier which they launched. 0:13:13.480 --> 0:13:15.559 I think it's giving them a lot of room to 0:13:15.640 --> 0:13:19.480 potentially play with the different subscription tiers once again giving 0:13:19.520 --> 0:13:22.000 them flexibility with their users and the revenue that they 0:13:22.040 --> 0:13:22.760 can get from. 0:13:22.559 --> 0:13:25.959 Them as the opportunity. Investors love it. Ashley Carmen, thanks 0:13:25.960 --> 0:13:28.760 so much coming on talking us through what is a 0:13:28.840 --> 0:13:31.800 key mover today. Meanwhile, sticking with earnings and those that 0:13:31.880 --> 0:13:35.079 are companies over in Europe, SAP says it's current cloud 0:13:35.120 --> 0:13:38.280 backlog so as fastest growth on record. This comes as 0:13:38.320 --> 0:13:40.560 Europe's biggest software firm is actually seeking to my great 0:13:40.600 --> 0:13:43.720 customers from its legacy on premise software to the cloud, 0:13:43.920 --> 0:13:46.480 where of course it gets to offer business AI services too. 0:13:46.480 --> 0:13:48.760 Sweetened that deal. We spoke to the CFO a little 0:13:48.760 --> 0:13:49.319 earlier today. 0:13:51.120 --> 0:13:54.760 The advent of AI has clearly propelled the story of 0:13:54.800 --> 0:13:57.240 the transformation to the cloud. To move our customers from 0:13:57.280 --> 0:14:00.760 their on prem installations onto clouds are thing in an 0:14:01.000 --> 0:14:04.000 uptick on a constant currency basis, and all that is 0:14:04.080 --> 0:14:06.880 driven really by the core offering we have in the cloud, 0:14:06.920 --> 0:14:09.480 which is called the cloud ear Peacewite. That offering has 0:14:09.520 --> 0:14:12.800 actually generated in excess of thirty percent growth for nine 0:14:12.880 --> 0:14:13.559 quarters in a row. 0:14:13.640 --> 0:14:24.800 Now time for talking tech first up, Elon Musk's social 0:14:24.880 --> 0:14:28.040 network has been hit with an interim injunction by an 0:14:28.080 --> 0:14:32.280 Australian court to remove footage of a recent terrorist attack 0:14:32.320 --> 0:14:35.240 and hearing last night in Sydney, the Federal Court of 0:14:35.280 --> 0:14:39.120 Australia ordered x to hide all recordings of the attack 0:14:39.200 --> 0:14:40.040 until Wednesday. 0:14:40.280 --> 0:14:42.880 The court will then convene for a second hearing at 0:14:42.920 --> 0:14:46.520 a later date to determine the validity of a removal 0:14:46.600 --> 0:14:51.240 notice by the country's e Safety Commissioner. Meanwhile, ASML is 0:14:51.280 --> 0:14:54.120 weighing options to expand its presence in the Netherlands. The 0:14:54.160 --> 0:14:57.200 move comes after the government committed two point seven billion 0:14:57.240 --> 0:15:01.000 dollars to infrastructure and education spending in the region. The 0:15:01.040 --> 0:15:03.360 company said it's signed a letter of intent and the 0:15:03.360 --> 0:15:06.600 final decision is subject to ironing out a few crucial 0:15:06.640 --> 0:15:10.800 points and Perplexity Ai has raised about sixty three million 0:15:10.840 --> 0:15:13.840 dollars in a new funding round that values the company 0:15:14.080 --> 0:15:17.520 and more than one billion dollars. Perplexity offers an AI 0:15:17.640 --> 0:15:22.200 chatbot that summarizes search results, list citations for its answers, 0:15:22.320 --> 0:15:26.120 and helps users refine their queries to get the best responses. 0:15:26.120 --> 0:15:32.200 The financing doubles perplexities valuation from just three months ago, Caroline. 0:15:31.720 --> 0:15:34.200 AI still so hot. Let's talk about AI in the 0:15:34.200 --> 0:15:37.400 context of Adobe now, because it's bringing more generative AI 0:15:37.480 --> 0:15:40.840 tools to Photoshop powered by it's Adobe Fileflight, Image three 0:15:40.960 --> 0:15:45.160 Foundation model. Joining us now from their Maps Creativity conference 0:15:45.200 --> 0:15:50.120 over in London, David Wanjani, Adobe Digital Media President, Welcome, 0:15:50.280 --> 0:15:53.800 and you know, how is this incentivizing clients to pay 0:15:53.840 --> 0:15:56.320 more for Adobe? How are you seeing generative AI really 0:15:56.360 --> 0:15:58.480 bring about a revenue increase for the business? 0:15:59.320 --> 0:16:02.160 Great to be here, Caline, you know, I think we 0:16:02.240 --> 0:16:04.480 have to put everything we're doing with generative AI in 0:16:04.520 --> 0:16:06.880 the context of what we've been doing over the last year. 0:16:06.960 --> 0:16:11.120 We first introduced generative AI a year ago, and in 0:16:11.200 --> 0:16:15.400 that period of time, we've added imaging model, a vector model, 0:16:15.440 --> 0:16:19.600 which is another very important format for a creative professionals, 0:16:19.640 --> 0:16:23.520 a design model. We've enabled customization of that content for 0:16:23.640 --> 0:16:26.760 their specific design needs or their assets that they work on, 0:16:27.160 --> 0:16:31.160 and we've exposed that in Photoshop at our creative cloud applications. 0:16:31.200 --> 0:16:35.040 We've exposed it in Adobe Express for marketers and creative 0:16:35.240 --> 0:16:39.520 professionals and solentrepreneurs, and we've exposed it as APIs for 0:16:39.760 --> 0:16:43.480 a broad base of automation workflows, And what this has 0:16:43.480 --> 0:16:46.240 really done is it's supercharged content creation. If you're a 0:16:46.240 --> 0:16:49.280 creative pro, you can produce that content much more effectively 0:16:49.400 --> 0:16:52.920 and much more quickly. If you're trying to automate workflows, 0:16:52.960 --> 0:16:55.480 you can do that with your existing environments that you have. 0:16:55.840 --> 0:16:58.160 And if you're a marketer, you can react more quickly 0:16:58.160 --> 0:17:02.240 to anything that's happening on social really empowered businesses to 0:17:02.320 --> 0:17:04.840 operate at another level of scale. 0:17:05.200 --> 0:17:08.480 I want to talk about scale and the difficulty ultimately 0:17:08.880 --> 0:17:12.200 of feeding data into foundational models. At the moment, you've 0:17:12.240 --> 0:17:14.520 just been unveiling sort of the new foundational model, and 0:17:14.560 --> 0:17:17.320 I'm interested in is what's going in because what set 0:17:17.359 --> 0:17:20.000 you apart, particularly in the narrative of Adobe, is that 0:17:20.280 --> 0:17:25.520 you're safer because you are building basically upon your own data, 0:17:25.640 --> 0:17:29.600 your own well images that you own, your stock. But 0:17:29.680 --> 0:17:32.360 then there was some reporting, some bloomberg ultimately that you're 0:17:32.359 --> 0:17:35.280 having to use synthetic data which is sometimes used from 0:17:35.400 --> 0:17:39.439 rival AI well image generators. Can you just tell us 0:17:39.440 --> 0:17:42.480 about how clients are responding to really what your data 0:17:42.520 --> 0:17:43.560 is being trained on right now? 0:17:44.480 --> 0:17:47.320 Yeah, we are, I think, without a doubt, the most 0:17:47.359 --> 0:17:51.520 responsible training model in the market. We've been very clear 0:17:51.680 --> 0:17:54.960 that we have full license rights for everything that we've 0:17:55.240 --> 0:17:58.400 trained on. We have a process that we internally call 0:17:58.560 --> 0:18:02.240 ART which is about accountability, responsibility, and transparency. So everything 0:18:02.240 --> 0:18:05.760 we generate and any model before its hips goes through 0:18:05.800 --> 0:18:06.440 this process. 0:18:06.920 --> 0:18:07.359 We have. 0:18:09.160 --> 0:18:12.320 Basically a moderation system in place so that we make 0:18:12.320 --> 0:18:14.680 sure any content that comes in does not have or 0:18:14.760 --> 0:18:20.119 is not encumbered with any misappropriated IP rights. And so 0:18:20.200 --> 0:18:22.640 customers have been very very clear with us is that 0:18:22.680 --> 0:18:25.760 there's a lot of interesting work going on around the 0:18:25.800 --> 0:18:29.280 industry around AI models, but when it comes to true 0:18:29.280 --> 0:18:33.000 production systems, we're really at the top of the marks 0:18:33.040 --> 0:18:34.960 in terms of the ability to actually use this to 0:18:35.040 --> 0:18:38.240 create and ship content that's generated with these models. 0:18:39.280 --> 0:18:43.200 David, there is only one single question that's being directed 0:18:43.200 --> 0:18:45.520 at a Davy right now, which is when and in 0:18:45.560 --> 0:18:48.960 what form will you have a text to video generation 0:18:49.640 --> 0:18:52.080 platform akin to Sora. 0:18:53.800 --> 0:18:54.399 Yeah, I don't know. 0:18:54.480 --> 0:18:56.680 If you had a chance to see the announcements that 0:18:56.720 --> 0:19:00.320 we made last week at the National American Broadcast, there's 0:19:00.359 --> 0:19:05.119 a video series we announced and we talked about how 0:19:05.240 --> 0:19:08.040 we are We actually gave us sneak of our text 0:19:08.040 --> 0:19:12.200 of video capabilities as part of that, we also announced 0:19:12.560 --> 0:19:16.760 that we're working with Sora, that we're working with Runway 0:19:16.840 --> 0:19:20.560 and with Pika, and together all of these capabilities are 0:19:20.560 --> 0:19:23.320 going to be embedded in all of our creative applications. 0:19:23.880 --> 0:19:27.200 What's really exciting about all this text of video capability 0:19:27.680 --> 0:19:30.480 is that we have the ability now to look at 0:19:30.480 --> 0:19:34.600 this and say, all of this generative capabilities is analogous 0:19:34.640 --> 0:19:36.959 to more cameras in the world, and the more content 0:19:37.000 --> 0:19:39.720 that gets created, the more content comes into our systems 0:19:39.720 --> 0:19:43.160 for editing. We've also been just as clear our technology 0:19:43.280 --> 0:19:47.760 for video, the architecture and the research that's gone into 0:19:47.760 --> 0:19:49.600 it is very similar to what we see out of 0:19:49.640 --> 0:19:52.840 Sora and others, and that we expect to have our 0:19:52.880 --> 0:19:54.880 model in market later this year. 0:19:56.359 --> 0:19:59.680 The strategy in Premier, and when I was at Generalism School, 0:19:59.720 --> 0:20:03.959 i trained Premiere, So it's interesting full circle. You are 0:20:04.080 --> 0:20:07.760 going to use third party models, and so far Photoshop 0:20:08.080 --> 0:20:11.320 has not had the extension of that strategy. Just explain 0:20:11.600 --> 0:20:13.399 why and what you'll do going forward. 0:20:14.560 --> 0:20:18.240 We are going to embrace all models. You know Photoshop 0:20:18.280 --> 0:20:20.080 you will see again later this year. 0:20:20.160 --> 0:20:20.800 You will see. 0:20:20.600 --> 0:20:23.280 Support for any model that can be integrated into Photoshop 0:20:23.280 --> 0:20:27.000 will be integrated into Photoshop. But we also recognize that 0:20:27.040 --> 0:20:30.480 each model has its own personality, and at any given moment, 0:20:30.560 --> 0:20:33.919 what you generate in one model versus another model, there 0:20:34.000 --> 0:20:37.439 might be be varying preferences. The one thing that we 0:20:37.640 --> 0:20:40.439 know is that Firefly is going to be, you know, 0:20:40.960 --> 0:20:44.639 synonymous with the best quality of content, with the best 0:20:44.640 --> 0:20:49.280 detail of content, and with the most controllability of that 0:20:49.359 --> 0:20:53.760 content that's generated in particular, and that means that whatever 0:20:53.880 --> 0:20:57.840 we create with Firefly can get more deeply embedded in 0:20:58.200 --> 0:21:01.240 our tools. As Caroline mentioned, we just had an enormous 0:21:01.280 --> 0:21:04.320 set of announcements in terms of dozens of new capabilities 0:21:04.600 --> 0:21:08.240 of AI generation embedded in our tools and workflows, and 0:21:08.280 --> 0:21:10.199