WEBVTT - Intel Earnings Signal Possible Comeback 0:00:02.520 --> 0:00:13.399 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live 0:00:13.440 --> 0:00:17.200 from coast to coast with Caroline Hide in New York 0:00:17.560 --> 0:00:19.480 and Eva Low in Sent Francisco. 0:00:24.440 --> 0:00:27.640 This is Bloomberg Tech coming up. Intel returns to profitability. 0:00:27.680 --> 0:00:30.440 It gives an upbeat revenue forecasts. Are the chip makers 0:00:30.520 --> 0:00:32.040 comeback efforts working. 0:00:31.880 --> 0:00:34.919 Plus banks for preparing to launch a thirty eight billion 0:00:35.040 --> 0:00:38.159 dollar debt offering to help fund data centers tied to Oracle. 0:00:38.200 --> 0:00:39.559 It's a record for AI. 0:00:39.440 --> 0:00:43.440 Infrastructure, and Mistraus's CEO, Arthur Mench joins us on the 0:00:43.440 --> 0:00:46.879 company's release of a new platform to help enterprise clients 0:00:47.159 --> 0:00:49.240 make customizable AI tools. 0:00:49.280 --> 0:00:51.560 An important private market conversation. We get back to the 0:00:51.600 --> 0:00:53.680 public markets to end this week. We are at a 0:00:53.680 --> 0:00:55.480 new record high when you're looking at the SMP, when 0:00:55.480 --> 0:00:57.280 you're looking at the NASDAC, we're up two percent of 0:00:57.320 --> 0:00:59.280 the course of the last five days. But a real 0:00:59.360 --> 0:01:01.920 tick hire on the day ed the macro picture, the 0:01:01.960 --> 0:01:05.000 inflation cooler than many had worried about, and indeed that 0:01:05.040 --> 0:01:06.880 gives a bedroom to run when it comes to maybe 0:01:06.880 --> 0:01:09.240 some more cuts that the market has already been pricing in. 0:01:09.360 --> 0:01:11.759 We've got China us. We've got plenty to be digesting, 0:01:11.760 --> 0:01:12.800 and you're looking at earnings. 0:01:13.480 --> 0:01:16.920 Yeah, in the earnings context, Intel's post earnings rally has 0:01:17.000 --> 0:01:20.040 basically completely faded. A gain of more than seven percent 0:01:20.360 --> 0:01:23.399 is now less than one percent, but profitable for the 0:01:23.400 --> 0:01:26.479 first time in a long time on a net income basis. 0:01:26.680 --> 0:01:29.720 The PC market was better than they expected. They're making 0:01:29.760 --> 0:01:33.560 some progress in server, even a little bit in foundry. 0:01:34.200 --> 0:01:36.880 The issue is that the quarter was all about getting 0:01:36.880 --> 0:01:39.559 money from anyone they could, clearing some of the debt, 0:01:39.880 --> 0:01:41.880 and there's still a lot of unknowns about how far 0:01:42.000 --> 0:01:43.600 there's left to go on this turnaround plan. 0:01:43.760 --> 0:01:46.039 Correct, Yeah, let's get about where some of the holes 0:01:46.040 --> 0:01:48.960 are still left on Intel Counjin surmanis with US beming 0:01:49.000 --> 0:01:52.520 intelligence senior analysts covering semiconductors, and we are still left 0:01:52.520 --> 0:01:54.920 with a lot to chew on. Because clearly PC doing 0:01:54.920 --> 0:01:57.760 a bit better, maybe even CPUs getting into those data centers. 0:01:57.760 --> 0:02:02.200 But what about the next iteration of fabrication of chips. 0:02:04.400 --> 0:02:07.160 This result shows the first sign in the right direction, 0:02:07.280 --> 0:02:10.200 sort of a turnaround, a beginning of a turnaround. You know, 0:02:10.400 --> 0:02:12.880 the gross margin headwinds. Like you said, the challenges are 0:02:12.960 --> 0:02:16.000 not gone away. But what they showed yesterday where they 0:02:16.080 --> 0:02:18.960 are running their demand is running ahead of the supply, 0:02:19.040 --> 0:02:21.119 which it will be for the first chapter twenty six. 0:02:21.360 --> 0:02:24.600 There were structural gross margin improvements, though we will not 0:02:24.760 --> 0:02:28.280 see a gross margin expansion next year, primarily due to 0:02:28.360 --> 0:02:31.360 the new eighteen A coming on their exit from the 0:02:31.360 --> 0:02:34.000 ALTA business, which was their highest gross margin business. 0:02:34.200 --> 0:02:35.679 But structurally under. 0:02:35.520 --> 0:02:37.760 When you peel the onion, we like what they're doing. 0:02:37.960 --> 0:02:40.040 Most of the eighteen A will be moving from Oregon 0:02:40.080 --> 0:02:42.800 to Arizona, which is a better cost structure fab to 0:02:42.800 --> 0:02:45.560 begin with, a lot more volume will be coming back 0:02:45.600 --> 0:02:48.680 to Intel's foundries, which is better for them as they 0:02:48.720 --> 0:02:52.000 go through the initial transition cost and the revenue scale, 0:02:52.040 --> 0:02:54.720 which it is showing from the higher demand and PCA 0:02:54.840 --> 0:02:59.400 Data center improves slowly structurally the overall gross margins to 0:02:59.400 --> 0:03:00.240 start to keep well. 0:03:01.480 --> 0:03:03.200 I don't know what happened, Conjum, but in the time 0:03:03.240 --> 0:03:07.000 you've been speaking, Intel's now flat and eliminated all of 0:03:07.040 --> 0:03:09.239 its gain of the day. And I'm not saying that's 0:03:09.280 --> 0:03:13.760 your fault. I'm just making the observation. Look, when I 0:03:13.800 --> 0:03:16.880 spoke to the CFO Dave's Instagram the phone, he was 0:03:17.080 --> 0:03:19.440 a bit surprised by some of the end markets that 0:03:19.440 --> 0:03:22.640 they're relying on. On the product side, servers in particular. 0:03:22.800 --> 0:03:26.480 The basic argument they're making is the hyperscalers has suddenly 0:03:26.520 --> 0:03:30.120 realized that you have to at some point update your CPUs, 0:03:30.400 --> 0:03:32.639 you have to invest in them, and so now they're 0:03:32.639 --> 0:03:34.720 saying that actually on a year on year basis, they'll 0:03:34.720 --> 0:03:35.680 see unit growth. 0:03:35.840 --> 0:03:36.760 What did you make of that? 0:03:38.400 --> 0:03:41.040 You know, that is a very credible story to believe in. 0:03:41.120 --> 0:03:44.400 We have seen signs of this in other markets. For example, 0:03:44.480 --> 0:03:47.240 the storage server market has been seeing a big demand 0:03:47.240 --> 0:03:49.480 when it comes to HDD. So when you think about 0:03:49.520 --> 0:03:52.040 every time when we're pinging something like a co pilot, 0:03:52.480 --> 0:03:56.040 it's going and clearing or analyzing data which was sitting 0:03:56.080 --> 0:03:58.520 dormant for the past six months, so the storage servers 0:03:58.560 --> 0:03:59.520 were not really. 0:03:59.280 --> 0:04:00.360 Using them cuddly. 0:04:00.400 --> 0:04:03.040 Now we're pinging them four to five times, So that 0:04:03.120 --> 0:04:05.840 does you know, it is a credible story to believe 0:04:05.880 --> 0:04:09.440 that the need for CPO, even outside AI servers, is 0:04:09.480 --> 0:04:13.240 going to increase now as we involve more and more AI. 0:04:13.040 --> 0:04:13.560 In our world. 0:04:13.600 --> 0:04:17.760 Day Conjensavania Bloomberg Intelligence. Later in the show, we'll get 0:04:17.800 --> 0:04:21.120 more on Intel from the cell side. Meanwhile, banks are 0:04:21.160 --> 0:04:25.360 reportedly preparing a thirty eight billion dollar debt offering for 0:04:25.560 --> 0:04:28.920 data centers tied to Oracle. Sources say the deal could 0:04:28.960 --> 0:04:32.280 launch as soon as Monday, with JP Morgan a MUFG 0:04:32.520 --> 0:04:35.799 among the lead banks. Here to discuss, Bloomberg Intelligence Senior 0:04:35.839 --> 0:04:39.960 tech analyst Anna rag Rana, there's a key point of 0:04:40.040 --> 0:04:44.200 clarification here that Caroline made to the team earlier in 0:04:44.240 --> 0:04:46.839 the chat, and it's not Oracle taking on this debt. 0:04:47.200 --> 0:04:51.279 Its advantage the developer who will do the project. Even so, 0:04:52.080 --> 0:04:54.600 when you see a news piece like that about that 0:04:54.720 --> 0:04:57.640 level of debt supporting the build out in infrastructure, what 0:04:57.800 --> 0:04:58.840 is your reaction to it. 0:05:00.360 --> 0:05:02.560 No, that's a very good point, and in fact, you know, 0:05:02.600 --> 0:05:05.560 I had a very good conversation with our credit analyst, 0:05:06.000 --> 0:05:08.960 Rob Schiffman, and we discussed this quite a bit. We 0:05:09.040 --> 0:05:12.080 have seen something like this coming from other places as well, 0:05:12.120 --> 0:05:16.040 which is when you have a contract from a particular vendor, 0:05:16.360 --> 0:05:19.520 you know you can create, you could an asset back 0:05:19.560 --> 0:05:24.800 securitization product where the contract itself says there is revenue 0:05:24.800 --> 0:05:26.960 that's going to come in the future. So the question 0:05:27.120 --> 0:05:30.640 is whether they're going to be appetite for such large 0:05:31.120 --> 0:05:33.600 dead deals going forward as well, because I think that's 0:05:33.640 --> 0:05:37.520 critical for recognizing a lot of that RPO that's coming 0:05:37.560 --> 0:05:41.280 in into revenue. Otherwise, you know it's going to be 0:05:41.400 --> 0:05:43.480 very difficult to convert that into sales. 0:05:44.360 --> 0:05:47.719 This is about yield, and for the facilities related to advantage, 0:05:47.720 --> 0:05:50.360 they're expected to come to you in about four years 0:05:50.520 --> 0:05:53.200 is about two one year extension options. You're getting two 0:05:53.200 --> 0:05:55.680 and a half percentage points over benchmark those. So people 0:05:55.880 --> 0:05:59.280 who are clamoring to get exposure to the AI narrative 0:05:59.600 --> 0:06:01.800 now just have to do it through equity. They can 0:06:01.839 --> 0:06:03.360 do it through debt, and they can do it in 0:06:03.400 --> 0:06:06.120 a nice yield. More broadly, are we going to see 0:06:06.160 --> 0:06:08.919 these sorts of packages come in this sort of sheer 0:06:09.080 --> 0:06:11.280 scale because of the need that we've got out there 0:06:11.360 --> 0:06:11.839 at the moment. 0:06:13.480 --> 0:06:16.240 So you have to because I think about it, if 0:06:16.279 --> 0:06:19.800 Open Eye has signed a deal worth three hundred billion 0:06:19.839 --> 0:06:22.960 dollars with Oracle, you know, how are you going to 0:06:23.000 --> 0:06:26.040 finance that? How are you going to convert that contract 0:06:26.160 --> 0:06:28.880 into sales? And you need data centers to come there, 0:06:29.080 --> 0:06:31.600 you need equipment, and finally that needs to be realized. 0:06:31.640 --> 0:06:34.359 So we are expecting a lot more in the market. 0:06:34.400 --> 0:06:37.000 The question is whether the private debt market has the 0:06:37.040 --> 0:06:41.120 ability to, you know, basically absorb this level of. 0:06:42.640 --> 0:06:43.159 Debt or not. 0:06:44.200 --> 0:06:47.040 Arak Rana, I'm pretty big intelligence. We'll see how this 0:06:47.320 --> 0:06:49.719 does get absorbed. It's coming to the market as soon 0:06:49.760 --> 0:06:52.560 as Monday. But let's just talk more broadly about what's 0:06:52.560 --> 0:06:54.240 happening in the debt markets, when it comes to tech, 0:06:54.240 --> 0:06:56.440 when it's happening in the equity markets, which are actually 0:06:56.920 --> 0:06:59.400 tech help performing in that particular area. Today, you've got earnings, 0:06:59.400 --> 0:07:01.280 you've got hopes on the China US trade talks, you've 0:07:01.279 --> 0:07:04.160 got stock ticketing on record. After that CPI number came 0:07:04.200 --> 0:07:07.000 in with well a relief that the Fed will potentially 0:07:07.120 --> 0:07:08.599 keep on cutting at the rate in the market things. 0:07:08.640 --> 0:07:11.600 Martin Norton's with US Chief Investment Strategies at EMPOWER. I 0:07:11.640 --> 0:07:13.320 want to go back to what we're just talking about 0:07:13.520 --> 0:07:15.600 and the debt that's coming to the market and the 0:07:15.680 --> 0:07:18.120 absorption that's going to be happening. I'm looking at a 0:07:18.120 --> 0:07:20.040 story right now saying that the Bank of England is 0:07:20.040 --> 0:07:23.520 actually probing data center lending because they're weren't about AI 0:07:23.600 --> 0:07:26.440 bubbles brewing. Is this something you're starting to hear about 0:07:26.440 --> 0:07:26.920 in the market. 0:07:26.960 --> 0:07:27.280 Martyr. 0:07:28.440 --> 0:07:31.520 Well, it's so interesting because a lot of the rationale 0:07:31.760 --> 0:07:35.480 for the I guess complacency around the AI trade has 0:07:35.520 --> 0:07:41.000 been that this is largely being funded by very well capitalized, 0:07:41.160 --> 0:07:45.720 very strong hyperscalers, and the companies are not taking on debt. 0:07:45.760 --> 0:07:49.320 They're using what they have to extend into this space. 0:07:49.720 --> 0:07:53.000 But now in the most recent month, we are beginning 0:07:53.040 --> 0:07:55.440 to see more debt issuance, and I think when you 0:07:55.480 --> 0:07:58.000 think about the scale of investment and the ratio of 0:07:58.040 --> 0:08:01.480 capex to revenue that we're seeing, even the hyperscalers, it 0:08:01.560 --> 0:08:04.000 does argue that we're going to have to use a 0:08:04.040 --> 0:08:07.280 broader range of financing to meet some of the targets 0:08:07.280 --> 0:08:10.000 that we have, And of course that's the signal that 0:08:10.360 --> 0:08:13.200 folks are looking for that there is an AI bubble now, 0:08:13.440 --> 0:08:17.240 you know. I think there's a real difference between extreme valuations, 0:08:17.280 --> 0:08:19.800 which is where I think we are in an AI bubble. 0:08:19.840 --> 0:08:22.520 I think the sentiment has to get more aggressive. I 0:08:22.520 --> 0:08:24.920 think we would have to see far more debt issue. 0:08:25.120 --> 0:08:29.720 I think we've our I guess kind of wildness around it. 0:08:30.520 --> 0:08:32.840 We're getting a few hits to the line. Mart we 0:08:32.840 --> 0:08:37.000 need more compute I'm interested in. Look, five trillion is 0:08:37.000 --> 0:08:38.640 what the spending is likely to be up to twenty 0:08:38.640 --> 0:08:40.559 thirty if we're going to get the data center and 0:08:40.559 --> 0:08:45.600 compute necessary to fuel the AI viewpoint. To that end, 0:08:45.640 --> 0:08:48.080 when you're thinking about clients coming to you saying I 0:08:48.120 --> 0:08:50.679 want exposure, I want it to be cross asset. Are 0:08:50.720 --> 0:08:53.959 you saying don't how you talking about the diversification between 0:08:54.160 --> 0:08:57.160 equity exposure and debt exposure foot bonds and the like. 0:08:58.240 --> 0:09:00.920 Well, at this point, I mean the primary to AI 0:09:01.160 --> 0:09:03.679 still within the equity market. I think this is something 0:09:03.679 --> 0:09:06.600 that especially for the active credit managers, it is an 0:09:06.640 --> 0:09:07.880 opportunity to vet. 0:09:08.040 --> 0:09:10.040 You know, you can get that added yield. 0:09:09.800 --> 0:09:12.080 As suggested, but I do think people want to be 0:09:12.120 --> 0:09:14.560 really cautious in terms of adding that debt. One thing 0:09:14.600 --> 0:09:17.000 that we're talking about a lot in the credit market 0:09:17.080 --> 0:09:19.560 is just how tight spreads are, and so that is 0:09:20.480 --> 0:09:23.120 we want to watch to make sure that isn't you know, 0:09:23.160 --> 0:09:25.959 evaluation risk within the within the credit market. 0:09:27.040 --> 0:09:29.840 Martya earnings was a factor in this market. 0:09:29.840 --> 0:09:30.240 This morning. 0:09:30.280 --> 0:09:32.400 When I came to my desk, we showed Intel actually 0:09:32.480 --> 0:09:36.480 is now basically flat. Even so, in the course of 0:09:36.480 --> 0:09:40.080 a conversation we had with Intel CFO Dave's insner. He 0:09:40.200 --> 0:09:42.520 made for an interesting case study, which is that he 0:09:42.600 --> 0:09:45.920 said they had been very cautious about tariffs, but the 0:09:45.960 --> 0:09:48.679 impact wasn't there in the end, and actually in the 0:09:48.679 --> 0:09:52.400 PC segment on which they depend, shipments were very strong, 0:09:52.520 --> 0:09:55.520 stronger than they had anticipated. Just as a case study, 0:09:55.880 --> 0:09:57.680 you know, that's really interesting data to me. 0:09:57.760 --> 0:09:58.600 What do you make of it? 0:09:59.440 --> 0:10:02.720 I mean, it's totally interesting, and it really echoes what 0:10:02.800 --> 0:10:05.400 we've seen over the course of twenty twenty five, which 0:10:05.440 --> 0:10:09.320 is this sea change in trade policy and yet really 0:10:09.360 --> 0:10:13.600 no discernible effect from either an earnings perspective or from 0:10:13.679 --> 0:10:17.640 an inflation perspective. Our emphasis over this period has been 0:10:17.880 --> 0:10:21.520 expecting to see some hit to earnings, less concern on 0:10:21.559 --> 0:10:24.280 the inflation front, and I think one thing that we're 0:10:24.280 --> 0:10:26.600 really learning over this process is that you can see 0:10:26.600 --> 0:10:30.320 a sea change in policy and yet not necessarily see 0:10:30.320 --> 0:10:33.280 the impact immediately. I think the concern I would raise 0:10:33.320 --> 0:10:35.600 to investors is just because you don't see an immediate 0:10:35.640 --> 0:10:38.520 impact doesn't mean there isn't an impact. When we look 0:10:38.520 --> 0:10:42.400 at that long term implications of globalization on earnings, it 0:10:42.400 --> 0:10:45.960 has been a real positive for the US and globally, 0:10:46.040 --> 0:10:48.480 and so as we roll that back, it stands to 0:10:48.600 --> 0:10:51.240 reason that it is a headwind. Maybe a headwind that 0:10:51.280 --> 0:10:53.480 we can overcome, but a headwind nevertheless. 0:10:54.240 --> 0:10:56.440 Marta, please respond to what is one of the top 0:10:56.440 --> 0:10:59.800 news stories of the day. President Trump says he's halted 0:11:00.000 --> 0:11:04.560 trade talks with Canada because of an advertisement that they ran, 0:11:05.880 --> 0:11:10.040 citing a Reagan era comment, you're aware of it. In response, 0:11:10.880 --> 0:11:14.240 Mark Carney says that trade talks were making progress before 0:11:15.000 --> 0:11:18.480 the president's post on true Social again as a case 0:11:18.520 --> 0:11:22.040 study of trade and policy in this market. 0:11:22.320 --> 0:11:23.520 Your reaction to it. 0:11:24.559 --> 0:11:26.920 Well, I guess I would say that that trade talks 0:11:26.960 --> 0:11:29.120 are the toddler that just won't go to bed. 0:11:29.400 --> 0:11:32.200 I don't think this story is really over yet. 0:11:32.280 --> 0:11:36.440 I mean, we have a lot of certainty, I guess 0:11:36.520 --> 0:11:39.440 in terms of the overall effective terrif rate, but the 0:11:39.600 --> 0:11:42.640 fine details of what those trade talks look like, yes, 0:11:42.720 --> 0:11:45.160 with Canada, but also of course there's still a lot. 0:11:45.000 --> 0:11:46.800 Of negotiation with China. 0:11:46.880 --> 0:11:48.920 So I think this is something that will be this 0:11:49.040 --> 0:11:51.520 kind of lingering volatility within the market. 0:11:51.840 --> 0:11:55.280 Marta, you have a sea of parents of young children 0:11:55.360 --> 0:11:59.760 who are just feeling that pain analogy really beautifully. Thank 0:11:59.800 --> 0:12:02.880 your just I want to go back to the very 0:12:02.960 --> 0:12:06.640 star of our conversation and they say that valuations you 0:12:06.760 --> 0:12:12.160 think are extended where exactly and what will earnings have 0:12:12.240 --> 0:12:14.439 to vindicate which types of companies. 0:12:15.720 --> 0:12:20.040 Well, when we're looking at the US market broadly, really 0:12:20.200 --> 0:12:24.400 every sector from our vantage point, with one exception, is 0:12:24.520 --> 0:12:27.880 quite expensive. And when we talk about expensiveness, we're looking 0:12:27.920 --> 0:12:31.320 at sectors and de siles of valuation relative to their 0:12:31.360 --> 0:12:34.240 own history, and what we're seeing is valuations that are 0:12:34.280 --> 0:12:36.880 really in those ninth and tenth deciles. And that's when 0:12:36.920 --> 0:12:40.160 that starts to matter to perspective three year returns. When 0:12:40.200 --> 0:12:42.720 we look under the hood and technology, we really see 0:12:42.720 --> 0:12:45.520 it across industries. Now, that doesn't mean that these stocks 0:12:45.520 --> 0:12:48.720 can't grind higher, and if we do see upside surprise 0:12:48.840 --> 0:12:53.160 within earnings, potentially that could push the stock market even further. 0:12:53.480 --> 0:12:56.319 I think the idea here is that there's just low immunity. 0:12:56.600 --> 0:12:58.840 So if we were to get an earning season that 0:12:59.120 --> 0:13:01.840 people expect, I think that's a lot harder to move 0:13:01.880 --> 0:13:02.600 the stock market. 0:13:02.840 --> 0:13:04.440 I will do a shout out to healthcare. 0:13:04.520 --> 0:13:07.200 This is something we've been surfacing since the summer This 0:13:07.240 --> 0:13:10.560 is one of those areas that is more attractively priced. 0:13:10.600 --> 0:13:13.360 It has a lot of problems that it faces, but 0:13:13.440 --> 0:13:15.920 it also has, you know, the potential to benefit from 0:13:15.960 --> 0:13:18.440 something like AI. So that's one of those areas that 0:13:18.480 --> 0:13:20.240 we're looking to in this environment. 0:13:21.320 --> 0:13:24.960 Martin Orton, chief investment Strategist to empower, thank you very much. 0:13:25.520 --> 0:13:28.920 A Clara Resources and Exploration and Mining Services provide a 0:13:29.000 --> 0:13:31.440 plans to build a two hundred and twenty seventy seven 0:13:31.440 --> 0:13:34.520 million dollar rare Earth's plant in Louisiana, the first of 0:13:34.559 --> 0:13:37.760 its type in the US. This comes as Western nations 0:13:37.760 --> 0:13:41.720 attempt to reduce reliance on China, currently the dominant supplier. 0:13:42.000 --> 0:13:45.439 The facility will process material from m clara's clay deposits 0:13:45.440 --> 0:13:49.040 in Brazil and Chile for magnets used in evs and 0:13:49.080 --> 0:13:53.000 wind turbines, and construction is expected to be completed by 0:13:53.000 --> 0:13:54.160 the end of twenty twenty seven. 0:13:54.760 --> 0:13:57.840 And coming up so much for pet rocks, hey. JP 0:13:58.000 --> 0:14:00.439 Morgan takes another big step into the crypto world. More 0:14:00.440 --> 0:14:02.320 on that next. This is Bloomberg Tech. 0:14:17.760 --> 0:14:20.800 JP Morgan is set to allow clients to use bitcoin 0:14:20.960 --> 0:14:24.560 in Ether as collateral for loans. That's according to sources 0:14:24.920 --> 0:14:27.640 the move marks a deeper step into crypto for Wall Street. 0:14:27.640 --> 0:14:31.640 Bloomberg's digital finance reporter Emily Nicole broke the story, joins us, now, 0:14:32.280 --> 0:14:34.840 I think it's really important to go through the mechanics 0:14:35.000 --> 0:14:40.440 of what we think this will work as right, institutional clients, 0:14:40.920 --> 0:14:42.920 what they can do is collateral and then what the 0:14:42.960 --> 0:14:44.440 bank will do in return take it away. 0:14:45.000 --> 0:14:47.440 Yes, so what we've been hearing is that JP Morgan 0:14:47.480 --> 0:14:49.520 will be allowing this by the end of this year. 0:14:50.000 --> 0:14:52.600 What the process would look like is where institutional clients 0:14:52.640 --> 0:14:55.320 come to JP Morgan with holdings of bitcoin and ether 0:14:55.400 --> 0:14:58.080 that they already own that would then be transferred to 0:14:58.160 --> 0:15:00.920 a third party custodian that JP Morgan well the point, 0:15:01.120 --> 0:15:03.000 who will look after the cryptos so the bank doesn't 0:15:03.040 --> 0:15:05.400 have to touch themselves, and that can be used as 0:15:05.440 --> 0:15:08.360 collateral for financing that the bank can lend against. 0:15:09.200 --> 0:15:12.560 What's really interesting is the context of JP Morgan and 0:15:12.600 --> 0:15:15.240 shall I say Jamie Diamond's relationship with crypto, because it 0:15:15.240 --> 0:15:17.960 was a few years ago he was calling them pet rocks, 0:15:18.240 --> 0:15:21.400 hyped up fraud and now most recently in your story, 0:15:21.400 --> 0:15:23.760 which is a beautiful quote talking about I don't think 0:15:23.800 --> 0:15:26.160 we should smoke, but I defend your right to smoke. 0:15:26.280 --> 0:15:28.720 Is that why they're not going to be custodian while 0:15:28.720 --> 0:15:30.840 they're letting others like State Street Bank of New York, 0:15:30.840 --> 0:15:34.120 Mellon Fidelity still play that game rather than JP Morgan itself. 0:15:36.040 --> 0:15:38.160 There's definitely a bit of a divide in terms of 0:15:38.240 --> 0:15:41.640 how banks want to touch crypto. Some like JP Morgan 0:15:41.680 --> 0:15:43.680 are happy for clients to touch it, but they don't 0:15:43.680 --> 0:15:46.320 necessarily want to be involved in touching it themselves. So 0:15:46.440 --> 0:15:48.920 earlier this summer, for example, this started out with JP 0:15:49.000 --> 0:15:52.000 Morgan allowing clients to use crypto ETFs as clateral, so 0:15:52.360 --> 0:15:54.920 traditional finance rappers that they're used to touching, but it 0:15:55.040 --> 0:15:57.640 tracks the price of a cryptocurrency. This is a step 0:15:57.680 --> 0:15:59.240 further than that, but they're still not getting to the 0:15:59.280 --> 0:16:01.440 point of why they'd want to touch the crypto directly. 0:16:01.800 --> 0:16:03.960 It should be no though, it's pretty difficult for banks 0:16:03.960 --> 0:16:06.560 to touch cryptodirectly sometimes because there are rules like the 0:16:06.600 --> 0:16:10.160 buzz or rules on banking that prevent them from touching 0:16:10.200 --> 0:16:12.880 crypto without having to hold an equivalent amount of capital 0:16:12.920 --> 0:16:15.040 and reserve at the same time. It can get pretty 0:16:15.080 --> 0:16:17.160 expensive unless you've got the right structures in place. 0:16:17.960 --> 0:16:20.040 There's a lot of institutions and a lot of private 0:16:20.040 --> 0:16:22.280 individuals have a lot of crypto gains they want to 0:16:22.320 --> 0:16:24.680 be able to use as collateral. Emily Nicole, it's a 0:16:24.680 --> 0:16:28.600 great story. Thank you coming up. Google says it's reached 0:16:28.640 --> 0:16:31.680 another new milestone in quantum technology. It's a step that 0:16:31.840 --> 0:16:34.440 could bring the long promise power of quantum computing closer 0:16:34.440 --> 0:16:36.880 to reality. One of the next this has been their tech. 0:16:52.200 --> 0:16:55.800 Google says it achieved a major milestone in quantum computing, 0:16:55.840 --> 0:16:59.760 bringing the technology's immense processing power a step closer to 0:16:59.800 --> 0:17:02.280 real world use. The company says it ran an algorithm 0:17:02.520 --> 0:17:06.520 on its Willow quantum chip that is verifiable and thirteen 0:17:06.600 --> 0:17:11.960 thousand times faster than today's best supercomputers. Let's discuss with 0:17:12.040 --> 0:17:16.359 Koreana Chow, chief operating officer at Google Quantum AI. I 0:17:16.359 --> 0:17:18.240 think actually the best place to start is the basics 0:17:18.240 --> 0:17:22.280 of quantum computing versus accelerated or supercomputing, because if you 0:17:22.440 --> 0:17:27.119 explain why that thirteen thousand x performance is notable in 0:17:27.200 --> 0:17:30.399 simple terms, it gives some measure of why it's a 0:17:30.400 --> 0:17:31.800 piece of news this week. 0:17:32.000 --> 0:17:36.760 Absolutely, today's computers classical computers, they use bits right zeros 0:17:36.800 --> 0:17:39.720 and once they use that to calculate, it's useful. 0:17:39.400 --> 0:17:41.479 For a number of different problems across the world. 0:17:41.800 --> 0:17:45.560 However, quantum computing is different uses a combination of zeros 0:17:45.560 --> 0:17:48.199 and ones at the same time that enables access to 0:17:48.240 --> 0:17:51.280 different types of problems, like the quantum echoes algorithm we 0:17:51.280 --> 0:17:52.199 announced this week. 0:17:52.359 --> 0:17:54.439 You have brought Willow with you, You've put it in 0:17:54.440 --> 0:17:58.199 an impenetrable safe housing and casing. There it is on 0:17:58.240 --> 0:17:59.840 the desk in front of me. I read a lot 0:17:59.840 --> 0:18:03.320 of academic papers this week, and many point out that 0:18:03.359 --> 0:18:06.919 you didn't use a scalable or fault tolerant chip for 0:18:06.960 --> 0:18:09.520 this demo, and so the argument follows that it would 0:18:09.560 --> 0:18:12.280 be a big challenge for you to commercialize or scale 0:18:12.320 --> 0:18:16.119 out that technology. Is that a fair concern from the 0:18:16.160 --> 0:18:17.119 academic community. 0:18:17.240 --> 0:18:20.000 That is the goal of quantum computing, to get to 0:18:20.119 --> 0:18:23.200 fault tolerant quantum computing. Nobody is there yet. It is 0:18:23.280 --> 0:18:25.880 a long journey, but it is very exciting. We've been 0:18:25.920 --> 0:18:28.520 excited last December to announce for the first time that 0:18:28.640 --> 0:18:32.000 error correction can work. We demonstrated that with our Willow chip, 0:18:32.200 --> 0:18:34.840 and we continue on this journey pushing the number of 0:18:34.880 --> 0:18:37.360 cubits and also bringing the errors way down. 0:18:37.840 --> 0:18:40.800 And it's the timing now, Karina, what is it five 0:18:40.880 --> 0:18:43.600 years do we get something that actually will show quantum 0:18:43.600 --> 0:18:48.120 computing being really applicable and useful in the areas of science, 0:18:48.160 --> 0:18:51.440 in the area of medicine. Why that timeline in particular. 0:18:52.359 --> 0:18:55.920 Yeah, we are optimistic that we'll see real world applications 0:18:55.920 --> 0:18:59.720 that are only possible on quantum computers in the next 0:18:59.760 --> 0:19:03.120 five five years. You know, this breakthrough that we announced 0:19:03.119 --> 0:19:06.879 this week is a great milestone towards that path. We 0:19:07.040 --> 0:19:10.520 showed that quantum echoes, this algorithm is not only thirteen 0:19:10.560 --> 0:19:13.560 thousand times faster on a quantum chip, but that it 0:19:13.600 --> 0:19:17.760 can be used to simulate and calculate the exact structure 0:19:17.760 --> 0:19:19.879 of a molecule. So we think this is an important 0:19:19.880 --> 0:19:20.600 step on the past. 0:19:20.640 --> 0:19:23.200 Someone on your team, we're on the twenty twenty five 0:19:23.280 --> 0:19:26.119 Nobel Prize in physics was among the winners. You have 0:19:26.200 --> 0:19:30.480 hert and leading the charge. We have real stellar well talent, 0:19:30.680 --> 0:19:32.960 but also a lot of investment. What did you make 0:19:33.000 --> 0:19:35.760 of the news the flow that maybe the US government 0:19:35.880 --> 0:19:38.480 is there to support other smaller quantum players here in 0:19:38.480 --> 0:19:41.399 the United States? Is that important? Yeah? 0:19:41.480 --> 0:19:44.000 We are really excited and pleased to see all of 0:19:44.040 --> 0:19:48.120 the investment, the support, the excitement about quantum computing across 0:19:48.160 --> 0:19:52.040 the board. US government has been a strong supporter and 0:19:52.240 --> 0:19:55.280 partner in this for the last many years, and we're 0:19:55.359 --> 0:19:59.200 very excited about those investments and continue partnership across the ecosystem. 0:19:59.359 --> 0:20:02.880 Crini, the COO of the Quantum Group, right, And we 0:20:02.920 --> 0:20:05.600 reflected earlier in the week on the show when the 0:20:05.640 --> 0:20:10.360 headline hit the Bloomberg about this breakthrough. Actually markets reacted, 0:20:10.480 --> 0:20:13.959 alphabet shares moved markedly. Would you reflect a little bit 0:20:13.960 --> 0:20:17.840 on what the days that followed that were, like, did 0:20:17.880 --> 0:20:21.200 the phone ring off the hook from various parties that 0:20:21.280 --> 0:20:23.400 are interested now to know more about how they might 0:20:23.400 --> 0:20:24.480 be able to use the tech. 0:20:24.760 --> 0:20:25.040 Yeah. 0:20:25.080 --> 0:20:28.040 For us at Google, we are really excited about all 0:20:28.080 --> 0:20:31.199 the interests that we're seeing across the board. Our mission 0:20:31.240 --> 0:20:33.679 at Google Quantum AI is to build quantum computing for 0:20:33.880 --> 0:20:37.880 otherwise unsolvable problems. I think that's why there's increasing interest 0:20:37.920 --> 0:20:40.800 with every breakthrough. People in other fields are getting excited 0:20:40.840 --> 0:20:43.520