Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Carolline Hide in New York
Speaker 1: and Edmavelow in San Francisco.
Speaker 2: This is Bloomberg Tech coming up. Intel gets two billion
Speaker 2: dollars from soft Bank as the US government confirms discussions
Speaker 2: to take a steak in the chip maker. Plus Palo
Speaker 2: Alto Networks gives a strong forecast for the cybersecurity giant
Speaker 2: our conversation with the CEO Nikesha Rura, and Apple expands
Speaker 2: its iPhone production in India as it seeks to lessen
Speaker 2: its reliance on China. But first I shinelight what's happening
Speaker 2: with arm as well, because the news was that SoftBank
Speaker 2: is taking well two billion dollars in inequity state. They're
Speaker 2: going to be selling new shells. Soft Bank is going
Speaker 2: to be having them. Remember SoftBank, of course, in many
Speaker 2: ways controls on the chip designer. We're thinking also about
Speaker 2: the US government, which doesn't indeed confirm that they are
Speaker 2: eyeing a stake for the business. We're wondering just how much.
Speaker 2: And I'm pretiused to say that we can dive into
Speaker 2: this with Michael Shepherd, of course, Blomberg's executive editor on
Speaker 2: all things to do with technology and Washington, and boy
Speaker 2: is Washington playing a bigger and bigger role at the moment.
Speaker 2: COMMAS Secretary Lutnik saying, yes, we're involved in talks, but
Speaker 2: how much equity MIC.
Speaker 3: Well, it's a great question.
Speaker 4: He stopped short of saying that it would be the
Speaker 4: ten percent stake that our colleagues scooped and reported yesterday,
Speaker 4: and it gave a size and scope to what we
Speaker 4: had broken earlier over last week, and that is that
Speaker 4: the government had been weighing this investment in the company.
Speaker 4: And the idea is to take some of the Chips
Speaker 4: Act money and those are funds and subsidies CARA that
Speaker 4: we have talked about on these airwaves so much.
Speaker 3: Over the past year and a half.
Speaker 4: But they would take that money and turn it into
Speaker 4: equity handstock over to the government, and that would make
Speaker 4: the federal government the largest holder in Intel, which would
Speaker 4: be an extraordinary step, especially in the tech space, and
Speaker 4: it would also provide something of a lifeline to this
Speaker 4: company as the new CEO, Lip Bhutan, tries to turn
Speaker 4: it around after inheriting from Pat Gelsinger's predecessor, a company
Speaker 4: that was really at a crossroads.
Speaker 2: Really at a crossroads. Lip Bhutan now has to almost
Speaker 2: try and weave a narrative that's got pretty confusing for
Speaker 2: the government. They care about manufacturing in the United States,
Speaker 2: they care about Ohio an awful lot, They care about innovation,
Speaker 2: and that almost felt like something that Boutan was pulling
Speaker 2: away from, and certainly in terms of the latest and
Speaker 2: greatest innovation with fourteen eight processes, but they couldn't find
Speaker 2: demand for it.
Speaker 4: Well, Caro, you hit the nail on the head right there.
Speaker 4: There is such tension between what lip Bhutan was going
Speaker 4: to have to do with the turnaround, with the goals
Speaker 4: of the administration, which, as you said, is to try
Speaker 4: to stoke warm domestic manufacturing, especially in the advanced technology
Speaker 4: space and semiconductor space, and that factory in Ohio we've
Speaker 4: talked so much about has now been pushed back to
Speaker 4: the twenty thirties, and that's not a timeline that the
Speaker 4: Trump administration would accept. The rub though, is that Intel
Speaker 4: just doesn't yet have the customers to be able to
Speaker 4: sustain the factory build out there, which is so costly
Speaker 4: and would involve such continued investment by the company. It
Speaker 4: needs a guaranteed revenue stream from those buyers of chips.
Speaker 3: To be able to make that work.
Speaker 4: Now, one of the questions is would the government try
Speaker 4: to cajole some other tech companies into buying chips from
Speaker 4: Intel to help it find that customer base as it
Speaker 4: seeks to move forward. We heard from Treasury Secretary Treasury,
Speaker 4: the secret Treasury Secretary Scott Vestn't this morning saying that no,
Speaker 4: the federal government would not get involved in trying to
Speaker 4: find those customers.
Speaker 3: But we'll wait and see.
Speaker 4: The President is very much interested in trying to see
Speaker 4: Intel succeed.
Speaker 3: He had a very positive meeting with.
Speaker 4: Bhutan about ten days ago, and this was just days
Speaker 4: after suggesting that the CEO might have to leave over
Speaker 4: his prior ties and engagement with China.
Speaker 3: China.
Speaker 4: So we are seeing a bit of a turn of
Speaker 4: fortune between not only the company and the government, but
Speaker 4: really the company and CEO with the president himself.
Speaker 2: I mean, Link Secretary Strategies might call this monumental the
Speaker 2: last couple of days in their view for Intel. What
Speaker 2: I think is really interesting though, is not aside from
Speaker 2: already the investment, they're managing to push from SoftBank, for example,
Speaker 2: into Intel. But whether other companies that have taken Chipsack
Speaker 2: money might see that turn into an equity investment too.
Speaker 2: That seemed to be what I was reading between the
Speaker 2: lines of our reporting. Well, Micron's taken money, but how
Speaker 2: could that possibly work for TSMC Samsung?
Speaker 4: We are seeing in between the lines of those reporting
Speaker 4: a sense among some White House officials that they would
Speaker 4: like to perhaps take it a step further with those
Speaker 4: other companies, perhaps including the ones that you mentioned now,
Speaker 4: with a venture like Micron, perhaps because it's US flagged
Speaker 4: and US based.
Speaker 3: Sure, maybe that could work.
Speaker 4: But then Taiwan and TSMC, how does Taiwan semiconductor manufacturing
Speaker 4: company and the Taiwanese government leadership accept something like that?
Speaker 4: And Samsung and the government in South Korea there lies
Speaker 4: some greater sensitivities. Even as those governments have come to
Speaker 4: embrace the need to diversify the location of their manufacturing
Speaker 4: and to also curry favor with Donald Trump by investing
Speaker 4: in the US, there may be a certain line when
Speaker 4: it comes to the equity stakes, Carol, So we'll have
Speaker 4: to see how that plays out.
Speaker 2: A Max Michael Shepherd and the Inside Track of what's
Speaker 2: happening in Washington. We thank you. Let's turn to well
Speaker 2: they analysis on the street now for Intel and the
Speaker 2: read across to the sector. Gailuria's with US head of
Speaker 2: Tech research at DA Davison. Is this a good thing
Speaker 2: for Intel?
Speaker 5: It's a lightsaver. They were on an unclear path before
Speaker 5: the government decided to renegotiate its deal. Let's not forget
Speaker 5: the US government already had a deal with Intel. It's
Speaker 5: we're going to give you six billion dollars and we're
Speaker 5: going to get a colored profit shared down the line.
Speaker 5: What this administration is doing is just renegotiating the deal.
Speaker 5: It's saying that's not good enough. We want to take
Speaker 5: an equity state. And by the way, Intel is different
Speaker 5: because part of this deal is a big Department of
Speaker 5: Defense component. Let's not forget. We're going to want Intel
Speaker 5: to manufacture chips for our F thirty fives and other
Speaker 5: important weapons systems. So the government has a different type
Speaker 5: of relationship, for instance, than it does with TMSMC, where
Speaker 5: we're just talking about making chips for data centers. So
Speaker 5: the government renegotiated the deal, and now when it's done that,
Speaker 5: it's not a coincidence that Libu time can go to
Speaker 5: his friend Masa San and say, okay, this is the
Speaker 5: time for SoftBank to invest as well and maybe line
Speaker 5: up some armed demand for those fourteen eight chips down
Speaker 5: the line.
Speaker 2: I'm so interested in the arm architecture side of this.
Speaker 2: How do you see these working hand in hand going forward?
Speaker 2: How more cemented could a relationship become?
Speaker 5: Well, clearly it could be part of the deal. And
Speaker 5: more importantly for Intel, as of a week ago, they
Speaker 5: had no customers for the fourteen A architecture and they
Speaker 5: said they may not even proceed with it. Now they
Speaker 5: might have one lined up. Let's not forget the Department
Speaker 5: of Defense is a customer that's now more likely to
Speaker 5: be lined up for that, And then they can go
Speaker 5: and talk to the other companies. And even if the
Speaker 5: government doesn't have it, doesn't go ahead and twist some arms.
Speaker 5: Let's not forget. And Nvidia's committed half a trillion dollars
Speaker 5: of investment in the US, so can the government now?
Speaker 5: Can President Trump called Jensen Wang and say, hey, this
Speaker 5: is part of how I want to see the investment
Speaker 5: play out. I need for you to be a customer
Speaker 5: of fourteen A that's not inconceivable at this point. And again,
Speaker 5: remember this is national security, So the rules of the
Speaker 5: games change once we say this is national security.
Speaker 2: Rules of the game are often blurred by frenemy lines.
Speaker 2: Gil And what's so interesting is Massa has had a
Speaker 2: long term relationship with the CEO of Invidia, of course,
Speaker 2: Jensen Wang, but also in some ways wants to build
Speaker 2: a competing architecture in some ways, what's to take on
Speaker 2: in Vidio in terms of AI chips? Could he do
Speaker 2: that with Intel's help.
Speaker 5: It's one way for him to participate in an even
Speaker 5: more broad fashion in the growth of AI, which he's
Speaker 5: doing now. He regrets selling in video when he did.
Speaker 5: He's buying some of it back, but he's also making
Speaker 5: a set of other investments in AI infrastructure. Let's not
Speaker 5: forget Stargate is probably the flag bearer of his effort,
Speaker 5: combining with open Ai and Oracle to build again at
Speaker 5: least one hundred billion dollars worth of data center capacity.
Speaker 5: And for that it would make sense to diversify and
Speaker 5: not only buy Nvidia chips. Now, that's going to take
Speaker 5: a while, and Nvidia not only has a lead but
Speaker 5: continues to extend its lead every year, but it does
Speaker 5: make sense for him and for other companies to try
Speaker 5: to diversify away from Nvidia.
Speaker 2: What's interesting is how a Lutnik Ecomo sextuary had said, look,
Speaker 2: we will be we confirm that we're looking at taking
Speaker 2: an equity stake. Didn't say how much, but it wouldn't
Speaker 2: be with a governance role. Now, well, broadly, how are
Speaker 2: you starting to analyze companies that are getting closer and
Speaker 2: closer to the US government and how much Well is
Speaker 2: it interference or is it positive help that is being
Speaker 2: led by a US government here.
Speaker 5: Well, the US government has an ability to to give
Speaker 5: proferential treatment to some of these companies to change the
Speaker 5: rules of the road, and it wants equity participation when
Speaker 5: it does that. And again, it's not doing it broadly.
Speaker 5: It's doing when it's a matter of national security. Let's
Speaker 5: not forget it's already very involved with Nvidia. It's limiting
Speaker 5: their chip sales to China. It's already very involved with
Speaker 5: open Ai. This may be quiet, but it's pretty safe
Speaker 5: to assume the Department of Defense gets briefs from open
Speaker 5: Ai very frequently about where the models are. So the
Speaker 5: government is involved because it's national security. In Intel's case,
Speaker 5: it's a matter of if this is this century's nuclear arsenal,
Speaker 5: we need somebody to make the shellcasings domestically. We can't
Speaker 5: have a Taiwanese company in a Korean company make our
Speaker 5: shellcasings for our nuclear arsenal. So in Intel's case, it's
Speaker 5: a much deeper involvement, and I wouldn't be surprised if
Speaker 5: there are if there is input into where the investments go,
Speaker 5: what the governance is, even if it's not explicit.
Speaker 2: Something that Blomberg will seek comment on Da Davidson's Guilduria,
Speaker 2: like so much be analysis today we are coming up.
Speaker 2: We have from Palo Alto Network CEO Niickesha Arora is
Speaker 2: the company sees it a stronger than expected twenty twenty six.
Speaker 2: This is Blue Medtech Shares a Palo alter Networks rising
Speaker 2: in fact best days since April. It's not apposting a
Speaker 2: stronger than expected forecast for twenty twenty six. We caught
Speaker 2: up with the CEO, Niickesha Rara earlier. That's what we
Speaker 2: had to say about the growth.
Speaker 6: The industry has got too many fragmented players where the
Speaker 6: customers are left to do the stitching on cybersecurity themselves,
Speaker 6: and now the base at which attacks are happening, the
Speaker 6: base at which the bad actor is able to get
Speaker 6: in and excellent straight data has shrunk to twenty five minutes.
Speaker 3: You can't solve that problem with the humans. You have
Speaker 3: to apply technology. You have to apply automation, you have
Speaker 3: to apply.
Speaker 6: Yeah, and that's why that's where platformization comes in.
Speaker 2: You talk about the pervasive attacks, I mean you apply
Speaker 2: GENI to tackle ultimately attacks coming from JENI. I think
Speaker 2: you had phenomenal statistics in the call, eight hundred and
Speaker 2: ninety percent increase in GENAI traffic in twenty twenty four.
Speaker 2: Can you just talk to us about how you can
Speaker 2: combat that, what sort of things you need in place
Speaker 2: to be able to take on the GENI impact.
Speaker 6: Well, look, as we're noticing everywhere as AI is getting deployed,
Speaker 6: the fundamental problem that every company is facing and deploying
Speaker 6: LLLMS or AI effectively is they don't have good data.
Speaker 6: You need good data on drug discovery, you need good
Speaker 6: data on self driving cars to understand where every tree is,
Speaker 6: where we plant is, So you need good data to
Speaker 6: solve the problem. If you want to use AI and
Speaker 6: What we have done at our end is we have
Speaker 6: basically built a platform that ingests so collects all the
Speaker 6: data from the enterprise and makes sense of it as
Speaker 6: fast as.
Speaker 3: The bad actors can. Now, that can't be done in humans.
Speaker 6: For example, in an instance of ourselves, Leaven just one
Speaker 6: hundred and fifty terabytes a day. That's a lot of data,
Speaker 6: and that's just for ourselves. And imagine doing that across
Speaker 6: four hundred customers. We're ingesting data and petabytes, analyzing it
Speaker 6: on the fly and trying to stop an attack made stream.
Speaker 6: That requires tons of technology, tons of AI expertise because
Speaker 6: the consequences are disastrous. Right, the bad actors are doing that,
Speaker 6: but they're trying to get it right once. We have
Speaker 6: to get it right one hundred percent of the time.
Speaker 2: Okay, so you're on the expertise that you need. You've
Speaker 2: had organically, but also some inorganic expertise coming on. When
Speaker 2: I think about the identity focus you've now put on
Speaker 2: with cyber arg it's a deal that of course will
Speaker 2: be folded in in the longer term.
Speaker 3: I don't know. You guys like to call it in organic.
Speaker 6: When you hire great people, that's possibly call it in organic,
Speaker 6: isn't it like, Well, Meta goes and hires AI researchers
Speaker 6: and people hire people. That's innerwirement. Guess we have to
Speaker 6: get great people from elsewhere because we don't have, you know,
Speaker 6: the prerogative of having best people on all of the time.
Speaker 3: So yes, we buy great teams who are doing great works.
Speaker 2: It's twenty five billion, This is a twenty five billion
Speaker 2: dollar Aquahi.
Speaker 6: Well, we can't get there the way we got here,
Speaker 6: so we're going to have to make sure that we
Speaker 6: go ahead. And it's not just acquhire. It's amazing technology.
Speaker 6: It's a great bunch of people. And honestly, I think
Speaker 6: the way to frame it, Caroline, is if you listen
Speaker 6: to all the narratives I here in Bloomberg and around
Speaker 6: in media, we're all worried about agents.
Speaker 3: We all believe that agents are going to take over
Speaker 3: the world.
Speaker 6: We believe they're going to be more agents in companies
Speaker 6: and they're going to be humans. Now, well, somebody's got
Speaker 6: to make sense of these agents. Somebody's got to make
Speaker 6: sure these agents have credentials, they're managed, they're understood, they
Speaker 6: don't run rogue, they have guardrails. That whole world of
Speaker 6: agentic AI needs a whole cloak or framework of identity
Speaker 6: management around them, and cyber Arc is the world leader
Speaker 6: in this topic. So partnering with them, making them put
Speaker 6: the networks allows us to see ahead and say two
Speaker 6: years from now, three years from now, when the world
Speaker 6: is talking about how to manage all these things, how
Speaker 6: does podel to get ready and be at the forefront
Speaker 6: so our customers can solve their problems on deploying AI
Speaker 6: while we help them a security What.
Speaker 2: Sales synergies do you see in that two to three years?
Speaker 2: How do you ensure that you don't get a hit
Speaker 2: to that margin that some award about.
Speaker 6: We are as the first at scale cybersecurity company. We
Speaker 6: crossed a ten billion dollar revenue rundrate never been done
Speaker 6: in cybersecurity. That allows us to leverage scale economics. We
Speaker 6: run a thirty percent operating margin, We run close to
Speaker 6: forty percent free.
Speaker 3: Cash flow margins.
Speaker 6: Were a robust, profitable company. Any company that isn't a
Speaker 6: billion two billion dollar ur business, which a cyber Arc is,
Speaker 6: we think we can vastly improve their operations as part
Speaker 6: of Polo Alto because the scale economics that we bring
Speaker 6: both on the go to market side, we have ten
Speaker 6: times of sellers they have, and on the operating side,
Speaker 6: and we run large scale systems for sixteen thousand employees.
Speaker 6: Adding six thousand employees doesn't take a lot, but it
Speaker 6: does improve the margins the underlying business of Tagic, So
Speaker 6: we believe that the acquisition will be a creative over time.
Speaker 6: The billion f FI twenty eight we can collectively achieve
Speaker 6: a forty percent free cash flow margin, which again is
Speaker 6: gold standard in our industry, let alone our industry and software.
Speaker 2: Hello Alto Networks Cee Nikesh Aurora. The AI industry's massive
Speaker 2: funding needs are being seen as an opportunity by private
Speaker 2: credit firms. For example, firms competed for months till Ard
Speaker 2: Meta twenty nine million dollars for its AI data center
Speaker 2: project in Louisiana. Now Pinco and blue Out Capital eventually
Speaker 2: selected there. Bloomberg's Laura Benitez joins us. She covers asset management,
Speaker 2: and we're reporting on this a lot, and just remind
Speaker 2: us why private credit is really salivating at the opportunity here.
Speaker 7: There's a huge opportunity within AI, you know, unline private equity,
Speaker 7: which we're seeing, you know, some kind of logjam with exits.
Speaker 7: You know, there's big opportunity with infrastructure and digital infrastructure.
Speaker 7: The margins can be quite high, the coupons can be
Speaker 7: very lucrative. So yes, it's a piece of the private
Speaker 7: everyone's trying to get in on right now.
Speaker 2: They get in our meta, there's opportunities to come. I
Speaker 2: was just looking at a note put out by UBS,
Speaker 2: So they almost worry that perhaps this is getting too much.
Speaker 2: The froth starts to appear, the risks start to appear.
Speaker 2: That something you're hearing, Laura, that's right.
Speaker 7: There are some concerns that, you know, there's too much
Speaker 7: money chasing this opportunity now, and that it might be
Speaker 7: overblown and demand you know, seem to be you know,
Speaker 7: apparently soaring. But we I think kind of a bit
Speaker 7: skeptical on that in the long term. But you're right.
Speaker 7: Morgan Stanley have said, for instance, that there's you know,
Speaker 7: trillions of capital expenditure needs for AI in the next
Speaker 7: few years, and that could translate to hundreds of billions
Speaker 7: of bond issuance coming into the bond market.
Speaker 8: So again huge numbers here.
Speaker 2: Three trillion in the next three years is the number
Speaker 2: that morgus Standing was estimating. It is eyewatering. A lot
Speaker 2: of it is US denominated. Just tell us where on
Speaker 2: the respectrum actually this lies. Is this what would be
Speaker 2: deemed investment grade debt? More broadly, because these companies are
Speaker 2: i mean washed with cash and very betterable against the
Speaker 2: many see the demand is there for these AI data centers.
Speaker 2: It's a good question.
Speaker 7: The vast majority of what we're seeing could translate into
Speaker 7: investment grade issuance, primarily because of the tenor so the
Speaker 7: maturities of these debt instruments are very very low long
Speaker 7: that allows companies and issuers to get an investment grade rating.
Speaker 7: And also they're back to against card assets, so you've
Speaker 7: got more collateral there.
Speaker 8: Should things go wrong.
Speaker 7: You've got more security to negotiate with.
Speaker 2: Banks, cut out private credit swoops in Pimco A big
Speaker 2: winner here, Bluemos, Laura Benitez, it has been great speaking
Speaker 2: to you, thank you. But elsewhere in AI, let's talk
Speaker 2: about regulation. Last year, California Governor Gavin Newsom, remember he
Speaker 2: vetoed an AI safety bill. The lawmakers actually pleased to
Speaker 2: take another swing at the regulation. Here's State Senator Scott
Speaker 2: Wiener speaking with us after the.
Speaker 9: Vetop California as the heartland of tech and.
Speaker 8: AI innovation, has a responsibility to lead on AI safety.
Speaker 2: Titus Wu. He covers California politics for Bluembag Industry Group,
Speaker 2: and you're joining us now because there are multiple AI
Speaker 2: in tech related bills in front of lawmakers and Sacramento.
Speaker 2: But I thought, this is exactly what the administration doesn't want,
Speaker 2: a patchwork effect, a state by state AI regulation future.
Speaker 10: I would say for thanks for having me on, but
Speaker 10: I would say that you know, Governor news doesn't necessarily
Speaker 10: say that he didn't want, you know, any air regulation
Speaker 10: whatsoever here in California. If anything, you know, in recent months,
Speaker 10: you know, given that you know, on the fairal level,
Speaker 10: we saw them try to implement a ten year moratorium
Speaker 10: on state IO laws. That you know, Newsom has tod
Speaker 10: that he's felt that California has to lead on AI regulation.
Speaker 10: The question is what is Newsome's preferred approach of regulating it,
Speaker 10: because clearly, you know last year was SP ten forty seven,
Speaker 10: that was not how he wanted to see it. And
Speaker 10: right now, you know, lawmakers they're trying again, and they're
Speaker 10: trying to suss out and read the teenies on us
Speaker 10: to what the governor wants what kind of regulation. What's
Speaker 10: the mill line in which the governor would say, okay,
Speaker 10: this supports innovation but also advances some sensible regulation.
Speaker 2: So they're thinking about AI developers testing the tools against bias,
Speaker 2: for example, that's in the AB ten eighteen. This isn't
Speaker 2: just the only era of regulation that my OVERSEAI, right,
Speaker 2: we're also thinking about how big tech, in many ways
Speaker 2: is lobbying against what's SB fifty three. Can you took
Speaker 2: us through that one, Titus?
Speaker 10: Yes? So SB fifty three is basically center and Winner's
Speaker 10: kind of second attempt after his teen forty seven got vitailed.
Speaker 10: It's definitely a lot less i'd say, restrictive than ten
Speaker 10: forty seven. It focuses mostly on kind of disclosing safety
Speaker 10: and security prodcasts for AA developers. There's s a blow
Speaker 10: of protections the third party audits. You have to report
Speaker 10: a kind of safety instance to the state ag. So
Speaker 10: it's it's it's nothing not as intrusive as last years
Speaker 10: ten forty seven, and it's trying to pick up on
Speaker 10: some of the recommendations from this working group formed by
Speaker 10: this group of experts that the governor formed after his
Speaker 10: vetol last year.
Speaker 2: And very briefly worker rights against automated tools. That seems
Speaker 2: to we canes.
Speaker 10: Yes, definitely. You know, labor forces in California, the really
Speaker 10: powerful political force, uh you know this year they're they're
Speaker 10: getting more in the weeds into trying to put in
Speaker 10: comprehensive rules around AI in the workplace SB seven. It's
Speaker 10: very very intense bill where you know, labor and in
Speaker 10: tech they're fighting with each other and the capital over it. Basically,
Speaker 10: that bill would, uh, that bill would give workers rights
Speaker 10: to kind of you know, opt out, potentially refuse you know,
Speaker 10: decisions by employers when they use AI, for instance, to
Speaker 10: make termination decisions, disciplinary decisions, and it had a big
Speaker 10: consequence of employers across the California.
Speaker 2: Titus Wio, California correspondent for Bluemag Industry Group. Great to
Speaker 2: get your insights. Thank you, welcome back to blombag Tech.
Speaker 2: We're all thinking about what the US government means for
Speaker 2: Intel ownership, how much they confirm that they are indeed
Speaker 2: looking at taking a stake, what size of steak is
Speaker 2: still under question, how we see a change of grants,
Speaker 2: money lent in the chip sat into equity, and what
Speaker 2: soft Bank's now getting in on the game. For we're
Speaker 2: up seven and a half percent. Let's get over to
Speaker 2: London where Peter Elstrom is with US executive editor who
Speaker 2: used to oversee. Of course, you're looking at the technology
Speaker 2: news for US more broadly and big expertise in Asia.
Speaker 2: So I go to Asia first. I ask you why
Speaker 2: SoftBank is taking that two billion dollar steak. Why are
Speaker 2: they getting Intel to sell more equity to them.
Speaker 11: Yeah, there's a lot going on here with Intel, but
Speaker 11: on the software. On the soft Bank front in particular,
Speaker 11: the founder Mosio Shechssan has had ambitions in the chip
Speaker 11: area for a long time. He bought armholdings of course,
Speaker 11: the chip designers that's commonplace and all sorts of smartphones,
Speaker 11: and he has ambitions to be able to compete in
Speaker 11: AI chips against Nvidia. In particular. They think that they
Speaker 11: can use some of those designs from ARM to make
Speaker 11: a much more efficient, energy efficient chip that could compete
Speaker 11: with Invidious chips, particularly for running some of these AI
Speaker 11: services like chat, GPT in particular. So the idea that
Speaker 11: SoftBank would put two billion dollars into Intel gives them
Speaker 11: a stake in the company that could be important, perhaps
Speaker 11: as an investment, but also if Intel is able to
Speaker 11: develop its foundry business, that is, making custom chips for
Speaker 11: other kinds of companies. You could imagine a day when
Speaker 11: Intel makes AI chips for soft Bank and is able
Speaker 11: to sell those, and both companies would be able to
Speaker 11: benefit from taking some of that demand away from Nvidia
Speaker 11: as this AI boom really explodes.
Speaker 2: And when we think about the foundry business, when we
Speaker 2: think about manufacturing, that's where the US government wants to
Speaker 2: lean in. They want domestically made manufactured chips that ultimately
Speaker 2: gives them control of the supply chain. But we're hearing
Speaker 2: from Howard Lutnink that he doesn't want control over Intel
Speaker 2: in any way. They don't want a governance role here.
Speaker 11: Right right, Yeah, you make a good point. The US
Speaker 11: government has wanted to rebuild the domestic semiconductor and industry
Speaker 11: for a number of different reasons. Partly because it's a
Speaker 11: great business. It could mean some jobs and some profits
Speaker 11: for them, but also they don't want to have the
Speaker 11: strategic risk of having all the advanced semiconductor and manufacturing
Speaker 11: in the world in East Asia and Taiwan and South
Speaker 11: Korea in particular. They want to be able to bring
Speaker 11: that into the United States, And Howard Lutnik eluded this
Speaker 11: today when he confirmed the nice group that we had
Speaker 11: yesterday about how the US government is looking at taking
Speaker 11: this ten percent stake in Intel. Intel, of course, is
Speaker 11: really the last major US chip maker standing that has
Speaker 11: a shot at being able to make those most advanced
Speaker 11: chips to be able to compete with the likes of
Speaker 11: TSMC and Samsung in particular. So Lutnik is saying, hey,
Speaker 11: we may use this chipsack money to convert into equity
Speaker 11: and then take this ten percent steak within Intel. And
Speaker 11: he's also suggesting that they may do that with some
Speaker 11: of the other companies that are supposed to be recipients
Speaker 11: of the chipsacked.
Speaker 2: Money, one of them being Micron for example. You want
Speaker 2: to on Earth that would sink in with a TSMC
Speaker 2: and Samsung they've also taken chipsacked money. Peter. But what's
Speaker 2: really interesting is weather this gets you. The end of
Speaker 2: the reason that we could pull back from fourteen A
Speaker 2: in many ways was because it was like, I don't
Speaker 2: want to be that person who just builds it in
Speaker 2: hopes that they come.
Speaker 11: Yeah, this isn't free money, to be clear, under the
Speaker 11: Biden administration, they allocated these Chips Act awards. Those were
Speaker 11: supposed to be grants. This was supposed to be money
Speaker 11: that was coming in anyway. There was no talk about
Speaker 11: these companies giving up equity to be able to get
Speaker 11: those billions of dollars. So the Trump administration is trying
Speaker 11: to change the calculus here where they still will give
Speaker 11: you the amount of money that you were supposed to
Speaker 11: get from the Chips Act, but in place you're going
Speaker 11: to have to give them some equity in the company.
Speaker 11: So it's not free money. And maybe a little bit
Speaker 11: accelerated from what the original vision was for the Chips Act.
Speaker 11: Intel for example, may be able to get that ten
Speaker 11: point nine billion dollars that they were supposed to get
Speaker 11: a bit sooner, but still it's not you know, it's
Speaker 11: not free money. They still have to go out there.
Speaker 11: They have to prove that they can succeed in the
Speaker 11: foundry business. And to your point, then they need to
Speaker 11: go out and get customers. The US government can do
Speaker 11: a lot, but it can't get Intel customers for that
Speaker 11: boundary business.
Speaker 2: To Alstrom also to articulate and like me, just then
Speaker 2: we thank you. Let's bring in Swiss COT senior analyst
Speaker 2: ipek Oskodeshka for more. Who I ask you whether there's
Speaker 2: changing up of the calculus is actually what global investors
Speaker 2: want to see. How difficult is it to calculate what
Speaker 2: the US government's going to do next?
Speaker 12: Well, it's very difficult, indeed, because the speed at which
Speaker 12: things are coming some news are usual, some news are unusual.
Speaker 12: So the speed at which things are coming to investors'
Speaker 12: attention is just went out of control. And some of
Speaker 12: the news do have positive implications for companies.
Speaker 2: But there is still the risk that the US.
Speaker 12: Government's goals are not going to be always aligned with
Speaker 12: business objective objectives and the company's primary goal of maximizing
Speaker 12: investor value.
Speaker 2: So the risks are building, risk of building. Does it
Speaker 2: put you off the generator of AI tailwinds? More broadly
Speaker 2: though that we've seen, Let's go back to previous weeks
Speaker 2: with Nvideo and AMD becoming in the eye of the
Speaker 2: political storm and having to pay fifteen percent if they're
Speaker 2: going to sell it to China, for example.
Speaker 12: So that's very interesting because if you look at AMD
Speaker 12: and Nvidia today, they are in a better place than
Speaker 12: they were a month or two months ago where they
Speaker 12: weren't able.
Speaker 3: To sell their hips to China.
Speaker 12: Today all of a sudden, they can if they pay
Speaker 12: fifteen percent cut of their Chinese sales.
Speaker 3: So this looks like it is good.
Speaker 12: News, but in the short run is going to give
Speaker 12: these companies more revenue. But in the long run, in
Speaker 12: the midium to long run, we don't know how the
Speaker 12: news and the US government interference is going to change,
Speaker 12: whether the changes are going to be positive or negative.
Speaker 12: So that means that the votility is higher and the
Speaker 12: risks are building up. It doesn't mean that the companies
Speaker 12: will not benefit from the US government support, but it
Speaker 12: means that the US government will not pursue the same
Speaker 12: goals that they do all the time. So that I
Speaker 12: think is a risk, and that is there's something that
Speaker 12: we become quite concious.
Speaker 2: Even though over the last let's call it two years,
Speaker 2: basically seven names have made up nearly all of the
Speaker 2: equity benchromarks gains. So how does an investor basically hedge
Speaker 2: against that volatility? Do they stay exposed but start diversifying impact?
Speaker 12: Well, diversific diversification is one of the rules that we're
Speaker 12: just like recommending obviously because diversifying away from the US
Speaker 12: equities that have quite high valuations right now towards sectors
Speaker 12: that do have opportunity to follow up is interesting. Then
Speaker 12: other clients are looking to byput options for example, that
Speaker 12: are interesting in case there is a sell off in
Speaker 12: the market and we start seeing valuations come down, and
Speaker 12: there are many things to do, but at the end
Speaker 12: of the day, what we see is that.
Speaker 2: AI is growing.
Speaker 12: It is not the AIK that's going to be smaller,
Speaker 12: but it is how the AIK is going to be
Speaker 12: pieced together that's going to be important. And we think
Speaker 12: that international companies are also going for a piece of
Speaker 12: a piece for themselves and that is actually giving way
Speaker 12: to opportunities in the international market. Is now that the
Speaker 12: US technology companies are value to perfection.
Speaker 2: It's been interesting. You just mentioned how perhaps you use
Speaker 2: options to be able to well hedge oneself. What many
Speaker 2: would say is what occurred with Intel, as many were
Speaker 2: using it as a hedge, betting against it to be
Speaker 2: able to protect the upside that they've been getting from
Speaker 2: in video and other areas of chips market. Was that
Speaker 2: something you saw at play and where else had basically
Speaker 2: investors looked to bet against to protect other winnings that
Speaker 2: they'd seen in the sector.
Speaker 12: Well, you don't really want to go against MVDA NAMS,
Speaker 12: you don't. You cannot really go against this machine. The
Speaker 12: only thing that you're willing to do is to protect
Speaker 12: any potential sell off or any potential drug down. So
Speaker 12: in this sense, we think that it is always very
Speaker 12: important to stay long and just diversific Diversification of the
Speaker 12: portfolios looks like the way to go for US. We
Speaker 12: do not really expect to see a sector meltdown or
Speaker 12: very very big change in the dominance of the US.
Speaker 2: What we're trying to do.
Speaker 12: Is just to diversify a little bit in order to
Speaker 12: tame the downside US for investors who are looking to
Speaker 12: have some international exposure to broader AI play.
Speaker 2: And is that Europe? I mean I think of ASML, SAP,
Speaker 2: but not many other AI names leap to the forefram
Speaker 2: when it comes to publicly traded equities. Is it more
Speaker 2: of an Asia game as well? Is it thinking elsewhere
Speaker 2: in the asset pool, not just equity, but maybe death?
Speaker 12: No, you're right, I mean for Europe, we are specifically
Speaker 12: looking into defense related technology plays and we think that
Speaker 12: the defense spending is somehow going to boost the technology
Speaker 12: spending in Europe as well, So we are mostly looking
Speaker 12: into military in defense technologies within the European context.
Speaker 2: For China, we are looking at the AI plays.
Speaker 12: We are looking at the funderies and the chip makers
Speaker 12: like SMIs for example. Same thing for South Korea.
Speaker 8: We are watching.
Speaker 12: Very closely some some what especially ska Heinex. So there
Speaker 12: are some champions around the world that are willing to
Speaker 12: take a piece of that cake and that are looking
Speaker 12: in resting and that how not seen enough exposure so
Speaker 12: far because they have remained will stay under the cloud
Speaker 12: of the US big technology giants. And we think that
Speaker 12: there's still opportunity there and there's still a reason to
Speaker 12: think about diverse buying there.
Speaker 2: Ibecshta Geshkaya, We thank you so much for Swiss quid
Speaker 2: open Ai. But it's launching a new subscription tier exclusively
Speaker 2: in India called chatchipt Go and the plan will use
Speaker 2: its latest GPT five model at just five dollars a
Speaker 2: month now. The plan would allow users to generate more
Speaker 2: images and interact with the chatbot more frequently compared to
Speaker 2: the free version. The latest tier will be in addition
Speaker 2: to its other paid plan offerings, including Chatchipt Plus, which
Speaker 2: course costs twenty dollars a month. Now, sticking with India,
Speaker 2: Apple is expanding iPhone production at five factories in the country. Look,
Speaker 2: it's a move aimed at lessening the company's reliance on
Speaker 2: China for US bound models. Let's bring in Marabell Lopez,
Speaker 2: Founa and play for analyst at Lopez Research and Marravell.
Speaker 2: What was so interesting is this brought the ire of
Speaker 2: President Trump, who was frustrated that Apple was doing more
Speaker 2: of its manufacturing in India, shifting from China. He wanted
Speaker 2: it in the US. But has Tim Cook done enough
Speaker 2: therefore in the United States to offset this.
Speaker 9: I think Tim Cook eventually will do enough on the
Speaker 9: United States to upset it. But today the answer to
Speaker 9: that is now. And it's unexpected that they move this
Speaker 9: to India. They've been working with India since roughly twenty seventeen.
Speaker 9: So it takes a long time to build manufacturing. So
Speaker 9: you just don't go in, no matter who you are,
Speaker 9: a president or not, and say you're going to build tomorrow.
Speaker 8: It takes time to build factors.
Speaker 2: Takes time. So how much do you think ultimately will
Speaker 2: be sourced from India into the United States. Is it
Speaker 2: only going to be iPhones in other accessories, Well.
Speaker 9: I think we're starting to see other plants come online
Speaker 9: in the US. For example in Houston, when we look
Speaker 9: at what they want to do with Apple Intelligence and
Speaker 9: Servers for they are building that and that's coming online
Speaker 9: in twenty twenty six. So that's an example of some
Speaker 9: of the products that will be built here. But the
Speaker 9: iPhone manufacturing, I expect that it will take several years
Speaker 9: to get up and running any major significant US presence,
Speaker 9: And this is part of the reason why there's roughly
Speaker 9: six hundred billion earmarked towards creating manufacturing in the US,
Speaker 9: and that comes in many different forms. Part of that
Speaker 9: will be for servers, but you have to envision that
Speaker 9: part of that will also be for iPhones.
Speaker 2: Let's talk about what's happening here in the United States,
Speaker 2: because today we understand that Apple is unfolding its academy.
Speaker 2: This is all about training here in the United States.
Speaker 2: Who exactly is it for and what production do that
Speaker 2: ultimately lead to here.
Speaker 9: So one of the things that we have happening right
Speaker 9: now is AI is very complicated and businesses actually don't
Speaker 9: know where to get started. So the concept behind the
Speaker 9: Apple Academy is for small medium businesses to understand effectively
Speaker 9: what they need to know to build next.
Speaker 8: Gen manufacturing, which would be highly AI driven. So that
Speaker 8: is going to.
Speaker 9: Be a multi day program that small and medium businesses
Speaker 9: sign up for. They currently have a wait list at
Speaker 9: this point for the next wave of that. They will
Speaker 9: be running those courses throughout the year, and then once
Speaker 9: you've gone through the course, there's an opportunity to discuss
Speaker 9: more detailed discussions about what kind of products and services
Speaker 9: we need. With Apple engineers, it can help you do
Speaker 9: something that's more specific to your organization.
Speaker 8: This is to fill a skills gap.
Speaker 9: You know, we have a plenty of education programs in
Speaker 9: high school and above to try to bring in new employees,
Speaker 9: but if you're actually a business running today, especially at
Speaker 9: small medium business, there's very few options for you. So
Speaker 9: this is both an opportunity to educate these small businesses
Speaker 9: but then also put them in the pipeline to buy
Speaker 9: Apple products and services moving forward.
Speaker 2: Really interesting you talk about this is the skills gap.
Speaker 2: Prior to this, of course, President Trump has talked a
Speaker 2: lot about the production gap and where he wants to
Speaker 2: see that rectivid. Just take a listen to what he
Speaker 2: said in August six.
Speaker 13: We're doing these things now in the United States instead
Speaker 13: of other countries, far away countries.
Speaker 2: This is a.
Speaker 13: Significant step toward the ultimate goal of ensuring that iPhone
Speaker 13: sold in the United States of America also are made
Speaker 13: in America with the mass infusion of capitalists. Announcing today,
Speaker 13: Apple will also build a two hundred and fifty thousand
Speaker 13: square foot server manufacturing facility in Houston and avest billions
Speaker 13: of dollars to construct data centers across the country from
Speaker 13: North Carolina to Iowa to Oregon.
Speaker 2: Marvell, you so thoughtfully put us right on the medium
Speaker 2: sized businesses. They really have nowhere to go when it
Speaker 2: comes to upskilling and being able to facilitate production. What
Speaker 2: is it that Apple brings by training? Because really the
Speaker 2: anxiety for Tim Cook has been they haven't got the
Speaker 2: tooling engineers in the United States that they have in
Speaker 2: China that they have in India. Is that what is
Speaker 2: going after longer term?
Speaker 9: So I think yeah is the short answer, but it's
Speaker 9: actually a very broad field when you think about what
Speaker 9: we're moving into moving forward, There's been a lot of
Speaker 9: discussion of physical AI and robotics, and a lot of
Speaker 9: that will be in manufacturing. It could be for iPhones,
Speaker 9: it could be for automotive. The reason that they've picked
Speaker 9: Detroit is not lost. It's a manufacturing culture. There are
Speaker 9: companies there, but we are running into this gap where
Speaker 9: these organizations don't have data scientists. They don't understand machine learning,
Speaker 9: as an example, so we're starting with things that is
Speaker 9: on the AI side, machine learning, which is a basic
Speaker 9: way to start, and then moving that forward. So these
Speaker 9: are short courses. The Apple engineers that are there are
Speaker 9: actually basically doing rotations to spend some time helping the
Speaker 9: small medium businesses, but they're also still doing their day job.
Speaker 9: So there wasn't a net new investment in terms of employees,
Speaker 9: but there is a net new investment in terms of
Speaker 9: getting organizations to understand what is required for them to
Speaker 9: participate in the next generation economy.
Speaker 8: That's stage one.
Speaker 2: Well alongside that stage is what companies are listening to
Speaker 2: in terms of what's needed in terms of manufacturing here
Speaker 2: in the US on the most sophisticated chips. I turn
Speaker 2: our attention to what's happening with Intel at the moment.
Speaker 2: I mean, we just heard from President Trump on all
Speaker 2: the sixth what he wants of Apple. How do you
Speaker 2: make of the state that they might take in Intel.
Speaker 9: I think we really were in this situation where the
Speaker 9: concept of a US chip manufacturer was almost going to
Speaker 9: go away. There was just so many discussions about what
Speaker 9: would happen Intel, and I think the US governments thing
Speaker 9: we're going to step in.
Speaker 8: We're going to take an equity stake.
Speaker 9: Some of that chip backed money that we had talked
Speaker 9: about in the Biden administration that was actually going to
Speaker 9: go away, it's actually.
Speaker 8: Now coming back.
Speaker 9: And the context of how that comes back, if you
Speaker 9: look at it as an investment and equity stake, it
Speaker 9: is really to try to create confidence in Intel as
Speaker 9: a long standing player, to take away that risk. Buyers
Speaker 9: do not want to invest in a chip company where
Speaker 9: they think that could be risk. These are multi year
Speaker 9: deals that we're talking about, plans that I talked to
Speaker 9: you today about something I want to have come online
Speaker 9: in three years. If I don't think you're going to
Speaker 9: be there in three years, I'm not calling you. And
Speaker 9: so part of this strategy is to take away some
Speaker 9: of that risk, to give Intel a foundation where they
Speaker 9: think they can execute on the strategy that they need
Speaker 9: to execute on without all being at the whim of
Speaker 9: how does the market feel about you?
Speaker 2: Marabell Lopez, founder and principal analyst of Lopez Research, fascinating
Speaker 2: to catch up with you. Let's get back to Intel,
Speaker 2: the government confirming that it is in talks with the
Speaker 2: company to acquire a stake in the chip maker. That's,
Speaker 2: of course, after SoftBank makes a two billion dollar investment
Speaker 2: Blue Bang Intelligence Senior semiconductor analyst Kunja Savani joins us
Speaker 2: now and Qunjin. You put out a react note along
Speaker 2: with colleagues, really talking about how this would offer support
Speaker 2: this potential stake, but it wouldn't close the gap with TSMC.
Speaker 2: Just talk us through your.
Speaker 14: Yeah, there's like positives of this stake one near term
Speaker 14: that it can help, but we don't think it's really
Speaker 14: positive long term for stakeholders. In terms of the new
Speaker 14: term positives they get the ten billion infusion, they get
Speaker 14: as signaling that the government is behind this, behind Intel,
Speaker 14: and so it might not fail as people have risks.
Speaker 14: And the third important point is we think given the
Speaker 14: looming risk of the semi conductor terriffs up till three
Speaker 14: hundred percent that's coming. The government could incentivize US fabulous
Speaker 14: semiconductors to bring business to Intel manufacturing, which could aid
Speaker 14: the company in lieu of getting exemptions for terraffs. So
Speaker 14: some positives near term, but long term, we don't think
Speaker 14: this is ideal for shareholders. First, you have the delusion. Second,
Speaker 14: most of this money would have come to Intel until
Speaker 14: last week almost in the shape of grants which they
Speaker 14: don't have to pay back. But now you have to
Speaker 14: give up about ten percent stake for receiving the same money.
Speaker 14: So not great outcome for share shareholders. And finally, like
Speaker 14: we say, this does not aid anything change structurally anything
Speaker 14: from Intel to catching up to TSMC.
Speaker 2: Isn't it interesting that the share price has been going
Speaker 2: up into the right in reaction to basically money they
Speaker 2: were getting anyway, but maybe it was more of a
Speaker 2: profit share in the future. Tell us a little bit
Speaker 2: though about where they really need to close the gap
Speaker 2: from an innovation perspective. Is this really going to get
Speaker 2: them out there with a fourteen A.
Speaker 3: It does not do anything.
Speaker 14: I mean, look, they ten billion is not going to
Speaker 14: make or break them getting out in the fourteen eight
Speaker 14: right so that is an execution challenge that only the
Speaker 14: company can fix. This could depends on what the you know,
Speaker 14: what are the things attached to this deal. This could
Speaker 14: even slow it down because now you have government on
Speaker 14: the decision making, seat driving some kind of decisions in
Speaker 14: that direction. So this does not do anything to close
Speaker 14: that gap when it comes to leading edge.
Speaker 2: I mean must be said how it lukmank Commers sexually
Speaker 2: was saying, we're not going to take a governance role here,
Speaker 2: but you can potentially you're saying, estimate, Maybe there's more
Speaker 2: thoughts that the executives have to think through. So we're
Speaker 2: p only in the here and now. What do you
Speaker 2: want to hear from the CEO, lit butan what's next?
Speaker 14: Yeah, I think we want to see the same reassurance
Speaker 14: that the focus is going to be on eighteen A
Speaker 14: and fourteen A and how like I said, the possibilities
Speaker 14: of those positives. Hopefully we hear that and that encourages
Speaker 14: investors that they'll deal will be positive in the near term.
Speaker 14: A is getting more business from US fabulous companies in
Speaker 14: order to get those exemptions from the tariffs.
Speaker 2: We still await those tariffs. Con Josvanni Bloomberg Intelligence. We
Speaker 2: thank you for the analysis. Meanwhile, that does it the
Speaker 2: this edition of Blomberg Tech. Do not forget to check
Speaker 2: out our podcast. You find it on the terminal as
Speaker 2: well as online on Apple, Spotify, and iHeart so much
Speaker 2: more Intel news to digest ap currently the highest since April.
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