WEBVTT - US Considers More Chip Tariffs 0:00:00.080 --> 0:00:13.600 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live 0:00:13.640 --> 0:00:17.439 from coast to coast with Caroline Hide in New York 0:00:17.720 --> 0:00:19.680 and Vla Lolow in San Francisco. 0:00:23.280 --> 0:00:25.159 This is Bloomberg Tech coming up. 0:00:25.200 --> 0:00:28.840 President Trump says more chip tariffs are coming soon. This 0:00:28.880 --> 0:00:33.000 is the administration explores equipping chips with location tracking tech. 0:00:33.320 --> 0:00:34.720 Will have the latest from Washington. 0:00:34.960 --> 0:00:38.600 Plus, Booming AI demand is sending Palenties second quarter revenue 0:00:38.800 --> 0:00:42.360 soaring above a billion dollars, Chez hit a new record. 0:00:42.800 --> 0:00:45.760 And AMD also out of earnings after market close today 0:00:45.800 --> 0:00:49.159 with the company under pressure to show benefits from the 0:00:49.200 --> 0:00:50.600 AI race, and. 0:00:50.520 --> 0:00:52.839 We take a check on the markets amid what is 0:00:53.040 --> 0:00:56.040 yet more earnings to come from AMD and a digestion 0:00:56.240 --> 0:00:58.480 of weaker services data that seems to be putting up 0:00:58.480 --> 0:01:01.480 pressure in a macro picture is underwhelming. We're off by 0:01:01.480 --> 0:01:04.160 five ten percent on nasback one hundred, but ed get 0:01:04.200 --> 0:01:06.640 to the nitty gritty, what's moving in terms of points here? 0:01:07.400 --> 0:01:09.920 Yeah, the earning story is palent here and we're up 0:01:09.959 --> 0:01:13.560 eight percentage points forty eight percent growth on the top line, 0:01:13.560 --> 0:01:18.120 which the company attributes to astonishing AI contribution. We're going 0:01:18.160 --> 0:01:20.920 to get deeper into that in the program. Another top 0:01:20.920 --> 0:01:24.040 story that we're tracking is what's happening with AI chips 0:01:24.040 --> 0:01:26.920 in particular. So we're going to talk about how tariffs 0:01:26.920 --> 0:01:30.399 are coming, specifically for semiconductors. But then there's the reporting 0:01:30.440 --> 0:01:34.399 overnight that the US is thinking about putting location trackers 0:01:34.600 --> 0:01:37.640 on AI chips that are exported to certain countries. In fact, 0:01:37.680 --> 0:01:40.000 overnight we caught out with a key White House official 0:01:40.160 --> 0:01:41.000 who talks about it. 0:01:41.040 --> 0:01:41.520 Listen to this. 0:01:42.959 --> 0:01:45.840 There is discussion around very important research and development that 0:01:45.920 --> 0:01:49.280 needs to be done on potentially the types of software 0:01:49.480 --> 0:01:51.840 or even physical changes you could make to the chips 0:01:51.840 --> 0:01:55.400 themselves to do better location tracking. And that's something that 0:01:55.440 --> 0:01:58.200 we're exploring and we explicitly included in the plant. 0:01:59.120 --> 0:02:01.800 We can get to order this with Boomberg's Mike Shepherd, 0:02:01.840 --> 0:02:02.960 who's joining us. 0:02:02.800 --> 0:02:03.800 Now from Washington. 0:02:04.120 --> 0:02:06.680 Look, I want to go into the broader picture first 0:02:06.680 --> 0:02:10.239 and foremost, we are anticipating semiconductors to be in the 0:02:10.240 --> 0:02:12.600 eye in the storm when it comes to localized tariffs. 0:02:12.840 --> 0:02:15.800 How much is that impacting the future of companies wanting 0:02:15.840 --> 0:02:16.360 to import. 0:02:17.760 --> 0:02:21.320 Well, that's a great question, Carol, because the administration, while 0:02:21.360 --> 0:02:26.000 it has spared chips imports from the country by country tariffs. 0:02:26.240 --> 0:02:29.280 We are now expecting Donald Trump to sign an order 0:02:29.280 --> 0:02:32.959 in the next week or so putting tariffs on semiconductors 0:02:33.040 --> 0:02:37.000 as a category, no matter the point of origin, and 0:02:37.440 --> 0:02:41.440 the countries will have to negotiate individual levels perhaps after that. 0:02:41.800 --> 0:02:44.960 But they have made clear that just like with pharmaceuticals 0:02:45.000 --> 0:02:48.520 and autos and copper and so many other categories of goods, 0:02:48.639 --> 0:02:51.480 they want to see more of them produced here in 0:02:51.520 --> 0:02:54.480 the US, and they see tariffs as a great means 0:02:54.480 --> 0:02:58.040 of doing so. Now, what this means is that industries 0:02:58.080 --> 0:03:02.040 such as automakers, even the chip plants themselves, will face 0:03:02.120 --> 0:03:05.240 higher costs. And then when you look at the hyperscalers, 0:03:05.320 --> 0:03:08.120 Open AI and the companies that we've seen report their 0:03:08.160 --> 0:03:12.279 earnings this week and announced even further intentions of expanding 0:03:12.320 --> 0:03:16.160 their investment in artificial intelligence, they run the risk CARAF 0:03:16.160 --> 0:03:20.520 facing higher costs on those two from chips. Chips are 0:03:20.520 --> 0:03:23.800 one of the biggest inputs that these hyperscalers face in 0:03:23.919 --> 0:03:27.400 terms of cost, and adding to that, adding up to 0:03:27.440 --> 0:03:30.480 a twenty five percent tariff would be tricky. Now we've 0:03:30.480 --> 0:03:34.000 been anticipating this since April, when the Commerce Department opened 0:03:34.040 --> 0:03:38.119 its investigation into whether tariffs were called for. It's under 0:03:38.160 --> 0:03:40.520 a so called two thirty two process. It would be 0:03:40.560 --> 0:03:45.040 on sounder legal ground than the reciprocal country by country tariffs. 0:03:45.160 --> 0:03:47.040 We will have to see what the timing looks like 0:03:47.080 --> 0:03:49.680 and whether or not they carve out any exemptions as well, 0:03:49.680 --> 0:03:53.840 including for semiconductor manufacturing equipment, which is key to expanding 0:03:53.880 --> 0:03:57.800 here in the US as well. 0:03:58.000 --> 0:04:02.320 Mike location track, we have the United States willing to 0:04:02.400 --> 0:04:06.040 export technology, the American tech stack around the world, but 0:04:06.160 --> 0:04:08.880 it wants to track where the chips are going. Can 0:04:08.920 --> 0:04:10.040 you explain that one to us? 0:04:11.800 --> 0:04:15.839 Yes, Ed, And it really is central to the administration's 0:04:16.160 --> 0:04:20.000 plan to try to expand the American tech stack, especially 0:04:20.080 --> 0:04:22.880 advanced AI chips. They want to be able to sell 0:04:22.920 --> 0:04:26.320 those more broadly and more widely, including even into the 0:04:26.400 --> 0:04:30.359 Chinese market. We saw the promise to loosen restrictions on 0:04:30.440 --> 0:04:31.719 those aged twenty chips. 0:04:31.880 --> 0:04:33.119 But it's more than just China. 0:04:33.200 --> 0:04:38.279 It's being able to sell those semiconductors across the Middle East. 0:04:38.720 --> 0:04:40.320 We saw all the deals that. 0:04:40.240 --> 0:04:43.600 Were reached with the United Arab Emirates and in Saudi Arabia, 0:04:43.640 --> 0:04:46.320 But to be able to sell in those markets. The 0:04:46.480 --> 0:04:49.839 US wants to also have the capability of tracking those 0:04:49.920 --> 0:04:53.080 chips to ensure that they are not somehow diverted or 0:04:53.080 --> 0:04:56.799 smuggled or resold or somehow end up in the wrong hands. 0:04:56.839 --> 0:04:59.839 And that would include not only China, but Russia, in Iran, 0:05:00.279 --> 0:05:02.760 every series that the US does not want to see 0:05:02.960 --> 0:05:07.080 gain capability when it comes to artificial intelligence, which of course, 0:05:07.120 --> 0:05:09.880 as we know, has a dual use capability. 0:05:10.279 --> 0:05:13.520 Mike Sheffin always on the nose. We thank you from Washington. Meanwhile, 0:05:13.520 --> 0:05:17.800 Taiwanese prosecutors, well, they've arrested six people suspected of stealing 0:05:17.839 --> 0:05:21.160 trade secrets from TSMC. Now, the chipmaker reported former and 0:05:21.240 --> 0:05:25.719 current staff to authorities on suspicion they illegally obtained core technology. 0:05:25.960 --> 0:05:28.159 The prosecutors searching the homes of some staff. 0:05:28.200 --> 0:05:31.400 Now authorities are now trying to find out if data 0:05:31.520 --> 0:05:33.080 had been leaked to other parties. 0:05:33.120 --> 0:05:38.159 Z okay Onto Earnings Palenteer reported a forty eight percent 0:05:38.200 --> 0:05:40.840 increase in revenue for the second quarter to more than 0:05:40.880 --> 0:05:45.520 a billion dollars. The company cited the quote astonishing impact 0:05:45.880 --> 0:05:49.800 of AI on its business. Bloomberg Intelligence senior analyst Mandy 0:05:49.960 --> 0:05:52.440 Singh joins US. Now, this is the story that everyone's 0:05:52.480 --> 0:05:57.000 talking about this morning, Palenteer's continued momentum. At BI, you 0:05:57.040 --> 0:05:59.719 went a little bit deeper on how that's playing out, 0:05:59.760 --> 0:06:02.480 But did you just summarize where they were strong and 0:06:02.520 --> 0:06:04.279 what's happening with Palenteer right now? 0:06:04.560 --> 0:06:04.720 Yeah. 0:06:04.760 --> 0:06:07.799 I mean when you look at the US commercial segment, 0:06:07.880 --> 0:06:10.679 that is what everyone is excited about. It grew ninety 0:06:10.720 --> 0:06:13.520 three percent for the full year. Their guide is eighty 0:06:13.560 --> 0:06:18.200 five percent, and look for a small segment with over 0:06:18.240 --> 0:06:21.080 a one point two billion dollar run rate, it's very 0:06:21.080 --> 0:06:25.080 impressive growth. But I think the metric that we still 0:06:25.120 --> 0:06:29.560 don't understand is how much is the AI contribution to 0:06:29.720 --> 0:06:31.839 their top line growth. I mean, when you look at 0:06:31.880 --> 0:06:35.919 a Microsoft Azure number, you know the AI contribution to 0:06:36.000 --> 0:06:39.320 growth this seventeen percent when they grew thirty nine percent. 0:06:39.440 --> 0:06:42.120 In the case of Palenteer, yes they grew forty eight percent, 0:06:42.680 --> 0:06:44.760 but we don't know how much of that is driven 0:06:44.800 --> 0:06:49.640 by AI because their business model is dependent on contract wins. 0:06:49.800 --> 0:06:52.760 And yes, they gave us a number around the backlock 0:06:52.839 --> 0:06:55.839 growth and the remaining deal value on the commercial side, 0:06:56.080 --> 0:07:00.000 but we just don't know enough to quantify that AI contribute. 0:07:00.320 --> 0:07:02.719 And for a company that's trading at such a rich 0:07:03.080 --> 0:07:06.039 valuation multiple, you want to have a better sense of, 0:07:06.160 --> 0:07:08.760 you know, what that flow through of AAR revenue is. 0:07:09.200 --> 0:07:12.360 Okay, So perhaps more transparency on a breakdown of numbers, Mandy, 0:07:12.760 --> 0:07:16.360 what about who they're taking market share from, who's losing 0:07:16.400 --> 0:07:19.520 out as we see Palenteer make these wins. 0:07:19.880 --> 0:07:23.200 Yeah, their core business is data ware housing, So you 0:07:23.280 --> 0:07:27.400 have the legacy vendors like terror Data and Oracle, and 0:07:27.480 --> 0:07:30.760 you also have cloud companies like Snowflake and Data Breaks. 0:07:30.760 --> 0:07:33.520 And we know Data Breaks is also doing very well 0:07:33.560 --> 0:07:36.560 in terms of growth rates. So now that Palenteer is 0:07:36.600 --> 0:07:39.720 expanding on the commercial side, it'll be interesting to see 0:07:39.720 --> 0:07:42.200 if they can sustain this kind of growth rates, because 0:07:42.200 --> 0:07:44.760 you're right, it will come at the expense of someone 0:07:45.160 --> 0:07:48.960 on the commercial side. Clearly, the hyperscalers are looking to 0:07:49.000 --> 0:07:52.120 get a piece of that pie as well. Because Microsoft, 0:07:52.120 --> 0:07:55.160 the way it's positioning Copilot, it's trying to solve some 0:07:55.240 --> 0:07:57.800 of the use cases that Valenteer is looking to solve 0:07:58.080 --> 0:08:02.440 by applying LLLM. So to my mind, the commercial side growth, 0:08:03.120 --> 0:08:06.360 the sustainability of growth is going to determine whether it 0:08:06.400 --> 0:08:09.720 can sustain this valuation, and so far I find the 0:08:09.760 --> 0:08:13.880 net new arr metric from the Hyperscalers far exceeds what 0:08:14.080 --> 0:08:17.600 Talenteer has had a given. Talenteers is a much smaller company. 0:08:18.040 --> 0:08:20.840 Great context, Blue meg Intelligence, Senior analyst, man Leeve Seeing, 0:08:21.080 --> 0:08:23.080 thank you so much. Let's dive into all of this, 0:08:23.160 --> 0:08:26.440 particularly into the valuation front. Stephanie Aliaga is with US, 0:08:26.640 --> 0:08:29.640 joining us from Global Market Strategy JP morgas Asset Management 0:08:29.720 --> 0:08:30.960 market Insights team. 0:08:31.040 --> 0:08:32.760 Stephanie, we look at. 0:08:32.600 --> 0:08:37.240 Something like Palenteer five hundred percent in twelve months, the 0:08:37.320 --> 0:08:39.600 most expensive stock on the s and P five hundred 0:08:39.600 --> 0:08:42.040 When you're looking at where it prices versus future sales, 0:08:42.520 --> 0:08:45.280 does it seem vindicated to you these sorts of valuations. 0:08:46.240 --> 0:08:49.800 There's absolutely some AI enthusiasm at play here, and I 0:08:49.880 --> 0:08:52.920 think there's some and I think in this earning season 0:08:53.040 --> 0:08:56.120 we have heard from a variety of companies, not just 0:08:56.200 --> 0:08:59.600 these megacap tech companies, that they're seeing early signs of 0:08:59.640 --> 0:09:03.080 success US with AI. AI is helping them run more efficiently. 0:09:03.120 --> 0:09:05.040 It's writing more and more of their code, something like 0:09:05.120 --> 0:09:08.240 fifty percent of code, and it's also helping them hit 0:09:08.280 --> 0:09:12.800 more shots on target, particularly in marketing. But beyond that, 0:09:12.880 --> 0:09:15.120 I think when it comes to valuations, you need to 0:09:16.520 --> 0:09:21.000 on one end, look at the stability in the core 0:09:21.160 --> 0:09:23.760 business operations of some of these companies, these megacap tech 0:09:23.760 --> 0:09:27.640 companies which remain highly profitable, and then also some of 0:09:27.679 --> 0:09:31.559 the upside moving forward in the AI race. And when 0:09:31.559 --> 0:09:34.200 it comes to the leading megacap tech companies, at least, 0:09:34.480 --> 0:09:39.960 we actually think valuations aren't as overstretched because core earnings 0:09:40.120 --> 0:09:44.240 are so robust and they are actively reinvesting a lot 0:09:44.320 --> 0:09:48.520 of those profits that cash flow into the next paradigm shift, 0:09:48.520 --> 0:09:50.679 and we're already seeing some early signs of success these 0:09:50.679 --> 0:09:51.840 Faces and Shovels companies. 0:09:52.000 --> 0:09:54.280 They're also digging for goals and seeing the fruits of that. 0:09:55.360 --> 0:09:57.640 Stephanie, when you were lost with us in April, it 0:09:57.720 --> 0:10:00.560 was just after the sort of deep seat chaos and 0:10:00.640 --> 0:10:04.440 we discussed how the semiconductor industry in particular was in 0:10:04.480 --> 0:10:08.400 the crosshairs of the administration. A lot has changed since then. 0:10:08.480 --> 0:10:12.640 Actually the administration has been very supported at exporting American technology. 0:10:13.040 --> 0:10:15.880 But just on the stories we touched on tariffs on 0:10:15.880 --> 0:10:19.800 semiconductors and location tracking on chips, there's a risk premium. 0:10:19.880 --> 0:10:25.160 There is there absolutely geopolitics remains a risk. Policy has 0:10:25.200 --> 0:10:28.559 been a headwind for the sector in recent months and 0:10:28.880 --> 0:10:32.160 particularly today, but we are seeing a shift from this 0:10:32.200 --> 0:10:38.120 administration towards a greater appreciation around what safeguarding US dominance in. 0:10:38.200 --> 0:10:39.520 AI really looks like. 0:10:39.679 --> 0:10:43.800 Right, And I will add, outside of these risks around tariffs, 0:10:44.120 --> 0:10:47.600 what is really promising and quite structural, is that you 0:10:47.720 --> 0:10:51.320 have seen a decline in over ninety percent around the 0:10:51.360 --> 0:10:54.080 cost of inference for AI, and that has to do 0:10:54.160 --> 0:10:58.760 with four factors. Hard hardware, the chips themselves have been 0:10:58.800 --> 0:11:03.400 getting significantly more efficient. Algorithms are getting more efficient, how 0:11:03.480 --> 0:11:06.079 much data, how many numbers they need a crunch, we're 0:11:06.160 --> 0:11:08.600 right sizing models. We now have mini models that we 0:11:08.600 --> 0:11:13.599 can access, and we've seen this democratization in models, particularly 0:11:13.679 --> 0:11:16.480 open source. So all of that has led to this 0:11:16.600 --> 0:11:19.839 pretty remarkable decline in the costs of AI, and I 0:11:19.880 --> 0:11:22.000 think we need to put that to one side when 0:11:22.000 --> 0:11:23.559 thinking about these risks for tariffs. 0:11:24.400 --> 0:11:28.240 We shall borrow the acronym going forward. What I've wanted 0:11:28.280 --> 0:11:30.480 to ask you for a real long time, is there 0:11:30.520 --> 0:11:34.000 an America ink trade going on here where you just say, 0:11:34.040 --> 0:11:37.760 I bet on these companies that are most likely to 0:11:37.800 --> 0:11:40.560 succeed if this American strategy pays off. 0:11:41.559 --> 0:11:43.920 I think it's a really interesting point, particularly in the 0:11:43.960 --> 0:11:48.120 context of this debate around US exceptionalism, because when I 0:11:48.160 --> 0:11:50.319 look at the markets right now, I don't see so 0:11:50.400 --> 0:11:56.560 much US exceptionalism, but exceptionalism from a few US companies, 0:11:57.120 --> 0:11:59.520 and that is really what is driving the markets right now. 0:11:59.559 --> 0:12:03.680 We're actually less concerned about valuations for let's say, the 0:12:03.679 --> 0:12:05.120 Magnificent seven and. 0:12:05.120 --> 0:12:06.959 A bit more concerned about the other four. 0:12:06.840 --> 0:12:11.320 Ninety three because without that structural tailwind when it comes 0:12:11.320 --> 0:12:15.280 to AI, it's a bit harder to see the cyclical 0:12:15.320 --> 0:12:17.880 tailwinds for the rest of the market. But when it 0:12:17.920 --> 0:12:20.520 comes to these leading tech companies, I think you do 0:12:20.600 --> 0:12:26.800 have unprecedented fundamentals and the continued dominance, particularly in tech services. 0:12:26.880 --> 0:12:29.600 Now there's plenty for investors to consider, and we still 0:12:29.640 --> 0:12:33.800 think portfolios should be diversified, but at a time like this, 0:12:34.240 --> 0:12:36.719 you maybe don't want to be diversifying away from that 0:12:36.760 --> 0:12:37.920 epicenter of innovation. 0:12:38.240 --> 0:12:39.520 Okay, so interesting that you got the. 0:12:39.440 --> 0:12:42.360 Acronym hard tech is where everyone's looking at from a 0:12:42.400 --> 0:12:45.640 spot up culture but also into these big Magnificent seven. 0:12:45.960 --> 0:12:48.280 But then drip feed it down into where if you 0:12:48.320 --> 0:12:51.080 are going to diversify the sector, is that are deploying 0:12:51.080 --> 0:12:53.240 it right or indeed, is it more about the picks 0:12:53.280 --> 0:12:54.800 and shovels a little bit more, it's about the energy, 0:12:54.800 --> 0:12:56.800 It's about the infrastructure and that slide of the equation 0:12:56.880 --> 0:12:58.080 that keeps you in the AI spin. 0:12:58.440 --> 0:13:02.360 Absolutely, the AI value is continuing to expand we think 0:13:02.360 --> 0:13:05.760 that infrastructure layer is huge, and that is a secular 0:13:05.760 --> 0:13:08.480 story that is still in its early innings. The amount 0:13:08.480 --> 0:13:10.360 of energy that we're going to need, the investment that 0:13:10.360 --> 0:13:12.560 we're going to need in a variety of different sources, 0:13:13.040 --> 0:13:16.680 and also everything that goes into those data centers themselves, 0:13:16.720 --> 0:13:19.920 the cooling equipment, the server technology, and so forth. So 0:13:19.960 --> 0:13:22.600 we still think there's a significant investment case there. But 0:13:22.640 --> 0:13:24.760 what's also really interesting in particularly what we're seeing in 0:13:24.760 --> 0:13:28.559 private markets this year, is this explosion of AI applications, 0:13:28.840 --> 0:13:31.440 the kind of applications that businesses are going to need 0:13:31.600 --> 0:13:33.640 because it's not enough to give their worker SHATBT. 0:13:34.080 --> 0:13:35.800 They need domain. 0:13:35.520 --> 0:13:40.079 Specific AI applications that are actually productivity enhancing and show 0:13:40.160 --> 0:13:42.440 up in the bottom line. We're seeing more and more 0:13:42.440 --> 0:13:45.880 of those come to market this year, mostly in private markets, 0:13:45.920 --> 0:13:47.760 but I think that's a trend that is worth watching 0:13:47.800 --> 0:13:48.640 and just getting going. 0:13:48.679 --> 0:13:50.679 And then they move from private markets into public markets 0:13:50.679 --> 0:13:53.319 and we see what happened with Figma and the bephoria 0:13:53.440 --> 0:13:55.520 around that particular listing. 0:13:56.160 --> 0:13:57.280 Are you seeing more of. 0:13:57.240 --> 0:13:59.480 Your clients wanting to know about what IPOs to get 0:13:59.520 --> 0:14:02.200 into or indeed how to make that move from private 0:14:02.200 --> 0:14:03.480 markets into public markets. 0:14:04.120 --> 0:14:05.800 I think there's a lot of interest there, as there 0:14:05.800 --> 0:14:07.800 should be. I mean, there's a lot of anticipation for 0:14:07.840 --> 0:14:11.120 a pickup an Ibo activity, and I think the fundamentals 0:14:11.160 --> 0:14:13.360 and the promise and a lot of those AI startups 0:14:13.360 --> 0:14:17.000 could be the thing that really gets enthusiasm and comfort going. 0:14:16.840 --> 0:14:17.640 In the market again. 0:14:18.080 --> 0:14:20.160 But I also don't think that we're going to go 0:14:20.320 --> 0:14:23.400 back to that kind of post pandemic period. A lot 0:14:23.440 --> 0:14:27.119 of these companies have different goals beyond just being profitable 0:14:27.200 --> 0:14:30.240 AI companies. Right, many of the LM providers that are 0:14:30.240 --> 0:14:32.560 in private markets, they're on the race to AGI, and 0:14:32.640 --> 0:14:36.120 so there is also this appreciation that these AI companies 0:14:36.160 --> 0:14:37.560 can get a lot of the capital that they need 0:14:37.600 --> 0:14:40.440 in private markets, maybe they will more control over their companies. 0:14:40.760 --> 0:14:43.560 So if you want to access that opportunity set, don't 0:14:43.560 --> 0:14:45.080 just wait for them to go public. I think you 0:14:45.120 --> 0:14:47.760 might want to look at your private market exposure and 0:14:47.800 --> 0:14:50.560 then also maybe some of those tactical opportunities that do 0:14:50.600 --> 0:14:51.440 arise this year. 0:14:52.600 --> 0:14:55.120 Stephanie Aliago, JP Morgan. Great to have you back on 0:14:55.160 --> 0:14:58.080 the show. Thank you very much. Now coming up, Joe Faff, 0:14:58.240 --> 0:15:01.000 known for making early bets on comempanies like Alphabet and 0:15:01.040 --> 0:15:04.720 Amazon while at tro Price, joins us discuss his new 0:15:04.800 --> 0:15:06.960 role head of Growth for Eclipse, a VC firm. 0:15:07.320 --> 0:15:09.560 That's next. This is Bloomberg Tech. 0:15:21.200 --> 0:15:24.960 Investor Joepath's scale trow Price's US growth stock Fund from 0:15:25.000 --> 0:15:27.720 fifty seven billion dollars to over one hundred and fifty 0:15:27.720 --> 0:15:31.000 billion dollars in assets, and had twenty years at the 0:15:31.040 --> 0:15:34.800 investment firm, making early bets on companies like Amazon, Alphabet, 0:15:34.840 --> 0:15:35.440 and Meta. 0:15:35.480 --> 0:15:37.280 He's now joining a Clipse, a. 0:15:37.280 --> 0:15:40.720 VC firm focused on physical industries as the head of 0:15:40.760 --> 0:15:42.440 growth and also as a partner. 0:15:42.880 --> 0:15:44.600 Joe's here with us in San Francisco. 0:15:45.120 --> 0:15:49.040 I've always known you to be somebody who is higher 0:15:49.120 --> 0:15:52.640 up the cap table of big companies that then go public. 0:15:52.760 --> 0:15:55.800 Rivian is the example that I know best, late growth 0:15:55.800 --> 0:15:59.200 stage round and anchor investor in in what was huge 0:15:59.240 --> 0:16:03.160 IPO in twenty twenty one. You've been lures to bench 0:16:03.240 --> 0:16:05.200 capital in Silicon Valley. 0:16:05.680 --> 0:16:08.040 Why good to be with you, Ed, I appreciate it. 0:16:08.480 --> 0:16:11.320 I'd say, you know, you've known me for a long 0:16:11.360 --> 0:16:13.920 time now, and I've been a builder of companies over 0:16:13.960 --> 0:16:16.280 time and investing capital, and those companies that they've scaled, 0:16:17.120 --> 0:16:19.880 I think what really attracted me eclips and opportunities. I 0:16:19.880 --> 0:16:21.520 really think we're at a seminal moment right now for 0:16:21.560 --> 0:16:26.120 physical industries. So if you look at the companies that 0:16:26.120 --> 0:16:28.600 have been created now, both private and public, and you 0:16:28.600 --> 0:16:30.880 look at the market caps, there's been significant interest in 0:16:30.920 --> 0:16:32.880 those and there's capital formation around them. 0:16:33.400 --> 0:16:34.640 The other parts of. 0:16:34.600 --> 0:16:36.480 This, I would say, you know, all this is coming 0:16:36.480 --> 0:16:38.880 together at once. Is US policy, which you talked about 0:16:38.880 --> 0:16:41.200 earlier in the segment, I think is very supportive of 0:16:41.240 --> 0:16:42.280 bringing industries back. 0:16:42.120 --> 0:16:42.960 To the United States. 0:16:43.400 --> 0:16:46.640 And the other thing is clearly an inordinate amount of 0:16:46.640 --> 0:16:52.320 innovation around artificial general intelligence and ultimately artificial superintelligence, which 0:16:52.360 --> 0:16:55.680 I think provides this unique intersection of hardware and software 0:16:55.800 --> 0:16:57.160 to transform physical industries. 0:16:57.400 --> 0:17:00.520 So the reindustrialization piece is something that comes up in 0:17:00.560 --> 0:17:05.040 this program all the time. There's a sort of national priority, 0:17:05.119 --> 0:17:08.600 national interest, even sort of national pride elements to it. 0:17:09.160 --> 0:17:11.800 How are you going to play that in your strategy. 0:17:12.200 --> 0:17:14.880 I think it's important you talk about policy and ultimately 0:17:15.040 --> 0:17:20.080 national security and economic sovereignty, and it's very important, I think, 0:17:20.160 --> 0:17:21.840 you know, looking at the Eclipse team and why I 0:17:22.000 --> 0:17:24.480 joined them specifically, they've been doing this for ten years 0:17:24.480 --> 0:17:28.040 and had a vision a decade ago, and it's an 0:17:28.040 --> 0:17:31.760 incredibly competent, amazing team. During my process, the time I 0:17:31.800 --> 0:17:35.280 spent with Lere and the rest of the partners, they're passionate, 0:17:35.520 --> 0:17:36.680 they're hungry. 0:17:36.359 --> 0:17:37.200 They're true builders. 0:17:37.200 --> 0:17:39.800 They roll up their sleeves, they get their hands dirty, 0:17:40.000 --> 0:17:42.520 and they've done a lot of you know, early stage 0:17:43.040 --> 0:17:47.000 enterprises and companies. Where I come in. I've allocated capital 0:17:47.040 --> 0:17:50.280 at scale. I've looked at companies both private and public 0:17:50.320 --> 0:17:53.000 that have grown, and I've worked alongside invested in many 0:17:53.000 --> 0:17:55.800 of the best companies in the world. So to do 0:17:55.840 --> 0:17:58.120 that as we scale these businesses and connect the two 0:17:58.200 --> 0:18:02.440 together with that team, their technical experience, in my financial experience, 0:18:02.440 --> 0:18:04.280 I think is really like a one plus one equals 0:18:04.320 --> 0:18:07.439 three situation. They remind me I'll date myself here, ed, 0:18:07.480 --> 0:18:10.640 but it's a team of Jerry Maguire's not. 0:18:10.680 --> 0:18:12.600 Dating at all. It's an iconic movie, Joe. 0:18:12.640 --> 0:18:16.240 I'm interested though, in just how you go from managing. 0:18:16.160 --> 0:18:18.240 Tens of billions to going. 0:18:18.320 --> 0:18:21.240 To managing and writing relatively small checks. What sort of 0:18:21.320 --> 0:18:23.159 size checking you're going to be giving do you think 0:18:23.240 --> 0:18:25.239 when you see these smaller scale companies that are going 0:18:25.280 --> 0:18:25.840 to be huge? 0:18:26.960 --> 0:18:30.040 Yeah, well, I mean initially, right at the early stage 0:18:30.080 --> 0:18:32.560 or venture side of this Caroline, you're going to see 0:18:32.560 --> 0:18:34.600 smaller check sizes. But we're going to scal all those 0:18:34.640 --> 0:18:37.680 over time, both for companies as they hit a scale 0:18:37.720 --> 0:18:40.400 velocity and they need more capital to continue to build 0:18:40.440 --> 0:18:42.720 out their strategies. And on top of that, there will 0:18:42.720 --> 0:18:45.719 be companies, as we've seen, that need bigger check sizes 0:18:45.760 --> 0:18:49.600 earlier and getting more traction. A good example that is investment. 0:18:49.600 --> 0:18:52.040 I made it both Trow and we've made it Eclipses 0:18:52.080 --> 0:18:54.000 Androl to give you an example. 0:18:54.080 --> 0:18:57.359 So, and Andrew, I immediately think of just the focus from 0:18:57.480 --> 0:19:00.199 the government and indeed for many an investor right now, 0:19:00.240 --> 0:19:02.280 just what was happening in point seventy two, for example, 0:19:02.440 --> 0:19:05.480 on getting in on defense tech in particular. But I'm 0:19:05.520 --> 0:19:07.720 interested in other particular areas where you think the US 0:19:07.800 --> 0:19:09.840 is leaning in more that you want to be contributing 0:19:09.880 --> 0:19:11.920 to thinking. When you think of red word, I'm thinking 0:19:11.920 --> 0:19:13.880 about the supply chain more. But when you're thinking then 0:19:13.920 --> 0:19:16.840 about Tesla is more about robotics. Where are your sweet 0:19:16.880 --> 0:19:17.480 spot's going to be? 0:19:17.520 --> 0:19:17.920 Do you think? 0:19:18.640 --> 0:19:20.920 Yeah, I've heard a lot of experience in electric vehicles, 0:19:20.960 --> 0:19:26.520 material science, battery technology, but that's also extended and I 0:19:26.560 --> 0:19:28.560 think it ties in with what Eclipse has done well, 0:19:28.640 --> 0:19:35.080 supply chain solutions, semiconductors. You mentioned defense tech, autonomy, So 0:19:35.280 --> 0:19:38.919 there's a lot of crossing a paths given my experience 0:19:39.000 --> 0:19:41.080 that I've had as a private and public investor, now 0:19:41.520 --> 0:19:42.240 as I join. 0:19:42.200 --> 0:19:46.400 Eclipse, Joe, you visited Tesla in twenty eleven. You took 0:19:46.480 --> 0:19:50.520 Rivian public basically, and then you help them after going public, 0:19:50.600 --> 0:19:53.000 just very quickly, What were the lessons you took from 0:19:53.119 --> 0:19:53.920 M two companies? 0:19:54.000 --> 0:19:55.800 Yeah, I mean, I think this is one of the 0:19:56.119 --> 0:19:58.640 seminal moment for me on physical industries was in twenty 0:19:58.680 --> 0:20:01.520 eleven when I visited Tesla. It was not just a 0:20:01.520 --> 0:20:03.800 differentiated product ed but at the end of the day, 0:20:04.000 --> 0:20:06.320 a different way of building right. The first principle ways 0:20:06.320 --> 0:20:10.240 of thinking, and we see that permeating a lot of businesses. 0:20:10.280 --> 0:20:16.879 And as we've had successful companies like Tesla, SpaceX, mentioned Anderill, Redwood, 0:20:17.280 --> 0:20:19.520 there's people leaving those firms and they're starting new firms 0:20:19.520 --> 0:20:21.640 as well. So the ecosystem is growing and they're taking 0:20:21.680 --> 0:20:25.120 those lessons they learned with them, things that were really 0:20:25.160 --> 0:20:27.320 important to me, and I think I can help businesses 0:20:27.320 --> 0:20:31.480 with clearly, product market fit is very important. You know, 0:20:31.560 --> 0:20:35.160 right product, right time, solving the right customer problem set 0:20:35.320 --> 0:20:37.960 or providing them something that they don't have, that's very important. 0:20:38.000 --> 0:20:41.120 I've always talked about, you know, additional acts beyond X one. 0:20:41.640 --> 0:20:44.560 You look at Tesla, They've done that, SpaceX has done that, 0:20:44.840 --> 0:20:47.480 Amazon's done that. So a handful of those and then 0:20:47.560 --> 0:20:50.520