Speaker 1: We're from Marhard where innovation, money and power.
Speaker 2: Collie in Silicon Valley, NBN.
Speaker 3: This is Bloomberg Technology with Caroline Hide and Ed Ludlove.
Speaker 4: IM Ed Ludlow in San Francisco.
Speaker 5: Caroline Hides out today this is Bloombag Technology. China's semiconductor
Speaker 5: and electronics output drops in the first quarter as a
Speaker 5: bullish rebound in the economy is.
Speaker 4: At odds with a smartphone slow.
Speaker 5: Down, and Apple pushes higher as Tim Cook opens the
Speaker 5: iPhone maker's first store in India. We bring you the
Speaker 5: details from Mumbai and California, and in Europe, bench capitalists
Speaker 5: are on pace for their worst funding year since twenty fifteen.
Speaker 5: Race Capitals Alfred Trung joins US to talk private markets.
Speaker 5: Does less capital mean fewer checks being cut? Well, first,
Speaker 5: it's going to check on those market's move As Katie
Speaker 5: Greif found out in New York, Hi, Kittie Hi.
Speaker 6: Ed, well, the bid has disappeared from the equity market.
Speaker 6: You're looking at the S and P five hundred off
Speaker 6: by about two tenths of a percent. The same thing
Speaker 6: sort of goes for the NASAQ one hundred, those big
Speaker 6: tech names. It's the financials that are interesting today. We're
Speaker 6: actually off the session lows that sector down about three
Speaker 6: tenths of percent.
Speaker 7: We know that Goldman Bake of America big.
Speaker 6: Wait today after reporting earnings earlier today, and the two
Speaker 6: year treasure yield up slightly about two.
Speaker 7: Basis points or so.
Speaker 6: You can see we are above four twenty on the
Speaker 6: two year treasure field.
Speaker 7: Let's get to the fun stuff though. Let's talk about Bitcoin.
Speaker 6: Bitcoin has been really interesting. It used to trade hand
Speaker 6: in hand with those tech socks. You can see that
Speaker 6: the relationship is really broken apart, and today's.
Speaker 7: Action drives that point home.
Speaker 6: You can see Bitcoin up by two and a half percent.
Speaker 6: It is above thirty thousand once again. It's going to
Speaker 6: be interesting to continue to watch this one and keep an.
Speaker 7: Eye on that correlation.
Speaker 6: But let's go from the big picture to some of
Speaker 6: those micro own names, and we should start with Nvidia
Speaker 6: higher by almost three percent today. It had one cell
Speaker 6: rating left that was HSBC that in lists changing its
Speaker 6: tune today a rare double upgrade. He went from a
Speaker 6: cell to a bye can see that is filtering through
Speaker 6: to n video shares. We're also looking at AMD. Not
Speaker 6: too much action there no real news that stock is
Speaker 6: hired by about half a percent or so on some
Speaker 6: heavy volume two, so keep an eye on that. And
Speaker 6: Southworth West Airlines briefly halted all of its flights due
Speaker 6: to a technology issue. As we understand, those flights of
Speaker 6: rezumed stock still off by about one point six percent.
Speaker 5: Yeah, we're going to get a deeper report in Southwest
Speaker 5: later on in the show. But it is interesting to
Speaker 5: note a little outperformance in the chip space. Thank you,
Speaker 5: Katie Greifert out in New York. So despite a bullish
Speaker 5: rebound in the economy, China's production of chips and other
Speaker 5: electronics are declining from slower sales as well as competitive
Speaker 5: pressures from factories that are in other locations joining me
Speaker 5: here in San Francisco, Bloomberg's Ian King. There is a
Speaker 5: short term story here and there is a longer term story.
Speaker 4: Let's start with the short term. What's happening?
Speaker 8: Yeah, I mean, think about what the companies have told us.
Speaker 8: I've said, Look, there's just too much inventory out there.
Speaker 8: There isn't enough phone demand, there isn't enough PC demand.
Speaker 8: We need to dig our way out of that mound
Speaker 8: of inventory and then we can go back to shipping
Speaker 8: towards what end demand is. The question is, well, where
Speaker 8: is end demand? Are we pre pandemic levels or are
Speaker 8: we at some level in between the pigs that we
Speaker 8: saw during the pandemic. We'll see in the second.
Speaker 5: Half that the broader debate is about supply chain de
Speaker 5: risking or diversifying moving out of China. What does this
Speaker 5: data signal about that?
Speaker 8: I think the big underlying concern and we won't really
Speaker 8: see that manifest itself until so the next year, the
Speaker 8: year after when a lot of these factories get built.
Speaker 8: Is governments everywhere around the world are saying, hey, we
Speaker 8: want a chip industry, we want a chip industry, throwing
Speaker 8: money at it. The economics that once drove where these
Speaker 8: chip plans were made arguably being upturned. So are we
Speaker 8: going to see excess.
Speaker 5: Supply over the Taiwan straight there's a bit more feel
Speaker 5: good about the state of chips and manufacturing TSMC. It's
Speaker 5: interesting look at the data on the Bloomberg the subject
Speaker 5: of our Techwatch column. A lot of bullishnists around that name.
Speaker 8: Yeah, I mean TSMC is a conduit for everyone. So
Speaker 8: if you believe in videos ai story, where does in
Speaker 8: video get its chip mode in Taiwan at TSMC, So
Speaker 8: you know, TSMC is kind of the way to play
Speaker 8: every angle here. Even though smartphones and PCs are kind
Speaker 8: of down, maybe AI is the play, as in videos
Speaker 8: would suggest.
Speaker 4: We I probably should have started with.
Speaker 5: In video Katie mentioned it it's final cell rating gone
Speaker 5: this morning, we'll bring up the where analysts see the
Speaker 5: stop but lots of bullishnis and it's all, well, it's
Speaker 5: partly about artificial intelligence.
Speaker 8: Yeah, I mean the HSBC report which was the final
Speaker 8: one to flip said, look, even though there aren't that
Speaker 8: many AI chips in the world, these things cost ten
Speaker 8: twenty grand each, right, that's ten times what a PC
Speaker 8: GPU cost. So even if PCs are bad, AI is
Speaker 8: good in terms of the ASP, the margins and everything else.
Speaker 4: That's the argument, all right.
Speaker 5: Thanks to Bloombozine king on Everything Semiconductor, and we talked
Speaker 5: about China. China's economy actually growing at the fastest pace
Speaker 5: in a year in the first quarter, giving the market
Speaker 5: some optimism, which I have to say was pretty short
Speaker 5: lived because we're now getting some jitters over a report
Speaker 5: that Saint Louis fed President James Billard is in favor
Speaker 5: at this time of more policy tightening, joining us to
Speaker 5: talk these markets. Emily Hill, CEO and founding partner of
Speaker 5: Bawasok Capital. Let's go to China first, Emily, in very
Speaker 5: basic terms, there was optimism and around that the reopening
Speaker 5: of the economy, strong GDP print. How in the markets
Speaker 5: do you interpret that?
Speaker 9: Well, we got pretty good GDP numbers out of China,
Speaker 9: four to five percent. The government's target for the year
Speaker 9: is about five So I think it shows that reopening
Speaker 9: is having exactly the effect that people anticipated. Consumers are
Speaker 9: getting out spending and that will be inflationary for the
Speaker 9: rest of the global economy. More demand for commodities, including oil,
Speaker 9: and so while it will help economic growth from an
Speaker 9: inflation perspective, is probably not a positive.
Speaker 5: Let's bring it back here to the United States and
Speaker 5: the FED, and I promise you we will talk about
Speaker 5: the technology sector. But Fed's Ballard saying that basically these
Speaker 5: ideas of recession are a little bit overdone and that
Speaker 5: he wants to see the discussion around more hikes. What's
Speaker 5: your interpretation of FED speak right now?
Speaker 9: I think that the market is continuing to not get
Speaker 9: the FED message, and I've been saying that consistently and
Speaker 9: I think part of the issue is that all of
Speaker 9: the hikes in recent memory, if you look back at
Speaker 9: the last thirty years, took place in an environment that
Speaker 9: was essentially disinflationary. We had low inflation. It was a
Speaker 9: very different environment than one we have now. And so
Speaker 9: last thirty years, the pauses by the FED have extended
Speaker 9: from about six months to about fourteen months. And you're
Speaker 9: still seeing large parts of the market expecting a rate
Speaker 9: cut by the end of this year. And so I
Speaker 9: think they're going to be some disappointed investors. And so
Speaker 9: I think, you know, while you do have some dubbish
Speaker 9: members FED, none of them are really talking about a
Speaker 9: rate cut in twenty twenty three. If we were to
Speaker 9: have a rate cut, it would mean that we had
Speaker 9: a hard landing, and that's not good for stock Emily.
Speaker 5: This is Bloomberg Technology. Let's talk a little bit about
Speaker 5: the technology sector. You know, if you expect this rate
Speaker 5: and inflation regime to persist, where do you want to
Speaker 5: position yourself within the technology landscape.
Speaker 9: Well, you know, there's defensive tech, which I would put
Speaker 9: Apple into that category, and I think it is sort
Speaker 9: of Apple is the you know, Johnson and Johnson of
Speaker 9: the twenty first century. Right, it's it's it's looked at
Speaker 9: as a safe bet. You know, it now comprises seven
Speaker 9: to eight percent of the S and P, which I
Speaker 9: think is something that you know, should raise a few eyebrows.
Speaker 9: But if the parts of you know, but I would
Speaker 9: say that Apple and these this you know, safe defensive
Speaker 9: tech is now a little bit richly priced. So if
Speaker 9: I want to look in the tech sector for good values,
Speaker 9: I'm going to look at or I would really actually
Speaker 9: even look at tech adjacent sectors. So the parts of
Speaker 9: the of the tech sector that have not gone through
Speaker 9: the roof this year, you know, the NAVVAC one hundred
Speaker 9: is up almost twenty percent, and I think that's overdone.
Speaker 5: If you're going to be a little bit more dynamic
Speaker 5: and look for opportunity in this market away from when
Speaker 5: you call them a defensive riting, you're suggesting look at
Speaker 5: the balance sheet, look at this company's staying power through session.
Speaker 5: But technologically speaking, what are the corners of the market
Speaker 5: that excite you?
Speaker 9: Okay, well, I would say companies like Corning that are
Speaker 9: manufacturing products used by Apple, so they make differentiated glass products.
Speaker 9: They make the gorilla glass for iPhone ceramic shield. They
Speaker 9: make ceramic substrates that are used in cutting carbon emissions,
Speaker 9: and so they're you know, a less exciting, you know,
Speaker 9: tech software innovative company. But this company has been innovating
Speaker 9: for you know, one hundred and seventy years. So I've
Speaker 9: got an alarm going off here that I'm going.
Speaker 4: To now dealing with the technology in real time. We
Speaker 4: love it.
Speaker 5: This is Bloomberg Technology, put it into practice.
Speaker 10: Bostonmai and that in Deli. Customers are lining up as
Speaker 10: Apple opens its first two stores in India. They may
Speaker 10: not be as unique as the Cube in New York,
Speaker 10: but they have all the features that Apple stores do
Speaker 10: worldwide today in Apple Apple store trade ins and the
Speaker 10: customery site of CEO Tim Cook at the front door
Speaker 10: on the first day welcoming the first few customers. Now
Speaker 10: between meeting Prime Minister Mobi of knobbing with business leaders
Speaker 10: here in Mumbai and then in Delhi and eating Mumbai
Speaker 10: Verapau with film stars. Tim Cook's visit to India and
Speaker 10: these store openings mark a significant next step in the
Speaker 10: India Apple relationship. India presents a critical supply chain diversification
Speaker 10: opportunity for Apple China manufactures more than ninety percent of
Speaker 10: iPhones to airports. Tim Cook says Apple is taking all
Speaker 10: that it learned in China out of scale China and
Speaker 10: bringing that to bear here in India. Compared to its neighbor,
Speaker 10: India is a tiny market for Apple, with just about
Speaker 10: six billion dollars in annual sales last year, but that's
Speaker 10: about fifty percent more than the year before. Local manufacturer
Speaker 10: will allow Apple to reduce some of the import taxes
Speaker 10: that it pays and make its products less expensive for
Speaker 10: Indian consumers. Two of Apple's three contract manufacturers here in
Speaker 10: the country are major beneficiaries of a flagship production incentive
Speaker 10: scheme launched by Prime Minister or In Removie's government. India
Speaker 10: too is hoping that Apple can pull a China here
Speaker 10: help build a manufacturing ecosystem that boosts jobs and exports. Medikadoshi,
Speaker 10: Bloomberg News.
Speaker 5: That was Bloomberg's India Senior editor Mana Kadoshi. Let's guess
Speaker 5: more on Apple's new expansion in India and bring in
Speaker 5: Bloomberg's Mark German Mark You reported a few weeks ago
Speaker 5: that even internally, Apple has been restructuring to to serve
Speaker 5: that market in India. What's the latest there.
Speaker 11: Yeah, India's all the hype for Apple right now. Really
Speaker 11: outside of these two retail stores, right, these retail stores
Speaker 11: probably not going to move the needle for Apple as
Speaker 11: a company revenue wise, even in India itself. Most Apple
Speaker 11: products in India and elsewhere, of course are going to
Speaker 11: be bought by consumers at third party retail stores or
Speaker 11: online or carrier partners, right. But this shows Apple's dedication
Speaker 11: to the area. These stores are not small investments. You
Speaker 11: have to hire one hundred people plus per store, You
Speaker 11: have to do inventory. They're setting up the Genius Bar
Speaker 11: and classes in India for the first time, and internally
Speaker 11: this year, they're restructuring their sales organization. So the head
Speaker 11: of India sales, right, what's known as their managing director
Speaker 11: or country manager for India, is now going to report
Speaker 11: directly to Apple's head of sales globally.
Speaker 4: Right.
Speaker 11: That's going to be a first. Previously you had a
Speaker 11: vice president in between who oversaw India as well as
Speaker 11: other emerging markets like Eastern Europe and Africa, So that
Speaker 11: layer has been removed, sort of elevating the importance of
Speaker 11: India within the company's operations itself.
Speaker 5: There's a lot of data when it comes to Apple
Speaker 5: flying out of India right now. You know that the
Speaker 5: latest reporting from Bloomberg is from a sales perspective, six
Speaker 5: billion dollars for the twelve month period through March. That's
Speaker 5: just one side of the story. The other is supply
Speaker 5: chain and manufacturing, right and I think the latest reporting
Speaker 5: from Bloomberg is the dollar value of exports or iPhones
Speaker 5: constructed in that nation hitting new milestone as well. What
Speaker 5: is the strategy for Apple in having a supply chain
Speaker 5: base in that nation.
Speaker 11: Yeah, the strategy for Apple to have a supply chain
Speaker 11: base in India is twofold one. You really need to
Speaker 11: manufacture devices that you're selling in India in India itself
Speaker 11: to save on some of those import taxes, right, which
Speaker 11: are incredibly high as they are in Brazil, another place
Speaker 11: where Apple has set up shop to produce iPhone. So
Speaker 11: that's one part of it. The bigger component is diversification.
Speaker 11: Right until now, Apple had mostly produced all of its
Speaker 11: devices in China. But over the last four to five
Speaker 11: years or so, you've seen issues related to tariffs, You've
Speaker 11: seen the potential trade war between the US and China.
Speaker 11: You've seen these COVID zero policies in China. You've seen
Speaker 11: the impact of the virus in China on Apple's production,
Speaker 11: so you've seen delay after delay to key products, the
Speaker 11: MacBook Air last year, the iPhone fourteen Pro. This was
Speaker 11: just at the end of twenty twenty two, right two
Speaker 11: years plus into COVID, and you saw major shutdowns at Fox.
Speaker 11: Cond prevented Apple from selling as many iPhone fourteen pros
Speaker 11: as possible. So you really need to diversify to try
Speaker 11: to avoid problems like that, and that's what you're seeing
Speaker 11: Apple lay the groundwork for in India primarily, but also
Speaker 11: in places like Vietnam, in Malaysia and Brazil as well,
Speaker 11: plus a little bit of Ireland.
Speaker 5: So that's the India story. Let's go a bit more global.
Speaker 5: We asked our audience if you're going to buy an
Speaker 5: Apple products, where do you do it?
Speaker 4: Install?
Speaker 5: Online or as you explaining from a third party right
Speaker 5: other retailers. Fifty five percent respondents online is where they're buying.
Speaker 5: What is store strategy broadly for Apple? What is the
Speaker 5: future of the Apple store with its shiny glass windows?
Speaker 11: You know, I think the poll is a little skewed, right,
Speaker 11: it was a Twitter poll and perhaps our audience on Twitter.
Speaker 11: There are people who you know want to go to
Speaker 11: an Apple store to buy an iPhone, or they live
Speaker 11: near Apple stores. But the actual truth is that the
Speaker 11: vast majority of iPhones, at least they're actually purchased through
Speaker 11: third party retailers and carriers, right, whether that's your Verizon
Speaker 11: store in the US, or your O two store in
Speaker 11: the UK, or in Best Buyer Target or elsewhere in
Speaker 11: the US, or Carphone Warehouse in Europe.
Speaker 6: Right.
Speaker 11: And so Apple really wants a lot more of those
Speaker 11: sales to flow through its own retail stores, right. And
Speaker 11: we've seen a slow down and expansion for retail stores
Speaker 11: over the last three to four years or so, primarily
Speaker 11: due to COVID.
Speaker 4: And other reasons.
Speaker 11: They have so many at this point, But what you're
Speaker 11: seeing is they're pushing more stores now in that Asia area, right.
Speaker 11: You have India, They've opened more stores in Korea recently,
Speaker 11: and then they have stores coming in Malaysia as well,
Speaker 11: So clearly their expansion is Asia related at this point.
Speaker 4: Mark.
Speaker 5: The other big story of the week is Apple in
Speaker 5: partnership with Goldman Sachs offering a savings account with a
Speaker 5: four point one five percent yield.
Speaker 4: Why is Apple doing that?
Speaker 11: Yeah, so this was actually introduced several months ago, right,
Speaker 11: it was a little bit delayed. It's now rolling out
Speaker 11: in the Wallet app if you have an Apple Card.
Speaker 11: And you know, some people think that Apple has big
Speaker 11: ambitions here, and that is absolutely true.
Speaker 4: But the reality is is.
Speaker 11: That this is still going to be US only and
Speaker 11: still Apple Card only. Eventually, this is probably going to
Speaker 11: expand as the Apple Card expands, hopefully. I know a
Speaker 11: lot of people in Europe and Canada want to get
Speaker 11: their hands on that. Four point one five percent is
Speaker 11: a pretty good rate. That's actually a quarter percent higher
Speaker 11: than the rate that Goldman offers if you were to
Speaker 11: create a savings account through the Goldman website versus through
Speaker 11: the Apple Card. And this is Apple wanting to give
Speaker 11: more people reasons.
Speaker 4: To hold onto their iPhone.
Speaker 11: Right, if you have your savings account in your phone,
Speaker 11: It's gonna make it all but impossible every time they
Speaker 11: add a new layer or a new feature to switch away
Speaker 11: to Android or to another product.
Speaker 5: All right, Bloomberg's Mark German with all the latest on Apple.
Speaker 5: Thank you coming up. Revenue from fixed income one of
Speaker 5: the main highlights as big banks like Goldman Sachs but
Speaker 5: also Bank of America report quarterly results. We'll get more
Speaker 5: on how those lenders performed coming.
Speaker 4: Up, But let's take a look at some of the stocks.
Speaker 4: How we're moving, how we're reacting. Some interesting numbers.
Speaker 5: But you look at the equity markets in the banking space,
Speaker 5: Goldman down one and a half percent, Bank of America
Speaker 5: off by eight tens of a percent. Why we'll ask
Speaker 5: that question next with Bloomberg shn Ali Bassak.
Speaker 4: This is Bloomberg.
Speaker 5: Coarsely results from Bank of America and Goldman Sachs show
Speaker 5: different approaches to fixed income trading, with Bank of America
Speaker 5: topping estimates as fixed income trading drives profits. Meanwhile, Goldman
Speaker 5: Sacks failed to catalyze on the trend.
Speaker 4: Who else is.
Speaker 5: Here but Bloomberg News Will Street Reports Shnalie Bassett give
Speaker 5: me the banking scorecard this Tuesday morning.
Speaker 12: Yeah, it's hard not to pay attention to those trading
Speaker 12: numbers because they've posted. Goldman Sachs had posted a drop
Speaker 12: relative to the others that was worth noticing because you
Speaker 12: saw beats a JP Morgan City Group and at Bank
Speaker 12: of America. However, I would still say that these are
Speaker 12: broader market moves as well, because you have the commodities
Speaker 12: business not as strong as it was a year ago
Speaker 12: when you had massive volatility in the industry, and same
Speaker 12: with currencies.
Speaker 7: I do want to point to.
Speaker 12: Some other things in the businesses here too, because remember
Speaker 12: Goldman Sacks had cut some headcount here, while Bank of
Speaker 12: America became the third big bank to show increasing headcount.
Speaker 12: That is a fascinating story at a time where we've
Speaker 12: seen a lot of pressure on jobs across the entire market.
Speaker 12: I want to take a little bit of a technology
Speaker 12: angle here as well, because as we know Goldman, as
Speaker 12: people look to how they are reshaping the firm to
Speaker 12: the consumer business, the business tied to Marcus is of
Speaker 12: high attention, and you have David Solomon, the CEO of
Speaker 12: Goldman Sachs, saying that they're exploring a sale of green Sky.
Speaker 12: This is the installment lending platform they had bought just
Speaker 12: a couple of years ago. So that is still something
Speaker 12: as Goldman transforms is weighing on its results in the
Speaker 12: near term. But again we're looking over to the other side.
Speaker 12: Bank of America, by the way, pulling in lots of
Speaker 12: deposits here and lots of new clients rather as deposits
Speaker 12: are under pressure as we watch to see how this
Speaker 12: kind of banking trump tumble really starts to play out
Speaker 12: so real quick.
Speaker 5: There's also tension here for Goldman, right questions about hold
Speaker 5: on you have Marcus, we also have now Apple savings
Speaker 5: of four point one five percent yield. Don't they do
Speaker 5: the same thing.
Speaker 12: I'm really glad you asked that, because the answer is no.
Speaker 12: On one hand, you do have a consumer business here.
Speaker 12: They've folded into platform solutions by working with Apple at
Speaker 12: four one point one five percent. This really intense yield
Speaker 12: you're getting from that Apple savings product. With Goldman Sacks,
Speaker 12: it's pulling deposits, lowering the cost of funding for gold
Speaker 12: and Sacks, whereas they're selling loans associated with that Marcus
Speaker 12: portfolio and as you know, lending to high networth individuals
Speaker 12: and private wealth instead.
Speaker 5: All right, Bloomberg Shnali Bassek on the Wall Street Beat,
Speaker 5: Welcome back to Bloomberg Technology, Imed Lovelow in San Francisco.
Speaker 5: Let's get a little check on the markets here. We
Speaker 5: kind of turned a corner in the last few minutes,
Speaker 5: and as that one hundred modestly hired just a tenth
Speaker 5: to one percent, basically flat without performance in the chip sector.
Speaker 5: Comments from Saint Louis FED President James Bullard basically saying
Speaker 5: more hikes still on the table and the market digesting that.
Speaker 5: Look at the short end of the curve, the two
Speaker 5: year up by three basis points four point two two percent.
Speaker 5: Bitcoin is Katie Greifeld was telling us earlier in the
Speaker 5: program holding above thirty five, I was in US dollars
Speaker 5: per token, So continue to track that. In the risk
Speaker 5: asset space, There's one mover that we're keeping an eye on,
Speaker 5: which is Southwest Airlines. A technology issue temporarily grounded a
Speaker 5: number of flights that the Southwest team had to coordinate
Speaker 5: with the FAA over We're off session lows, but still
Speaker 5: lower one point two percent. Let's stick with that story
Speaker 5: and get the latest details with Catherine Larkin, who's the
Speaker 5: Global business editor at Bloomberg News. Simply put Kathy, what happened?
Speaker 7: Oh, thanks for having me in.
Speaker 3: So yet again we're seeing Southwest with a big operations problem.
Speaker 3: Today they had a sixteen minute groundhoult that delayed over
Speaker 3: one thousand planes this morning. They said it had to
Speaker 3: do with a vendor supplied firewall prevented planes from taking
Speaker 3: off or leaving the gate. And this is just you know,
Speaker 3: while a short term problem was you know, sixteen minutes,
Speaker 3: it really caused a big mass for this morning was
Speaker 3: air traffic.
Speaker 5: So as I said, the stock down one point two percent,
Speaker 5: we have been markedly lower. It was sixteen minutes of chaos. Basically,
Speaker 5: how impactful was it for flights around the country.
Speaker 3: Yeah, so the problems actually seem to emerge even before
Speaker 3: that ground hault was put in place. So, like I said,
Speaker 3: over one thousand flights, you know, we're delayed. We wouldn't
Speaker 3: be surprised to see several of these flights be canceled
Speaker 3: by the end of the day. This is really a
Speaker 3: ongoing problem for Southwest. You remember in December they stranded
Speaker 3: tens of thousands of passengers right around the holidays. They
Speaker 3: are just seeing, you know, repeat problems with their operations
Speaker 3: and their scheduling. And even here if it's a vendor issue,
Speaker 3: that still ultimately comes down to management to be accountable.
Speaker 5: It's interesting because I remember last month there was a
Speaker 5: partnership announce between Southwest and AWS on the cloud Side
Speaker 5: to try and rectify some of the sort of long
Speaker 5: standing systemic technological issues, begs the question of kind of
Speaker 5: what happens next to Southwest?
Speaker 3: Cathy, No, they are going to have to answer questions.
Speaker 3: I mean, this is something like you said, they've been
Speaker 3: talking about for the last several months. They say that
Speaker 3: they're putting new systems in place to prevent future issues,
Speaker 3: and yet here we go again today with a major issue,
Speaker 3: you know as a big Groundhoult, not something we see
Speaker 3: every day. They're going to have their earnings and just
Speaker 3: you know, another like couple of weeks April twenty seventh,
Speaker 3: and management's going to be asked to answer for this.
Speaker 3: This is this is really unacceptable, and I think flyers
Speaker 3: are going to start to think twice whether they want
Speaker 3: a book with Southwest.
Speaker 5: All right, Bloomberg's Global Business editor Katherin Larkin, thank you
Speaker 5: very much. All Right, let's move from transport to cyber
Speaker 5: and in cyber news, the European Union just proposed several
Speaker 5: new cybersecurity efforts basically aimed at bolstering the block's response
Speaker 5: to online threats.
Speaker 4: The new plan, which.
Speaker 5: Still needs to be approved, as is often the case
Speaker 5: in Europe, would link national and cross border operations centers
Speaker 5: across the EU to detect and act on threats, among
Speaker 5: other measures. And what about the USA, how organizations grappling
Speaker 5: with data security and what more can be done? Let's
Speaker 5: ask people sending a CEO of Rubric who joins.
Speaker 4: Me here in San Francisco.
Speaker 5: You've just put out a pretty wide ranging report survey
Speaker 5: based companies all across the country globally keep telling us
Speaker 5: we're investing in cybersecurity data protection.
Speaker 4: What did your report find?
Speaker 13: Thank you so much for the opportunity. They are still
Speaker 13: not secure. What we found was every organization has already
Speaker 13: been infiltrated. Ninety nine percent of the IT and security
Speaker 13: leader that we surveyed reported cyber incidents in their organization
Speaker 13: and fifty two times last year, so almost one cyber
Speaker 13: attack per week, which essentially means that all the preventions,
Speaker 13: tools and technology that they have purchased over the years,
Speaker 13: while needed, is not sufficient. It's not working.
Speaker 5: A part of your findings your survey was actually many
Speaker 5: cases companies across all sectors, do you have a backup plan?
Speaker 5: It's just the backup plan work. Is that a lack
Speaker 5: of investment, a lack of care, a lack of strategy
Speaker 5: are the what is it the core of that vulnerability?
Speaker 13: So legacy backup was built for human error recovery or
Speaker 13: natural disaster recovery. It was not built for cyber As
Speaker 13: a result, it is vulnerable. In our finding, what we
Speaker 13: found that the nine out of the ten organizations actually
Speaker 13: saw an attempt to manipulate their backup And what was
Speaker 13: interesting was that three out of the four attempts we
Speaker 13: are successful. So folks, fundamentally, the bad guys know that
Speaker 13: it is a vulnerability for most of the organizations and
Speaker 13: they are going after it.
Speaker 5: The behavior of attackers and the industry response really interesting.
Speaker 5: Ransomware being a great example. There are lots of incidences
Speaker 5: of late where in a ransomware attack, the hackers leaked
Speaker 5: the information they obtained, the data they attained in order
Speaker 5: to kind of induce a pay up.
Speaker 4: How do you protect against that?
Speaker 13: Ransomware is particularly nasty problem. What we found was that
Speaker 13: over seventy two percent of the organizations we surveyed paid ransom.
Speaker 13: That was an incredible stance. And what is interesting is
Speaker 13: that only sixteen percent of these organizations, after paying ransom,
Speaker 13: could recover their data using the decryptor tool from the
Speaker 13: threat actors. So essentially, businesses are at their wits end
Speaker 13: to really take care of the ransomware problem, not only
Speaker 13: in terms of the locking of their data, but as
Speaker 13: you said, in terms of exposure of their business critical data,
Speaker 13: whether it's customer data or their own internal data.
Speaker 4: Rubrick, let's talk about the company.
Speaker 5: I think you've been quite open about a cybersecurity incident
Speaker 5: where hackers leak some data linked to you. Did you
Speaker 5: pay a ransom in that case? What was the scenario
Speaker 5: that played out?
Speaker 13: I mean, a threat actor got hold of one of
Speaker 13: our test bed system in the IT department, and we
Speaker 13: actually laid it out what happened. It's a case study
Speaker 13: as a case study as how they entered and what
Speaker 13: did they do as part of our blog post. And
Speaker 13: then the threat actually put our name in their name
Speaker 13: and shame website. People who don't pay ransom.
Speaker 4: They get their name and pay their ransom, and I mean.
Speaker 13: It is very clear what we did we did not
Speaker 13: and then and then what we did was we used
Speaker 13: Rubric's own technology to restore our services. And this is
Speaker 13: our core message that attacks are inevitable and businesses need
Speaker 13: to have resilience strategy as opposed to just prevention.
Speaker 5: I know there's a lot of interest in Rubric from
Speaker 5: investors globally. Cybersecurity space seems to have some momentum behind it,
Speaker 5: some dollars behind it. So do you take the opportunity
Speaker 5: in that and go public? Have you thought about a
Speaker 5: timeline to an IPO.
Speaker 13: We want to be a public company. We want to
Speaker 13: build a long term company. Going public is the is
Speaker 13: the route. We are doing work on our end to
Speaker 13: prepare ourselves. We are also looking at the at the
Speaker 13: markets and trying to understand how where the market is.
Speaker 13: We'll want to be public when the market is ready
Speaker 13: and we are ready.
Speaker 5: Fil Senya, CEO Rubig, thank you for joining me here
Speaker 5: in San Francisco. Now we ramp up to Earth Day
Speaker 5: this Saturday. We considue to take a look at new
Speaker 5: technologies in the fight against climate change, like air travel.
Speaker 5: Bloomberg Steve Rappaport has more.
Speaker 2: The race to reduce carbon emissions from air travel has
Speaker 2: seen multiple milestones this year, with two companies having completed
Speaker 2: successful test flights of hydrogen powered aircrafts UK startup Zero
Speaker 2: Obvious said it successfully conducted a test flight of a
Speaker 2: hydrogen powered nineteen seater plane in January and in March,
Speaker 2: at universal hydrogen plane, ifquipped with the largest hydrogen fuel
Speaker 2: cell ever to power in aircraft, had a successful fifteen
Speaker 2: minute flight of a modified Dash eight aircraft in Washington State.
Speaker 1: It is the beginning of a flight test campaign that
Speaker 1: will ultimately culminate in a twenty twenty five entry into
Speaker 1: passenger service of fifty to sixty seat regional airplanes starting
Speaker 1: with the ATR seventy two.
Speaker 2: The Paris Agreement has a goal of net zero emission
Speaker 2: air travel by twenty to fifty, and hydrogen powered planes
Speaker 2: present one of the most promising options.
Speaker 1: So aviation is one of the few sectors that's actually
Speaker 1: forecasted to grow in emissions on the time horizon of
Speaker 1: the Paris Agreement by twenty fifty, and so hydrogen probably
Speaker 1: represents the best that only hope the sector really has
Speaker 1: to make a meaningful dent right enough to offset continuing
Speaker 1: traffic growth. The only alternative we as an industry have
Speaker 1: is curtailing traffic volumes in order to reduce emissions.
Speaker 2: Connect the Airlines, which operates regional flights between Toronto and
Speaker 2: Cargo and Philadelphia, has already placed in order to convert
Speaker 2: seventy five planes to hydrogen power through Universal Hydrogen and
Speaker 2: Air New Zealand is working with a series of partners
Speaker 2: as it looks to make its aircraft fleet zero emission. However,
Speaker 2: several hurdles remain, including how best to transport the hydrogen
Speaker 2: and space limitations of the hydrogen modules aboard the aircrafts.
Speaker 2: But these test flights present a promising step in the
Speaker 2: right direction as airlines work towards reduced emissions. Steve Rappaport,
Speaker 2: Bloomberg News.
Speaker 5: Let's stick with the hydrogen story. Nikola shares jumping as
Speaker 5: much as twelve percent on Monday, now up around nine percent,
Speaker 5: coming off an all time low last Friday. What's astonishing
Speaker 5: with this stock up for a second consecutive day, biggest
Speaker 5: two day game.
Speaker 4: Going back to October.
Speaker 5: This is one of those companies that went public virus
Speaker 5: back twenty twenty. But the long term story is around
Speaker 5: not just building fuel cell trucks, but also the hydrogen
Speaker 5: infrastructure to power them. But again very at all, you know,
Speaker 5: really really heading towards penny Stock territory.
Speaker 4: Interesting.
Speaker 5: Now coming up, we're going to take a pulse of
Speaker 5: the VC landscape and what generative AI has to offer
Speaker 5: two bench capitalists with Race Capital General Partner Alfred Chuang,
Speaker 5: that's next.
Speaker 4: This is Bloomberg.
Speaker 14: Time.
Speaker 4: Now for the VC roundup.
Speaker 5: Let's start with Devon, the pioneer of the shale revolution
Speaker 5: that reignited US oil and n actural gas production, is now
Speaker 5: getting into geoform or renewable energy. A ten million dollar
Speaker 5: investment into geofirm will startup Fervo Energy, and over in Europe,
Speaker 5: Venge capital firms are on pace for their lowest year
Speaker 5: of funding since twenty fifteen. A's the weaker stock market
Speaker 5: rising interest rates is causing larger institutional investors LPs like
Speaker 5: pension funds to pull back in the VC space. Let's
Speaker 5: bring in Castle General Partner Alfred Juwang for his read
Speaker 5: on the VC landscape here in the US, in Europe
Speaker 5: and globally. You issued this like rallying cry in the
Speaker 5: pandemic era. You wanted your founders and CEOs to be
Speaker 5: more active, do more. You wanted your industry peers to
Speaker 5: do more, and then the world sort of fell apart,
Speaker 5: higher rates, the war in Ukraine. Where does your rallying
Speaker 5: cry sit now?
Speaker 14: Good morning and very good to see you. Thank God
Speaker 14: for having me back most definitely. I think this is
Speaker 14: an economic environment that clearly is for investing, is not
Speaker 14: for the faint hearted at all. I think we have
Speaker 14: seen VC funding for startups dropped over fifty percent down
Speaker 14: to seventy six billion dollar in the first quarter.
Speaker 4: That was globally. That globally, yes.
Speaker 14: And then we saw all the specteal, the whole frenzy
Speaker 14: went away. We also saw the IPR marketers and our
Speaker 14: time law. We also heard Silken Value Bank went under
Speaker 14: after four decades of service, specific specifically for our industry.
Speaker 14: So these are a huge monumental impact that we've seen
Speaker 14: in the industry yourself, so tough time.
Speaker 4: Yeah.
Speaker 5: I am really interested on the relationship between the public and
Speaker 5: private markets, but also how you follow the same data
Speaker 5: sets that the public market investor would be. So today
Speaker 5: one of the stories is fed speak James Blood of
Speaker 5: the Saint Louis fed saying actually more hikes. So if
Speaker 5: you think about an inflation regime, the hike regime being
Speaker 5: there for longer, how does that impact the mindset of
Speaker 5: aventure capitalist.
Speaker 4: So obviously it has.
Speaker 14: An impact that's clearly have an impact on evaluation. So
Speaker 14: if you look at like very lay stage deal like
Speaker 14: Stripe is now down thirty percent during this time, so
Speaker 14: we have to expect lay stage deals when its prices
Speaker 14: goes down, it will triggle down all the way to
Speaker 14: the earlier stage deal. The impact to the deals that
Speaker 14: my team and I, that is capital are involved in
Speaker 14: a very early they see than preseed in those particular
Speaker 14: kind of investments, the impact has been a lot less
Speaker 14: because people are still very helpful to look out a
Speaker 14: much longer period of time horizon for technological innovation.
Speaker 5: We discussed that contrast on the program Pretty dowur broad
Speaker 5: outlook from VCS. A lot of excitement about the seed
Speaker 5: and pre seed stage. Is it just simply because it's
Speaker 5: easier to write a smaller check and not lose as
Speaker 5: much sleep over it?
Speaker 14: Yeah, Actually I don't think that's the case. I think
Speaker 14: actually it has a lot more to do the visas
Speaker 14: of self. If you look at what we do, because
Speaker 14: we're so early, we have the lookout for the kind
Speaker 14: of company and technological innovation. What will happen to them?
Speaker 14: What impact would they have ten years down the road
Speaker 14: or sometimes longer. So for that downturn has.
Speaker 4: Always been proven.
Speaker 14: I mean myself had gone through ran large companies, tech
Speaker 14: public company during up and downturns, there's no better time
Speaker 14: to invest in early stage things for new invention, for
Speaker 14: the outlook of how a world's going to be evolving
Speaker 14: too ten years down the road artificial intelligence.
Speaker 5: How many times a day do you say, where's artificial
Speaker 5: and intelligence?
Speaker 4: At the moment our offices in Palato not enough.
Speaker 14: Every street corner, every conversation of Starbucks, every conversation and
Speaker 14: the office, every everything.
Speaker 4: Is about generating.
Speaker 5: You're investing in the area, of course we are, and
Speaker 5: how do you invest in the area.
Speaker 14: So we have specifically focused on the impact of this
Speaker 14: level of generative AI for automation in the enterprise. So
Speaker 14: we think the biggest opportunity and the safest place to
Speaker 14: deploy these type of technology is inside the enterprise itself.
Speaker 14: Large banks, large telcos, pharmaceuticals, governments.
Speaker 4: Those are great places that you can wall.
Speaker 14: In the learning itself and then be able to control
Speaker 14: and pace and govern how AI will be used.
Speaker 5: You kind of have this race between Alphabet and the
Speaker 5: parent company of Google, Google and Microsoft and a person
Speaker 5: he may have called heard of, called Elon Musk wade
Speaker 5: into the middle of that. What do you make of
Speaker 5: the Elon Musk saying, you know what, I'm going to enter.
Speaker 4: The AI race.
Speaker 14: Yeah, I think this will be something very difficult to end.
Speaker 14: You Just think about this, right, put it in context.
Speaker 14: We have not seen a disruptive technology like this since
Speaker 14: the late nineties. How the Internet has done the companies.
Speaker 14: Remember what had happened to Microsoft, they were behind in
Speaker 14: the browser war. So this is even bigger. We saw
Speaker 14: Microsoft gone out to do a deal. There's ten billion
Speaker 14: dollar plus with open Ai, a company nobody heard of
Speaker 14: until last year, right, so November November, Okay, So think
Speaker 14: of this context. And now they're using this to disrupt Google,
Speaker 14: which has a franchise have been going on forever on
Speaker 14: search worth one point three trillion dollars. This is the
Speaker 14: only time we've seen little company now have a chance
Speaker 14: to impact and make huge impact in the innovation of
Speaker 14: large companies.
Speaker 5: We've been talking so much about AI that we haven't
Speaker 5: talked so much about crypto, and that was an area
Speaker 5: where you made some pretty fast and in some cases
Speaker 5: not as good bets. What is your reaction to that statement,
Speaker 5: I suppose, but also do you you know, would you
Speaker 5: change how you do your due diligence now how you
Speaker 5: look at that space.
Speaker 14: Yeah, so with our adult crypto was you know, the
Speaker 14: last excitement that we saw in twenty twenty and twenty
Speaker 14: twenty one. We made some vact some very extremely good bets,
Speaker 14: you know, our contray to the believe itself.
Speaker 4: So obviously we're in some bad bets. Oh and some
Speaker 4: bed better.
Speaker 14: I mean we learned a lot in this process, but
Speaker 14: we didn't make huge bed bets, you know, so I
Speaker 14: think that was what we are designed to do as
Speaker 14: an early stage Friendshire from you.
Speaker 4: Look at what had happened.
Speaker 14: Twipto is addressing a much smaller addressable market, so it's
Speaker 14: tem is far smaller than comparing to Lesli Jenei. So
Speaker 14: the merger of I will say Race Capital as the
Speaker 14: fun is. We always said we're all about infrastructure where
Speaker 14: there is work who were free, we do them more.
Speaker 4: So we have wa able to hash those kind of bets.
Speaker 5: All right, Race Capitals ouverage one, thank you so much.
Speaker 5: Lululemon is exploring the sale of Mirror only three years
Speaker 5: after buying the fitness equipment maker. This, according to sources,
Speaker 5: this comes as fitness focus hardware companies have struggled basically
Speaker 5: post pandemic as consumers head back to Jim's for in
Speaker 5: person workouts. Leana deal Leanna Baker, who leads our deals
Speaker 5: coverages here with more. It does feel like just yesterday
Speaker 5: that we were talking about this deal going ahead in
Speaker 5: the first place.
Speaker 15: As a long time deals reporter, we tend to see this.
Speaker 15: Companies will get in a mode where they're buying assets
Speaker 15: and then just a few years later they'll sell assets.
Speaker 15: Bankers luckily get to work on both sides of these
Speaker 15: deals each time, so everyone's happy in terms of getting paid.
Speaker 15: But lul Lemon, definitely here is looking to recoup some
Speaker 15: of that five hundred million that they invested in this.
Speaker 5: Well, that raises the question ofvaluation. Are they going to
Speaker 5: sell it for more than they bought?
Speaker 15: At this point, we don't know what exactly this deal
Speaker 15: will fetch, but it does seem pretty clear that they
Speaker 15: won't get the five hundred million. I think they're just
Speaker 15: trying to recoup some of the investment. But from what
Speaker 15: I've seen, this hasn't performed that well for Lululemon.
Speaker 7: It's unclear if it makes money.
Speaker 15: The company took a charge of four hundred and forty
Speaker 15: three million an impairment charge earlier this year, so clearly
Speaker 15: it's not a huge money maker and that could weigh
Speaker 15: on the valuation.
Speaker 5: It takes two to tango, sometimes more actually in a
Speaker 5: complicated piece of m anda.
Speaker 4: But who could buy Mirror?
Speaker 15: It's a great question you mentioned before the changing habits
Speaker 15: for remote fitness and working out at home, and a
Speaker 15: lot of the companies in the space are challenged right now.
Speaker 15: So Peloton, let's say it could make sense as a buyer,
Speaker 15: but they don't have the money given all the challenges
Speaker 15: that are going on their Tonal.
Speaker 7: Another company in the space, they.
Speaker 15: Just switched out their CEO, they cut their valuation, so
Speaker 15: it is kind of unclear if there's a strategic competitor
Speaker 15: out there that could buy this potentially private equity. They
Speaker 15: love to look at unloved assets to see if they
Speaker 15: could do a turnaround, So I would imagine that the
Speaker 15: investment bankers that are working with Lululemon are casting a
Speaker 15: wide net to find a potential buyer.
Speaker 4: Very very quickly.
Speaker 5: Anna, Do we have a timeline on this, Where is
Speaker 5: this deal stage at.
Speaker 7: At this point it's pretty early.
Speaker 15: We do know there's a bank engaged on this, so
Speaker 15: I would say probably, you know, a few months from now,
Speaker 15: but it's hard to say. With deals and Lulu Lemon,
Speaker 15: of course, could always hold on to the asset. If
Speaker 15: they don't get bis that they like, they might say, okay,
Speaker 15: let's just shut it down or do something else with it.
Speaker 5: We'll keep you posted, right bloombergs Leana Baker on the
Speaker 5: deal's beeed.
Speaker 4: Thank you very much.
Speaker 5: That does it for this edition of Bloomberg Technology. Stay
Speaker 5: with Bloomberg in the next hour. Ryan Reynolds joins US
Speaker 5: well known technology investor and football club owner. Don't forget
Speaker 5: recap the show, check out the podcasts wherever you get
Speaker 5: your podcasts, Apple, Spotify, iHeart, and all of the Bloomberg platforms.
Speaker 4: From San Francisco, This is Bloomberg