Speaker 1: From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed.
Speaker 2: Lud Love.
Speaker 3: Live from New York and San Francisco.
Speaker 4: This is Bloomberg Technology Google. It's in the crosshairs. Bloomberg
Speaker 4: reports Washington is thinking about breaking up the Search Giant
Speaker 4: after that Landmark, Antitrust.
Speaker 5: Win, Big Tech, Nvidia and Bitcoin ETFs. In focus is
Speaker 5: the thirteen f filing sit insight on the secretive world
Speaker 5: of hedge funds tech holdings.
Speaker 3: An earning season.
Speaker 4: It continues, we push our head to Cisco as a
Speaker 4: company cuts costs and jobs amid a shift to aid head.
Speaker 5: Yeah, let's get right to Alphabet, the parent of Google
Speaker 5: shares a down three and a half percent after a
Speaker 5: slow start at the open within two standard deviations. The
Speaker 5: headline that Bloomberg's reporting is that DOJ officials and attorneys
Speaker 5: are assessing a bid to break up the Search Giant,
Speaker 5: and as you know, Caro, there are many other options
Speaker 5: being discussed at actions that could be taken. We also
Speaker 5: are going in later in the show to talk about
Speaker 5: the pixel event. Right the hardware game from Google is
Speaker 5: that a part of the stock story this morning not
Speaker 5: really clear, but it's a big headline where the nuance
Speaker 5: is important, and it's a big.
Speaker 4: Market cap erosion seventy one billion dollars on the day.
Speaker 4: And of course yesterday the Department of Justice, well we
Speaker 4: were understanding from Bloomberg's own reportant are potentially considering a
Speaker 4: bid to break up Google following the Landmark court ruling
Speaker 4: that found that the company monopolized the online search market.
Speaker 4: Let's get into it in Mosley and Nylan has been
Speaker 4: bringing us scoop after scoop in Washington, DC, And just
Speaker 4: how likely, how realistic is that we go back to
Speaker 4: two decades ago in the Microsoft fight.
Speaker 6: Yeah, so the Justice Appartment is considering recommending a breakup.
Speaker 6: They have a couple options on the table to see
Speaker 6: if they could require that Google sell off the Android
Speaker 6: operating system that's the hardware that you guys were talking about,
Speaker 6: the Chrome web browser, or potentially AdWords, which is the
Speaker 6: platform it uses to sell the text ads that appear
Speaker 6: at the top of the search results page.
Speaker 7: It's all going to be up to the judge.
Speaker 6: Though, he's the one who gets to choose the remedy.
Speaker 6: And you know they did had proposed breaking up Microsoft
Speaker 6: back in the day, and the courts just didn't go
Speaker 6: for it, and instead Microsoft ended up being under a
Speaker 6: consent decree that went on for more than ten years.
Speaker 6: So that's sort of what they're mulling. Should they try
Speaker 6: and propose a breakup that's sort of like pain a
Speaker 6: lot upfront and that it's over, or should they do
Speaker 6: something that goes along for oversight for many, many years.
Speaker 5: You know, Leah, the stock is down more significantly in
Speaker 5: this moment than it was in after hours when the
Speaker 5: story broke. There are many factors behind that. There's not
Speaker 5: much research out in response. What's interesting about the reporting
Speaker 5: is sources are giving us into an insight how the
Speaker 5: DOJ works, right, So tell us who they're speaking to,
Speaker 5: who they're soliciting information from, and kind of the things
Speaker 5: on the table, so to speak, of where they might
Speaker 5: go next.
Speaker 6: Yeah, So the Justice Department doesn't make this decision in
Speaker 6: a vacuum. They're consulting with a lot of third parties
Speaker 6: who've been impacted by Google's behavior, So obviously other search engines,
Speaker 6: but also like advertisers, people who advertise on Google, you know,
Speaker 6: lots of other websites that could be impacted by this.
Speaker 6: One thing that they are very interested in is Google's
Speaker 6: move into AI. They're a little bit concerned that Google
Speaker 6: could use some of its dominance in the search area
Speaker 6: sort of to leapfrog other companies and AI. So that's
Speaker 6: one thing they're also looking at.
Speaker 3: Are there any sort of.
Speaker 6: Restrictions they need to put on Google's development there? One
Speaker 6: possibility is sort of requiring that any information that they
Speaker 6: collect for the purposes of search is not allowed to
Speaker 6: be used for purposes of AI.
Speaker 3: So this is just the beginning.
Speaker 6: You know, there's going to be a hearing next month
Speaker 6: to sort of set up the procedure for how this
Speaker 6: remedy gets put into place. But you know, these are
Speaker 6: some of the initial thoughts that they have been thinking.
Speaker 4: As you say, it's just the beginning, and Alphabet and
Speaker 4: Google itself are going to fight this. How open to
Speaker 4: political persuasions? Is this going to be like we're looking
Speaker 4: at an election in November? Would anything change on the
Speaker 4: back of that.
Speaker 6: That's the other possibility. You know, if there is a
Speaker 6: Trump administration next year, there will be all new folks.
Speaker 6: They might have different ideas about what they should see her.
Speaker 6: But the one thing you do need to remember is
Speaker 6: this case actually started in the Trump administration. It was
Speaker 6: the Trump administration's folks on antitrust in twenty twenty who
Speaker 6: brought the original case.
Speaker 7: So the Trump.
Speaker 6: Administration, a second truck administration would probably want to continue
Speaker 6: pursuing a remedy against Google. They might just have different
Speaker 6: ideas about how to go get about it.
Speaker 5: Most Leah Nylan reporting out of Washington, d C. Thank
Speaker 5: you very much. That was the reporting. Let's get the
Speaker 5: reaction sell side first. Dan I is from Webbush writing
Speaker 5: this on the subject to break up of the big
Speaker 5: tech business models is highly unlikely down the road. Although
Speaker 5: business model tweaks and heaviest scrutiny of M and A
Speaker 5: will be front and center, there's also the sort of
Speaker 5: industry and academic perspective. Christina Kafara is the co founder
Speaker 5: and vice chair at Competition Research Policy Network. You're an
Speaker 5: expert in this field, so let's start with the likelihood
Speaker 5: that the DOJ launches an initiative or bid to break
Speaker 5: up Google.
Speaker 2: Thank you, Ed and Caroline, it's a pleasure to be here.
Speaker 2: The likelihood reflects the viewing side of DJ and will
Speaker 2: broadly held outside that Fundamentally, the purpose of all of
Speaker 2: these actions needs to be to restore or to induce competition.
Speaker 2: It is pointless to have just an opinion or a
Speaker 2: judgment that tells us that Google is a monopolist. We
Speaker 2: have a number of those in Europe. We have failed, however,
Speaker 2: in Europe to follow that through and implement measures remedies
Speaker 2: that were really capable of increasing competition. So the question
Speaker 2: is to what extent will the judge, as Leah was saying,
Speaker 2: just that you feel the appetite and the opportunity to
Speaker 2: push the remedy following his decision into a real that
Speaker 2: can create that competition.
Speaker 5: So Christina, on the word appetite, You forget that there
Speaker 5: are people behind this story. Our reportings based on anonymous sources.
Speaker 5: But we're trying to infer the thinking of DOJ officials
Speaker 5: and attorneys. Why in this moment might they feel this
Speaker 5: is realistic as a course of action, if not a breakup,
Speaker 5: but the other potential actions that Leah reported on just
Speaker 5: a moment ago.
Speaker 2: The reason why it is now a salient moment for
Speaker 2: this kind of action is that there is a global
Speaker 2: sense that anti trust action against big tech and Google
Speaker 2: in particular has not delivered, and fundamentally, because the reaction
Speaker 2: is being too timid, we haven't adopted measures that were
Speaker 2: capable of inducing competition. So the Department to Justice follow
Speaker 2: what Jonathan Canter said. He called this decision mount rushmore
Speaker 2: of anti trust historic monumental. This is the time when
Speaker 2: we need to get serious about whether we use anti trust.
Speaker 2: There's a real industrial policy tool to create competition in
Speaker 2: sectors where we have failed so far with half witted measures,
Speaker 2: and or we continue to do something which is marginal
Speaker 2: targeted and very prescriptive, but at the same time does
Speaker 2: not deliver competition, which is the goal here. So the
Speaker 2: Department of Justice will feel that this is this salient
Speaker 2: moment at which to pursue this kind of aggressive.
Speaker 4: Christina is a gender three and a half percent fall
Speaker 4: in market cap and share price. It's a big move
Speaker 4: on the day, but it certainly doesn't reflect the idea
Speaker 4: that it will be broken up. So is this in
Speaker 4: any way realistic And what do you anticipate will actually
Speaker 4: be the real soulce here?
Speaker 2: The markets never really anticipate that antitrust is going to
Speaker 2: do very much. And this is the text is the
Speaker 2: outcome of this case in which the judge is delivered
Speaker 2: a very thoughtful, very wealthul opinion. Is it going to
Speaker 2: be serious or is it going to be again nibbling
Speaker 2: at the margin of the problem. So I think markets
Speaker 2: are just waiting to see. Of course, the prospect of
Speaker 2: breaking up Google is very ambitious. On the other hand,
Speaker 2: if we don't do it now, then when how are
Speaker 2: we're going to create competition. A judge that just simply
Speaker 2: mandates that Google can no longer pay for exclusivity on
Speaker 2: Apple Os Samsung should note that this kind of measure
Speaker 2: is going to be performative, is not going to deliver
Speaker 2: anything of substance.
Speaker 4: What would be substantive from your perspective, Christina, Is it
Speaker 4: about going into all the which ways that Google basically
Speaker 4: impacts the ecosystem and trying to unravel it, Because that's
Speaker 4: a herculean task.
Speaker 2: It is at qli N And in fact, I fear
Speaker 2: that we might end up with proposals that are at
Speaker 2: rue Goldberg machine of various little measures, of various attempts
Speaker 2: to deal with the control points that Google has. There
Speaker 2: is no question that the tentacles have gone deep in
Speaker 2: multiple control points, and unless we addressed those choke points,
Speaker 2: then we are not finding a solution. Redlining a contract
Speaker 2: prohibiting exclusivity is not an answer. So breakup is difficult,
Speaker 2: but there are precedents in the US. Of course, you
Speaker 2: have done add the most significant president there and it
Speaker 2: unleashed competition and innovation. Of course, there will be massive
Speaker 2: challenges because Google will not take this line down. There
Speaker 2: will be possibly years of challenge. But fundamentally, you have
Speaker 2: an ecosystem in which you have YouTube and Google Search,
Speaker 2: which are the two most important websites that people actually use.
Speaker 2: And then you have the same company owning the most
Speaker 2: important browser, Chrome, and if you allow all of that
Speaker 2: to be under the same umbrella, the incentive of this
Speaker 2: company are continually to use all of these pieces of
Speaker 2: the technology to favor itself, to drive revenues for itself
Speaker 2: in ways that cement their monopoly, continue continually forevermore without
Speaker 2: allowing anyone to come in with Microsoft Office opened twenty
Speaker 2: billion over five years to be able to be on
Speaker 2: Safari instead of Google Search, and.
Speaker 4: We have to leave it here. But we really appreciate
Speaker 4: the nuancewer perspective. Christina Kafara, co founder and vice chair
Speaker 4: of the Competition Research Policy.
Speaker 3: Network, we thank her. Meanwhile, coming up thirteen F filing.
Speaker 4: Season, we'll discuss the latest and what those hedge funds
Speaker 4: have been up to.
Speaker 3: This is blue meg technology.
Speaker 4: It is so called thirteen F filing season or moment.
Speaker 3: What does that mean?
Speaker 4: It's where investment managers where hedge funds are forced to
Speaker 4: disclose what their US equity holdings have been in the
Speaker 4: previous quarters. It's a snapshot, but it's an interesting one,
Speaker 4: and we break.
Speaker 3: It down Bloomberg's Hemma palma.
Speaker 4: Much is being made of some holdings of bitcoin ETFs?
Speaker 3: Yes, what do you make of the reporting there? Yes,
Speaker 3: so it's kind of interesting.
Speaker 8: The SEC, if you recall, approves spared ETFs with bitcoins earlier,
Speaker 8: and so we had seen some buying. It looks like
Speaker 8: Goldman Sachs bought about four hundred million of it.
Speaker 4: Now.
Speaker 8: The thing to keep in mind with thirteen and f's
Speaker 8: is it gives us some clarity, but not full clarity,
Speaker 8: So we don't know which part of the bank necessarily
Speaker 8: bought it. We also don't know intentionality behind trades. So
Speaker 8: is it a bullish bed fundamentally on these ETFs and
Speaker 8: bitcoin or is it an opportunity to capitalize the volatility
Speaker 8: of the trade or is it a shorts against longer
Speaker 8: hedge along that against shorts you might hold, but it
Speaker 8: is interesting to see some significant buying in that space.
Speaker 7: Lindsay and New York's going to bring up the Nvidia chart.
Speaker 5: I think it's an interesting case study, right, because the
Speaker 5: data is backward looking. You want to go into the
Speaker 5: dark world of hedge funds and particularly stock picking funds, right.
Speaker 5: So the headlines I see is that a number of
Speaker 5: funds increase their position in Nvidia. It's interesting because it's
Speaker 5: the period ending June thirtieth, and as you see on
Speaker 5: the chart, we hit high on I think June eighteenth.
Speaker 7: What have you learned so far through.
Speaker 8: The Yeah, So that's one of the key themes we're
Speaker 8: looking at for this thirty and f season is how
Speaker 8: were funds, especially stock pickers, positioned just ahead of the
Speaker 8: time that we then saw in July and then got
Speaker 8: worse in August. So we did see some nominal buying
Speaker 8: of Navidia. Wisconsin's pension bought a little bit, UBSS Management
Speaker 8: bought a bit Co two trimmed their position in Nividia slightly.
Speaker 8: So it's interesting to see how funds were positioning their
Speaker 8: books ahead of what was a very tumultuous several weeks.
Speaker 4: What else are you managing to peel back in terms
Speaker 4: of some of the key players when it comes to
Speaker 4: technology names, the CO two is the D one.
Speaker 8: Precisely, so KO tow some interesting movement there. They slashed
Speaker 8: their alphabet position by thirty eight percent, I'll be prescient exactly,
Speaker 8: and they also slashed a salesforce position by about sixty percent,
Speaker 8: so two prescient moves ahead of this downturn. They ditched
Speaker 8: their Instacar position entirely, trimmed Meta, trimmed Navidia, so some
Speaker 8: really interesting moves ahead of this volatility that we saw.
Speaker 8: They started about six new positions. One of them is
Speaker 8: in g g Vanova, which is a company we're hearing
Speaker 8: a little bit more about that's the spinout from GE
Speaker 8: that's more energy focus. So they started a new position
Speaker 8: in that company that stock us up about thirty seven percent.
Speaker 5: Hemy you've done a really brilliant job of explaining the basics,
Speaker 5: you know, to the audience around the world on Bloomberg technology.
Speaker 5: Many of them will not understand thirteen f So we
Speaker 5: went over stock picking in directional bets. There's a lot
Speaker 5: more to come, right, we can't in aggregate say this
Speaker 5: is what the story was, just explain basically how it
Speaker 5: will play out over the next couple of days.
Speaker 8: Yes, so hedge funds are required to file these thirteen
Speaker 8: F positions, which shows their positions as of the end
Speaker 8: of the second quarter, and so what that means is
Speaker 8: we get a bit of a backwards.
Speaker 3: Looking view into these funds.
Speaker 8: They have to file it by the end of day
Speaker 8: to day. Oftentimes we see these filings coming in later
Speaker 8: in the day as maybe some funds procrastinate till ear
Speaker 8: later in the day, so we get more of an
Speaker 8: aggregate sense of how funds were positioned later in the afternoon.
Speaker 8: So tomorrow we'll have a little but more clarity in
Speaker 8: whole as to like what the positions were with what
Speaker 8: the popular buys and the more popular selling trends were.
Speaker 8: But keep in mind, even though this data is backwards looking,
Speaker 8: it's still helpful because hedge funds are notoriously secretive about
Speaker 8: what stocks are in and so this gives us some
Speaker 8: insights into what and how they're thinking might be across
Speaker 8: the sector, but especially in tech, which is precisely interesting
Speaker 8: these days.
Speaker 5: And interesting on this program. Bloombergs Hemma Palmer, thank you
Speaker 5: very much. Let's talk about markets more broadly. Core US
Speaker 5: inflation ease for a fourth month on an annual basis
Speaker 5: in July, keeping the Fed on track to lower interest
Speaker 5: rates next month. How's that going to impact the technology
Speaker 5: sector and technology stocks? Joining us now is Rob Howeth,
Speaker 5: senior investment strategists at US Bank Asset Management. It feels
Speaker 5: they're like there's been some anxiety of.
Speaker 7: Late in the market.
Speaker 5: So I think back to that fateful Monday after the
Speaker 5: boj We talked a lot about the yen carry trade.
Speaker 5: But what to you all mind is the principal driver
Speaker 5: in financial markets right now, particularly when you focus on
Speaker 5: technology and the equities market.
Speaker 9: Good morning, yeah, good morning. In the end, it is spending.
Speaker 9: Right what we've seen really drive tech stocks. I think
Speaker 9: for the bulk of this year is much higher investment
Speaker 9: in technology infrastructure to support artificial intelligence. I think the
Speaker 9: question before US as we look ahead is not is
Speaker 9: that going to continue? But does it broaden out? Is
Speaker 9: the consumer still healthy enough to increase goods spending which
Speaker 9: puts further pressure on technology infrastructure or we've seen fairly
Speaker 9: light auto sales. We've seen the consumer weakening, I think,
Speaker 9: and they've been focused this year so much on services.
Speaker 9: Some of the news we're seeing indicates some a lack
Speaker 9: of clarity on services spending into year end, and does
Speaker 9: that pivot into goods spending like on autos or other
Speaker 9: durable goods that we know have lots of chips in
Speaker 9: them as well? So does that put more pressure on
Speaker 9: technology infrastructure as we look into year ed That's not
Speaker 9: clear to us, but it's a question we have.
Speaker 5: Well, there are many days until August twenty eight for
Speaker 5: notable date because Nvidia reports earnings, and that may answer
Speaker 5: some of your questions. What's your approach to that. It's
Speaker 5: a single name that's driving the entire market at the moment.
Speaker 9: It's a single name that remains important to be in
Speaker 9: portfolios and at a market way, we would say, But
Speaker 9: our approach is we think this rally really has to
Speaker 9: broaden out a little more. We're looking more towards an
Speaker 9: equal weight SMP five hundred position because we think that
Speaker 9: there needs to be more beneficiaries than just technology. If
Speaker 9: this economy is really holding up as well as the
Speaker 9: data would indicate, right we're seeing softer inflation, but we're
Speaker 9: seeing still low unemployment, still good wage growth, still good
Speaker 9: GDP growth, and so we need to see more beneficiaries
Speaker 9: of this economic activity beyond technology as we look into
Speaker 9: the year.
Speaker 3: Well go across asset class for US as well.
Speaker 4: Should you be only thinking of equities in the tech space,
Speaker 4: what about fixed income?
Speaker 3: What about their corporate bonds?
Speaker 9: Fixed income is certainly extremely attractive. We're looking a little
Speaker 9: more at getting more credit exposure in our in our
Speaker 9: fixed income portfolios, whether it's a high yield municipal bonds
Speaker 9: for taxable investors or below investment grade corporate credit. I
Speaker 9: think the interesting thing in the technology space is often
Speaker 9: they're so cash rich that that you're getting high quality
Speaker 9: bonds there as well. So we would look to get
Speaker 9: some credit exposure at this point in portfolios because the
Speaker 9: economy is holding up fairly well. The interesting thing is investors.
Speaker 9: Investor sentiment is still very robust in credit compared to equity. Right,
Speaker 9: We've we've seen softness in the equity market here of late,
Speaker 9: but that that credit sentiment has stayed very strong. So
Speaker 9: there's not a lot of expectations there yet that this
Speaker 9: is a slowing economy.
Speaker 3: Well pay with so good to catch up with you.
Speaker 3: Thank you very much.
Speaker 4: Indeed, senior investment strategists of US Bank Asset Management across
Speaker 4: the essay classes for US.
Speaker 3: Time for AI and action.
Speaker 4: How is artificial intelligent artificial intelligence being implemented right now?
Speaker 3: We can speak to a founder about it.
Speaker 4: Minisong, co founder and CEO of elise AI, who's just
Speaker 4: announced that you're raising money. You've got a billion dollar
Speaker 4: valuation and it's all about helping renters.
Speaker 3: Am I correct? How are you helping rentors with AI?
Speaker 10: Yes, that's exactly correct.
Speaker 11: So elise AI is an AI technology company based in
Speaker 11: New York City that serves the housing and healthcare industries.
Speaker 11: Both of these industries experience significant operational challenges because the
Speaker 11: day to day operations are largely managed by arcane and
Speaker 11: manual processes. So we provide AI technology that allows our
Speaker 11: customers to automate the most important and business critical functions.
Speaker 11: So in the housing industry, for example, we provide an
Speaker 11: AI that helps renters with all of their needs from
Speaker 11: looking for an apartment, to touring, to handling their maintenance
Speaker 11: requests to even renewing their leases. And this helps housing
Speaker 11: providers be able to serve more renters, faster and better,
Speaker 11: and also at a lower cost. And today our AI
Speaker 11: is already used by over seventy percent of the largest
Speaker 11: property management companies in the US, and we've also expanded
Speaker 11: into the healthcare market, So in the healthcare industry, our
Speaker 11: AI similarly automates the day to day workflows like scheduling
Speaker 11: appointments that allow our customers to manage their businesses more effectively.
Speaker 5: Seventy five million dollars billion dollar value. Congrats, there's a
Speaker 5: lot of people sitting behind you. Who are they, what
Speaker 5: are they working on? And what are you going to
Speaker 5: use those funds for? Because you seem pretty busy already.
Speaker 10: We are extremely busy.
Speaker 11: So we're at our office headquartered here in New York City,
Speaker 11: and behind me are a bunch of really really talented engineers,
Speaker 11: product and many people that are supporting new customers every
Speaker 11: day in transforming their businesses using AI. So we're using
Speaker 11: the funding to expand our team and help more customers
Speaker 11: and build more innovative products to create efficiencies in their operations.
Speaker 4: We've got about thirty seconds Sapphire Ventures led the around
Speaker 4: others point seventy two Divco West.
Speaker 3: How is it like they're raising funds?
Speaker 10: It was surprisingly really easy.
Speaker 11: I think there's a lot of funding available for great
Speaker 11: businesses solving really important problems, and we're really excited to
Speaker 11: I've partnered with.
Speaker 10: With people who understood how the industry should be.
Speaker 5: Minnesotan co founder and CEO of elise A I, thank you.
Speaker 3: Very much, Welcome back to bluemot tenology.
Speaker 5: I'm Caroline Hid in New York and Amed Lodlow in
Speaker 5: San Francisco.
Speaker 3: Quick check on these.
Speaker 4: Markets said, because, well, the whipsawing of Nvidia means that
Speaker 4: we're now currently flat on the Nasdaq one hundred index.
Speaker 4: It had been training lower now and video pushes up higher.
Speaker 4: Also BROADCLM doing some heavy lifting at the moment. Basically,
Speaker 4: we are seeing a flat date calm after the CPI anticipation,
Speaker 4: and we do get a print that basically shows the
Speaker 4: federal reserve is still likely to be able to cut as.
Speaker 3: The market had anticipated.
Speaker 4: Tenure yield just dies down a little bit two basis points,
Speaker 4: so we're seeing buying a.
Speaker 3: Bond Bitcoin THO just off by two and a half percent.
Speaker 3: We're now at about fifty nine thousand.
Speaker 4: We since been training in that range of about sixty
Speaker 4: thousand of late move on, have a look at what's
Speaker 4: happening on some individual names, and as I mentioned in video,
Speaker 4: has been dictating sort of the way that the benchmark
Speaker 4: has been going, and we're up more than a percentage point.
Speaker 4: We are, though seeing ten Cent interestingly doing ten Cent
Speaker 4: music here. Maybe I gave the wrong particular focus, but
Speaker 4: Tencent has been giving us it's earnings. Going to delve
Speaker 4: into that in a little bit, but really thinking about
Speaker 4: how this juggernaut when it comes to gaming, when it
Speaker 4: comes to chat, when it comes to overall well fintech
Speaker 4: as well, has managing to push up is overall revenue.
Speaker 4: We're seeing Alphabet though, really the drag on the market today,
Speaker 4: and we're going to delve into not only what has
Speaker 4: been a DOJ discussion.
Speaker 3: We understand from reporting.
Speaker 4: At Bloomberg that maybe they're anticipating breaking up Alphabet that
Speaker 4: what weighs down three and a half percent. But this
Speaker 4: is after some important announcements. Yesterday, ed the really showed
Speaker 4: off its AI prowess, which in many ways is what
Speaker 4: regulators are worried about.
Speaker 7: Yeah, this is the hardware story.
Speaker 5: Google announced that they're rolling out upgraded smartphones ahead of
Speaker 5: Apple's u iPhone release in a push to sell AI.
Speaker 5: Joining us to break it all down from yesterday's event
Speaker 5: fresh off location is Bloomberg's Mark German. It's a simple
Speaker 5: story where we have updated line of pixel phones and
Speaker 5: one pixel fold phones. But what Google is trying to
Speaker 5: convince us of is we need that hardware for the
Speaker 5: best integration of Gemini and use of Gemini the generative
Speaker 5: AI tool in the real world.
Speaker 7: What did you make of it?
Speaker 11: All?
Speaker 1: That's right?
Speaker 12: I mean, these Google launches they've been happening since twenty sixteen,
Speaker 12: are so interesting, right, these phones. They announce parts of
Speaker 12: the phones, they post pictures of them on their website,
Speaker 12: they tweet them out. There are so many leaks of
Speaker 12: these devices. People go hands on with them before they're announced.
Speaker 12: So by the time that they actually announced these are
Speaker 12: older formal event, the phone has already essentially been announced, right,
Speaker 12: so we had long anticipated what these AI features are
Speaker 12: going to be. There are some interesting things here, and
Speaker 12: why I think it's so interesting is how tightly they've
Speaker 12: integrated everything, and the timing obviously couldn't be better. We
Speaker 12: had the news about the DOJ looking to break up
Speaker 12: the company. How do you break up a company that
Speaker 12: is now so tightly integrated. And it's so interesting that
Speaker 12: they made the decision to fold their Devices group and
Speaker 12: Android group together just a few months ago.
Speaker 3: Mark, that is exactly.
Speaker 4: Also, the push ahead from regulators is worrying that the
Speaker 4: amount of the web, the ecosystem that alphabet Google controls
Speaker 4: allows AI offering to be that much better than anyone else's,
Speaker 4: is it? How much would we likely to see that
Speaker 4: Google can now go head to head in a smartphone
Speaker 4: arena where they have five percent of the market in
Speaker 4: the US.
Speaker 12: You know, it is their competitive advantage, right.
Speaker 7: They've built Google Search.
Speaker 12: They built it, you know, Sergey Brin and Larry Page,
Speaker 12: they built it from the ground up twenty thirty years ago.
Speaker 12: And they built this network, this web crawling system, this
Speaker 12: amazing search engine that can now power these really incredible
Speaker 12: artificial intelligence features. And now that prowess, that technology that
Speaker 12: they spent decades building up is now being held against them, right,
Speaker 12: And so I don't think that the government should be
Speaker 12: holding that against them. Their ability to build a better
Speaker 12: product because of how many decades and how many billions
Speaker 12: or more they've spent to develop this technology, and to
Speaker 12: your point, this is much more advanced than what Apple has.
Speaker 12: Apple is very new to this AI game, using same
Speaker 12: similar models to what Google was doing.
Speaker 5: Now, well, Les's compared contrast, right, because the market's important.
Speaker 5: You know, there are roughly a couple billion monthly active
Speaker 5: users of all of the Google applications, but they're only
Speaker 5: shipping I think ten third party data ten million handsets
Speaker 5: a year, nothing really compared to the scale of iPhone.
Speaker 5: You cover Apple better than anyone on the planet. Is
Speaker 5: it going to be a real competition on the handset side?
Speaker 7: Based on what you saw, well, it depends how you
Speaker 7: look at it.
Speaker 12: The features ten times better if you're using the Google platform,
Speaker 12: if you're using a on Epixel, your AI experience, how
Speaker 12: much embedded AI you're getting, is going to be far
Speaker 12: far better. But if you really think about it, Apple
Speaker 12: is going to become the biggest mobile AI player overnight
Speaker 12: right in October when Apple Intelligence launches as part of
Speaker 12: iOS eighteen point one, a few weeks after the iPhone
Speaker 12: sixteen launches. But I've been using Apple Intelligence for weeks
Speaker 12: now as part of the eighteen point one betas there's
Speaker 12: not a lot there. You're getting summaries of text messages,
Speaker 12: you're getting summaries of emails, You're getting some notification prioritization.
Speaker 12: But there were some pretty cool demos from Google. You
Speaker 12: can have the phone answer phone calls on your behalf.
Speaker 12: You can go through trees when you make a phone call.
Speaker 12: It can re edit images for you. It can place
Speaker 12: you in a completely different environment. It can do things
Speaker 12: on your behalf. It could create resource reports. It's really
Speaker 12: day and night what you're getting between.
Speaker 7: Apple and Google.
Speaker 5: Bloomberg's chief correspondent for Everything Consumer Electronics, Mark German, thank
Speaker 5: you so much. Another story we're tracking is gaming ten cents.
Speaker 5: Revenue growth accelerated after the release of their blockbuster game
Speaker 5: this summer. Join us to take a closer look is
Speaker 5: Bloomberg's Henry Wren. I mean, basically it's an earning speed,
Speaker 5: but specific performance of one title has us very optimistic
Speaker 5: about a rebound for the gaming industry at large in China.
Speaker 7: Good afternoon to you in London. Yes, indeed, so.
Speaker 13: Tensen's gaming revenue has definitely been a highlight for the quarter.
Speaker 13: The domestic gaming revenue grew by eight percent in the
Speaker 13: second quarter, and that's the fastest growth pace that Tencent
Speaker 13: has seen for the segment in at least two years.
Speaker 13: The key catalyst, as you said, has been the Dungeon
Speaker 13: and Fighter mobile game, which was released in May. However,
Speaker 13: Tencent is also saying that it's seeing stronger grow stronger
Speaker 13: momentum across its evergreen games, so namely the Peacekeeper Elite
Speaker 13: as well.
Speaker 1: As Honor of Kings.
Speaker 13: So it's not just one game outperforming, but in the
Speaker 13: meantime some other older titles have been seeing stronger attractions
Speaker 13: as well.
Speaker 4: Tencent is such a juggernaut though, and the fact that
Speaker 4: it has so many people using weed chat and still
Speaker 4: manages to add to that as extraordinary. Do we get
Speaker 4: any sort of detail on how that're betting on AI
Speaker 4: and how that's going to revolutionize some of its products
Speaker 4: other than the gaming side.
Speaker 2: Yeah.
Speaker 13: Interestingly, actually, in this press conference that we've had with Tencent,
Speaker 13: the details with AI has been pretty scarce. The company
Speaker 13: has said that it's using a twe year model for
Speaker 13: its new AI assystem. However, apart from that, we actually
Speaker 13: haven't got too much details. It seems that the company's
Speaker 13: mindset has been rolling slowly with AI to get ready
Speaker 13: for its AI tours instead of rolling rapidly like you
Speaker 13: know alphabet that we have just discussed.
Speaker 3: Henry Wren, what are we going to do without you?
Speaker 4: We appreciate the sum up of what is a massive
Speaker 4: story today. Meanwhile, let's just talk a little about ed
Speaker 4: tech startup by you. It's back facing the potential insolvency
Speaker 4: after India's top court order to stay on a ruling
Speaker 4: allowed it to evert acruptcy. Now that means the startups
Speaker 4: insolvency proceedings can we start at least until the Supreme
Speaker 4: Court further decides on the case. Next week coming up,
Speaker 4: we're going to deep dive in the world of VC CRVS.
Speaker 4: Max Gazora is with us to talk about artificial intelligence valuations.
Speaker 4: Are they too heavy? We're also talking the economy and more.
Speaker 4: There's a BLUEBD technology.
Speaker 5: Code Rabbit, an AI powered platform focusing on the code
Speaker 5: review process, just announced it's completed a sixteen million dollar
Speaker 5: Series A funding round led by CRV. The round also
Speaker 5: included participation from Flex Capital, Engineering Capital, and prominent angel investors,
Speaker 5: including Olivier Pommel, CEO of Data Dog, another CRB backed business.
Speaker 5: Let's bring in Max Gazor, the general partner of CRB
Speaker 5: for more. In today's VC Spotlight, we can get into
Speaker 5: code Rabbit, but I just reflect in the first instance,
Speaker 5: while we try and make sense of what's happening in
Speaker 5: private markets. That on the one hand, sixteen million dollars
Speaker 5: might have been quite a large Series A in periods
Speaker 5: gone by, but at the application layer, foundation, model layer, otherwise,
Speaker 5: it's not that big in this context of the last year.
Speaker 7: Good morning, what do you make of thatness?
Speaker 14: Yeah, well, we've had a very busy summer. Code Rabbit
Speaker 14: was an investment we announced this morning. We've also announced
Speaker 14: a deal called Napkin last week, and it's been.
Speaker 1: One of our busiest summers on records.
Speaker 14: So the early stage private investment market for startups is
Speaker 14: very active.
Speaker 1: Most that's concentrated in AI.
Speaker 14: It is completely independent of what you see with the
Speaker 14: volatility in the public markets. So we're still very active
Speaker 14: investing across a number of different categories. I'd say one
Speaker 14: of the more interesting themes is that the investment shift
Speaker 14: has focused slightly from infrastructure into applications, and we're seeing
Speaker 14: a very wide breadth of domains that we're funding these days.
Speaker 5: A code Rabbit AI powered code review. There are some
Speaker 5: things that are out there that are sort of analogous
Speaker 5: with that, But would you mind going into the round itself,
Speaker 5: like how competitive it was, what it was like getting
Speaker 5: something done this summer relative to last summer for example.
Speaker 14: Yeah, my partner Read Christian led that deal. Code Rabbit
Speaker 14: is a repeat founder. They're focused on AI using a
Speaker 14: for improving code quality and code reviews. It was a
Speaker 14: competitive round and like many other deals that we see,
Speaker 14: we have to show up with very strong conviction, do
Speaker 14: work and you know, get to conviction on a category.
Speaker 14: It helps to have a prepared mind, which we do,
Speaker 14: and I think our portfolio in the developer tools, in
Speaker 14: developer ecosystem space helps us win those deals. So we
Speaker 14: were early investoring companies like Data Dog, like Verseell and
Speaker 14: a number of other high flying companies that I think
Speaker 14: helped to seal that deal.
Speaker 4: How many of those high flying companies in your portfolio
Speaker 4: are going to be able to exit in the next.
Speaker 3: Year or so, do you think, Max?
Speaker 1: You know, Carolyn, it's a very good question.
Speaker 14: Last time I was on the show, I was very
Speaker 14: enthusiastic about the prospects for IPOs this year.
Speaker 1: I think the reality is.
Speaker 14: That in the first half of the year, we had
Speaker 14: a situation where tech was ripping, it was low volatility,
Speaker 14: We had some moderately to you know, very successful IPOs,
Speaker 14: and we still didn't see a lot of activity. Now,
Speaker 14: with the second half of the year, with all this
Speaker 14: volatility in the backdrop and an election cycle, I think
Speaker 14: it would be you know, challenging to expect a lot
Speaker 14: more activity with the IPO window opening, and so our
Speaker 14: expectations are a little bit tempered. We think that these
Speaker 14: are very high quality companies and if it's not a
Speaker 14: public offering, we are seeing very creative deal making going
Speaker 14: on behind the scenes. So we expect that, you know,
Speaker 14: our focus is on building great companies, and we expect
Speaker 14: that the exit opportunities will emerge if we focus on
Speaker 14: building very durable companies, and so we're very patient and
Speaker 14: very resilient.
Speaker 3: Creative to say the least.
Speaker 4: There was just a graphic showing that some of the
Speaker 4: customers of your portfolio companies are character AI and that's
Speaker 4: been a literally creative exit of late. I'm interested, though,
Speaker 4: Max like this rather gross acronym I keep coming across
Speaker 4: at the moment is ROAI. Basically, what is the return
Speaker 4: on investment of artificial intelligence. Everyone's trying to understand in
Speaker 4: the public market, what do you think it is in
Speaker 4: the private market.
Speaker 14: Well, the reality is is if you listen to what
Speaker 14: public markets or public companies are saying, they're saying that
Speaker 14: the demand is there.
Speaker 1: We don't quite understand the.
Speaker 14: Return profile yet, which is I think a fair place
Speaker 14: to be. What we are seeing is the return on
Speaker 14: investment is much much higher in the application domain, and
Speaker 14: that's why a lot of the activity that you've seen
Speaker 14: has shifted into that domain versus infrastructure, which is sort
Speaker 14: of a picks and shovels business and much harder to
Speaker 14: measure our OI. You know, you had a previous guest
Speaker 14: on in solving problems in the real estate domain. You know,
Speaker 14: code Rabbit is solving code of view problems. The number,
Speaker 14: the breadth of application use cases and the ability to
Speaker 14: solve those quickly and deliver customer values much stronger there.
Speaker 5: You're an early stage investor in pot and you know, actually,
Speaker 5: I was really curious by Carrier bringing up character AI.
Speaker 5: There are new methods of exit so to speak, aqua
Speaker 5: higher and you can then eive a transfer IP or
Speaker 5: you don't like. In inflections case, the IP was fully
Speaker 5: transferred to Microsoft in characters case.
Speaker 7: I don't think that it was.
Speaker 5: But do you then think differently about your like ten
Speaker 5: year time horizon when you invest in a startup, if
Speaker 5: you see a potential, so you sign creative.
Speaker 14: It's a very good observation. It's a it's an interesting time.
Speaker 14: Let me just give you some anecdotes we've seen just
Speaker 14: in the last couple of weeks. There's you know, four
Speaker 14: acquisition discussions. There's discussions of direct secondaries, there's discussions of
Speaker 14: tender offers, there's discussions of continuity funds for venture firms,
Speaker 14: you know, seeking liquidity. And I'm even going through a
Speaker 14: situation now where there might be a merger of equals,
Speaker 14: which is the first time I've seen something at that
Speaker 14: scale in a private company. So it just gives you
Speaker 14: a visibility into what's going on in our world. There's
Speaker 14: a lot of creative dealmaking, you know, discussions going on
Speaker 14: behind the scenes. I think some of this is in
Speaker 14: part due to the lack of IPO window being open.
Speaker 14: But the good news is that these are all very
Speaker 14: good companies and the founder for the most part, are
Speaker 14: very patient exploring things opportunistically.
Speaker 3: Can you tell us through the merger of equals.
Speaker 14: Is I would love to that's that's for a different
Speaker 14: time on.
Speaker 4: Set, Come on back when it happens, Mexica Zoo I
Speaker 4: thank you general partner at CRV.
Speaker 3: Intel.
Speaker 4: It's slashing jobs, it's expenses and a bid to turn
Speaker 4: around the business, and it's just sold its holdings in
Speaker 4: chip Technology Creator Armed during the second quarter. Now the
Speaker 4: company reported it in a regulatory filing Tuesday, and it
Speaker 4: no longer owns the one point one eight million shares
Speaker 4: it held three months earlier. This is Intel, of course,
Speaker 4: has been struggling to regain its footing in an industry
Speaker 4: at once dominated ed more on companies cunning jobs.
Speaker 5: Yeah, there's a lot to discussing the landscape. Cisco plans
Speaker 5: to report its fiscal fourth quarter performance, providing fresh insight
Speaker 5: into where the corporations are back to investing in their
Speaker 5: computer networks, joining us to discuss Bloomberg's Ian King and
Speaker 5: you take those two stories and aggregate. Right, It's it's
Speaker 5: a landscape and environment thing. The winners and losers of
Speaker 5: what's happening. Cisco is interesting because they would say we're relevant,
Speaker 5: We're a part of this.
Speaker 7: Earnings will tell us whether they are or not.
Speaker 15: Yeah, I mean it's a transition story for Cisco. They're
Speaker 15: kind of promising that as an organization that they're transitioning
Speaker 15: into more sort of relevant for today technology and less
Speaker 15: focused on what they used to be good at. So
Speaker 15: kind of a wait and see. It's not going to
Speaker 15: be a one day thing for them. Intel probably less.
Speaker 4: So yeah, just go go into Intel for a moment
Speaker 4: because just the fact that they're having to sell off
Speaker 4: such holdings, that they're trying to cut costs to such
Speaker 4: an extent, this seems very painful. We were just talking
Speaker 4: the other day about how they're cutting their marketing spend
Speaker 4: acting an event.
Speaker 15: Yeah, I mean it doesn't. I mean we don't know
Speaker 15: the precise details because Intel wouldn't comment other than outside
Speaker 15: of the filings. But it's not a good look, right,
Speaker 15: I mean, this is not something that they bought as
Speaker 15: a massive investment to make a huge amount of money on.
Speaker 15: Given the nature of the company, it's probably going to
Speaker 15: have been a sort of strategic purchase. The fact that
Speaker 15: they decided to sell that and the fact that if
Speaker 15: you look on their balance sheet that the actually made
Speaker 15: losses on some of their equity investments not a good look,
Speaker 15: and it seems to indicate that they really need any
Speaker 15: cash wherever they can get it.
Speaker 7: Right now, could we end on that?
Speaker 5: Just the basics of the balance sheet, you know, Pat
Speaker 5: Gelsinger's approached has been what he calls smart capital, partnering
Speaker 5: with strategics, taking public or government money, and then the
Speaker 5: balance sheet to fund what he's trying to do.
Speaker 7: How is that part going.
Speaker 15: Well, I mean it depends on who you speak to.
Speaker 15: Some of the analysts are talking about Intel and its
Speaker 15: access to capital. Moodies, as you know, downgraded the last week.
Speaker 15: There are a couple of runs above junk now unfortunately
Speaker 15: for them, so that's obviously going to raise their custom capital.
Speaker 15: But in general, to be talking about Intel and its
Speaker 15: access to capital is new territory for the chip industry.
Speaker 15: I mean, this is a company that just was a
Speaker 15: wash with cash for so many decades and now it's
Speaker 15: a concern ian.
Speaker 3: King with a fascinating beat. We thank you so much.
Speaker 4: Meanwhile, Secret code names billboards deal drama. This is just
Speaker 4: a window into the kind of competition for data supremacy
Speaker 4: between data breaks and Snowflake joining us now. But he
Speaker 4: wokes Brodie Ford, who has a fascinating deep dive into
Speaker 4: a rivalry started as frenemies, not so much at all
Speaker 4: in the tech industry.
Speaker 16: We love a good old fashioned rivalry, and we haven't
Speaker 16: seen them like this in a while. I mean, two
Speaker 16: companies that are really just going after each other, right,
Speaker 16: I mean, they each kind of have cute nicknames for
Speaker 16: each other when they go and try to steal each
Speaker 16: other's business. They incentivize sellers to go after each other, right.
Speaker 16: I mean what really underlines all this is these are
Speaker 16: companies that maybe aren't household names, but they are required
Speaker 16: when you want to get your day in order to
Speaker 16: go use it for AI.
Speaker 7: Right.
Speaker 16: And so I mean pretty much name any company you
Speaker 16: can and they're gonna be customers of one or two,
Speaker 16: most likely both of these vendors.
Speaker 5: Brady, remember in March, long time ago, but you and
Speaker 5: I did that story about Ali Gotzi basically saying that
Speaker 5: Frank Slutman left is of the competition, which is kind
Speaker 5: of wild at the time. There are some pretty scoopy
Speaker 5: bits within the feature valuations deal making.
Speaker 7: Just give us the rest of that stuff.
Speaker 16: Yeah, I mean, one interesting one is that Snowflake was
Speaker 16: ready to purchase a startup for six hundred million, and
Speaker 16: then you know, Data Bricks comes in and ends up
Speaker 16: spending almost nearly two billion to buy it. And that's
Speaker 16: an unreported detail. Another interesting element is that while everybody
Speaker 16: understands on some level these two companies are a threat
Speaker 16: to one another, what isn't quite understood is the looming
Speaker 16: risk of the hyperscalers. Microsoft is, you know, their cloud
Speaker 16: infrastructure is what a significant chunk of Data Bricks revenue
Speaker 16: is coming from customers on there? And Microsoft said last month, hey,
Speaker 16: data Bricks is a competitor now, and Data Bricks has
Speaker 16: spent a lot of time and energy recently quietly toughening
Speaker 16: that competitive stance.
Speaker 4: It's interesting again and again in the story there's this
Speaker 4: fighting among what is the cheapest offering?
Speaker 8: Yeah?
Speaker 4: Right, will price come into it when you've got Microsoft
Speaker 4: is the juggernaut that's just so easy to integrate with,
Speaker 4: probably for everything.
Speaker 16: Well, what's funny is most will say that it purchasers
Speaker 16: don't fully spend on price. They do want functionality at
Speaker 16: the end of the day. Yeah, the easiest thing to
Speaker 16: dig your competitor on is a look how expensive they are.
Speaker 16: That's an easy bit of fun you could throw at
Speaker 16: the wall, and so it's not surprising that every single
Speaker 16: company involved is saying this.
Speaker 5: Lindo's Brady Ford check out that deep dive in that
Speaker 5: feature on Bloomberg dot com.
Speaker 7: Thank you Wednesday, Caro completed it in the bag.
Speaker 3: How can that be done?
Speaker 4: For this addition of Bloomberg Technology so much to digest
Speaker 4: the fact that we're still an earning season that we've
Speaker 4: braced the Cisco says it all.
Speaker 5: Yeah, for August Newsflow, things going pretty well. Don't forget
Speaker 5: to recap on the podcast. You know where to find
Speaker 5: it Bloomberg Terminal as well as on Apple, Spotify, and
Speaker 5: iHeart Caro and the team in New York City, me
Speaker 5: and the team in San Francisco.
Speaker 7: This is Bloomberg Technology.