Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and ever though in San Francisco.
Speaker 2: This is Bloomberg Tech Coming up.
Speaker 3: Service now agrees to by cybersecurity startup Armists for seven
Speaker 3: points seventy five billion dollars, its largest acquisition to date. Douz,
Speaker 3: Invidia's biggest Southeast Asia buyer, faces a chip smuggling probe
Speaker 3: despite the tech giants insistence that chip diversion doesn't exist.
Speaker 3: And crypto's big year that wasn't a win for all
Speaker 3: the billionaire's hit hardest by recent price drops. First rechecking
Speaker 3: on those markets and bigcoin continues to be on the downside.
Speaker 3: We're off five percentage twin eight, three and sixty one,
Speaker 3: so once again another annual loss for the OG in
Speaker 3: the crypto space.
Speaker 2: But we're seeing risk on perpetuate a little bit.
Speaker 3: And then as that one hundred, we're higher on the day,
Speaker 3: we're higher on the month, and boy are we higher
Speaker 3: on the year, up more than twenty percent. And of
Speaker 3: course today's figures the US economy expanding at four point
Speaker 3: three percent annualized pace. Maybe just easing back a little
Speaker 3: bit of risk on feeling if indeed the FED doesn't
Speaker 3: cut as much as I'm in anticipated because this economy.
Speaker 2: Looks like it's doing fine.
Speaker 3: Let's talk about some of the animal spirits in the
Speaker 3: market right now, particularly when it comes to M and A.
Speaker 3: And let's look at Service Now. We're currently trading lower
Speaker 3: on that particular stock.
Speaker 2: We're off by two and.
Speaker 3: A half percent because well, they're going to use cash,
Speaker 3: They're going to use debt for his biggest acquisition so far.
Speaker 2: It's all about the world of cyber and it's actually.
Speaker 3: A story that Bloomberg broke where ahead of the formal announcement.
Speaker 3: Let's get to it at Bloomberg's Andrew Martin, and it
Speaker 3: was last week that you made clear to the market
Speaker 3: that Service Now was looking at this particular acquisition.
Speaker 2: Why is it building up in.
Speaker 4: Cyber Well, I think there's sort of following a path
Speaker 4: that Microsoft and Google were already followed, which is, you know,
Speaker 4: combining a enterprise software product and our cyber is sort
Speaker 4: of a bonus. And so you know, Microsoft sort of
Speaker 4: perfected this idea of.
Speaker 5: Having a package of.
Speaker 4: Their software offerings in the cloud and bringing in cyber.
Speaker 4: Google bought Whiz to do something very similar and now
Speaker 4: Service now, you know, is basically saying as we automate
Speaker 4: you know, they basically automate it and personnel, and now
Speaker 4: they're offering cyber is sort of a broader package to
Speaker 4: entice customers.
Speaker 3: So the safety of Agenda KI is crucial. Wise, armis
Speaker 3: the right holding. Tell us about the founding team and
Speaker 3: other reason.
Speaker 5: Armist is an interesting company there.
Speaker 4: Like a lot of cyber startups, it was started by
Speaker 4: Israeli military veterans who had worked in one of their
Speaker 4: elite cyber units. And what these guys do is they
Speaker 4: they call it cyber exposure management. It's basically looking across
Speaker 4: your whole digital footprint and finding in real time flaws
Speaker 4: and vulnerabilities and fixing them quickly. And it's something that
Speaker 4: really lends itself to AI see that being automated, and.
Speaker 5: You know, the company has grown incredibly fast.
Speaker 4: And uh you know, for for a company that uh
Speaker 4: that that automates processes, automating cyber just makes sense as
Speaker 4: part of that.
Speaker 2: What's interesting is, as you said, this is part of
Speaker 2: a theme.
Speaker 3: The fact that the mega deal of the year was
Speaker 3: Whiz with alphabet Are we expecting yet more and more
Speaker 3: these platforms looking to bolt on cyber acquisitions.
Speaker 4: It just makes sense, right, I mean, it just makes
Speaker 4: sense to to offer cyber as part of a broader package.
Speaker 4: And you know, among the big cyber players, Microsoft being
Speaker 4: the biggest, Google, CrowdStrike, palom Alto, they're all trying to
Speaker 4: build a bundle that can attract users with with sort
Speaker 4: of one stop shopping and cyber.
Speaker 3: That word platformization, which a horrible words, horrible word, but
Speaker 3: they love it. Megs, Andrew Martin, we so appreciate you
Speaker 3: coming on about the latest deal. Let's turn our attention
Speaker 3: to another huge, huge piece of reporting by Bloomberg. In
Speaker 3: Vidia's largest buyer in Southeast Asia, it's under investigation by
Speaker 3: the US government over whether it smuggled advanced chips into China.
Speaker 3: Now Singapore based Megaspeed imported at least four point six
Speaker 3: billion dollars worth of in Vidio hardware through November since
Speaker 3: it's founding back in twenty twenty three. The company wasn't
Speaker 3: its obscure spinoff of a Chinese gaming enterprise could become
Speaker 3: a prime example of Washington's fears of Beijing gaining access
Speaker 3: to advanced chips For commercial and military uses. Megaspeed denies
Speaker 3: any wrongdoing, says it abides by all regulations from the
Speaker 3: US and elsewhere relevant to its operations. Let's get the
Speaker 3: details on what was a very long running investigation for
Speaker 3: Bloomberg's chips reporter Ian King and the deep dive the
Speaker 3: reporters have done to understand whether we really understand how
Speaker 3: many GPUs are going to megaspeed and where they're ending
Speaker 3: up in.
Speaker 2: Talk us through it.
Speaker 6: Yeah, I mean there's a lot of evidence. It's important
Speaker 6: to point out, as you already did that in Nvidia
Speaker 6: says there's nothing going on here. Speed itself says there's
Speaker 6: nothing going on here. But you know our colleagues reporting here, Caroline,
Speaker 6: is that there is an investigation going on, and you
Speaker 6: know Southeast Asian governments and also Washington are looking at
Speaker 6: this and still trying to find out whether there has
Speaker 6: been anything significant going on the go ahead.
Speaker 3: Sorry, Well, from what we know, it's a Singapore based company,
Speaker 3: Megaspeed operating fully in compliance, as they say, with applicable laws.
Speaker 3: But what ultimately has had to spring up ever since
Speaker 3: the Biden administration back in twenty twenty two was a
Speaker 3: restriction on sophisticated chips kind of from Nvidia to China.
Speaker 3: So suddenly you saw other Asian countries become real areas
Speaker 3: of focus for importing chips, so that Chinese companies could
Speaker 3: actually do the workload, could do the compute outside of
Speaker 3: their own country.
Speaker 6: Correct, Yeah, now that's absolutely right. There's nothing illegal with
Speaker 6: setting up a data center and serving Chinese customers, providing
Speaker 6: those customers don't have links with a band entity in
Speaker 6: the US, whether that's the military or some company which
Speaker 6: the US government has decided serves China's military. However, there
Speaker 6: is a suspicion about these links, about who's in control
Speaker 6: of what. There is a you know, and this is
Speaker 6: the problem that in Vidia has to face and in
Speaker 6: video you know say, look that there's nothing to see here,
Speaker 6: there's nothing.
Speaker 5: To worry about.
Speaker 6: But as you'll see from our story, there's a lot
Speaker 6: of links between individuals in China. There are you know,
Speaker 6: there's a lot of lack of clarity in the relationships,
Speaker 6: which I think everybody is trying to work through to
Speaker 6: make sure that there is nothing untoward going on.
Speaker 3: Because Bloomberg didn't find evidence of any megaspeed in video
Speaker 3: chips actually being divert into China. But there's all these inconsistencies,
Speaker 3: as you say, in Megaspeed's Southeast Asia demand and ship
Speaker 3: inventory and wherever all they all end up in.
Speaker 2: What's so interesting is this is a moment.
Speaker 3: Where maybe actually in we'll get more access to China.
Speaker 3: H two hundreds have in theory or at least according
Speaker 3: to a truth social post been allow it back into China.
Speaker 2: The question is where the China wants them.
Speaker 3: But also where the megaspeed will actually have Chinese demand
Speaker 3: going forward if indeed we start to see access once
Speaker 3: again to mainland Yeah.
Speaker 6: I mean there's again we're in a kind of a
Speaker 6: transition period where we're trying to find out exactly how
Speaker 6: this will all play out. In Vidia wants to do
Speaker 6: business directly in China, that's absolutely true. At the moment,
Speaker 6: it cannot do that because of these restrictions. What we're
Speaker 6: trying to find out is whether the Chinese want to
Speaker 6: do business directly within VideA, and if that's the case,
Speaker 6: what level of demand that they will be there. In
Speaker 6: Vidia has really kind of had a good year in Washington.
Speaker 6: It's gone from really restrictive rules to freeing up of
Speaker 6: some of them. But again that has to translate into
Speaker 6: shipments into that Chinese market, and we haven't seen that
Speaker 6: yet and we don't know that that will actually happen. Clearly,
Speaker 6: stories like this that there are suspicions about smuddeling that
Speaker 6: we know perhaps should be more secure and more kind
Speaker 6: of careful in how we deal with China and Chinese
Speaker 6: entities don't help that case. So again, there's a lot
Speaker 6: at stake here, and we really need a lot more
Speaker 6: clarity about the details of how this is all going
Speaker 6: to work out.
Speaker 3: It's a very fairo incredibly complex story, and you broke
Speaker 3: it down perfectly for us Bloomgazine, King, thank you very much. Indeed,
Speaker 3: go read more about the Invidio supplier on your terminal
Speaker 3: or online. But let's talk more now about chip and
Speaker 3: trade news because the US it's actually accused today China
Speaker 3: of engaging in unfair trade practices in the semiconductor sector,
Speaker 3: but Washington won't place additional tariffs on chip imports till
Speaker 3: at least mid twenty twenty seven. Chinese embassy in Washington
Speaker 3: did not immediately respond to the request for comment. That's
Speaker 3: going the details of blombgs, Jordan Fabian and so we
Speaker 3: understand that USTR, that's the Office of US Trade Representative saying, look,
Speaker 3: what they're doing isn't fair.
Speaker 5: Exactly.
Speaker 7: It's an interesting development. This investigation actually started under the
Speaker 7: administration of former President Joe Biden, with the expectation that
Speaker 7: Donald Trump, who talked tough on China during the campaign,
Speaker 7: would follow up on it when he became president. But
Speaker 7: in the interim he started a trade war with China.
Speaker 7: He then struck a deal with Jijenping to take off
Speaker 7: those tariffs. And so the US right now, if you
Speaker 7: listen to what Jamison Greer, the Trade Representative, has said
Speaker 7: other senior administration officials, they want a stable relationship with
Speaker 7: China on trade, and so they're not going to look
Speaker 7: to hike tariffs at the current moment, which is why
Speaker 7: you have this odd outcome of an investigation saying the
Speaker 7: obvious really, which is that China is using non market
Speaker 7: practices to dominate the chip industry. But at the same time,
Speaker 7: the US isn't really going to do anything about it,
Speaker 7: at least not for the foreseeable future.
Speaker 3: So ESDO was legally required to publish the outcome and
Speaker 3: the investigation the three to Zho one investigation, but is
Speaker 3: being thought of that China is up to in terms
Speaker 3: of unfairly supporting its industry. They say, China's targeting in
Speaker 3: the semiconductor industry for dominance is unreasonable and burdens or
Speaker 3: restricts US commerce and thus is actionable.
Speaker 2: Jordan, what are they being told or accused of.
Speaker 7: You know, they're being accused of using non market practices
Speaker 7: to bolster their domestic industry. You'll sell those chips that
Speaker 7: perhaps below market rates into various countries to get them
Speaker 7: hooked on the Chinese technology stack and thereby increasing the
Speaker 7: market share of their chip industry. The irony is that
Speaker 7: the US is pretty much trying to do the same thing,
Speaker 7: which is basically doing a take it or leave it
Speaker 7: deal with countries around the world, saying that you need
Speaker 7: to use the US tech stack. We want to make
Speaker 7: sure that countries are not on the Chinese tech stack
Speaker 7: and had been for a while, you know, trying to
Speaker 7: limit X worts to China to other countries that are
Speaker 7: deemed unfriendly, and also crack down on the Chinese market.
Speaker 7: So they're saying, essentially, you know, you know, China can't
Speaker 7: try to dominate the market. We're going to try and
Speaker 7: dominate the market. But right now they're again going to
Speaker 7: sort of stand off our whole back on increasing terrorists
Speaker 7: further on Chinese chips to address that.
Speaker 2: Problem complex trade web. Jordan Fabian, thanks so much for
Speaker 2: talking us through it. We really appreciate you.
Speaker 3: Meanwhile, coming up, thing about Larry Allison, his big bet
Speaker 3: on paramount that could alter his vast Oracle fortune.
Speaker 2: One on that. Next, this is Blomberg Tech.
Speaker 3: Larry Alison no stranger to bold bets, but his biggest
Speaker 3: one yet maybe in media. A potential personal guarantee more
Speaker 3: than forty billion dollars to backstop paramounts all cash bid
Speaker 3: for Warner Brothers Discovery.
Speaker 2: He could dramatically we shape the.
Speaker 3: Oracle founder's fortune and Meg's Dylan Sloane joins us for
Speaker 3: more as we're picking apart how Larry Ellison is basically
Speaker 3: helping his son, David Ellison potentially by Warner Brothers Discovery.
Speaker 3: What's so extraordinary about your reporting on the billionaire is
Speaker 3: that he has sold very little of Oracle stock over
Speaker 3: the years.
Speaker 8: He has Yeah, and even amongst the billionaires that we're
Speaker 8: looking at on the Bloomberg billionis Index, he really stands out.
Speaker 8: He's sold about seven and a half billion dollars worth
Speaker 8: of stock lifetime, no more than a billion dollars in
Speaker 8: a single year since twenty ten, So that pair that
Speaker 8: really pales in comparison in looking at some other founders.
Speaker 8: You know, he still earns about forty percent of the company,
Speaker 8: which is, you know, multiples higher than a lot of
Speaker 8: comparable tech founder peers. So his strategy in terms of
Speaker 8: his wealth management has been to stick really closely to
Speaker 8: holding his Oracle stock, not cashing out at any point,
Speaker 8: which has been very successful for him as a stock
Speaker 8: has done well. But it does raise some questions about
Speaker 8: the cash that he has on hand and whether or
Speaker 8: not he would be able to imediately meet those equity
Speaker 8: financing comitment should he be called on to do so.
Speaker 3: Yeah, because like forty billion in the grand scheme of things,
Speaker 3: is actually not that much compared to his two hundred
Speaker 3: and fifty two billion dollar net worth. But how liquid
Speaker 3: is any of that? Where has money gone? What could
Speaker 3: he sell to help out?
Speaker 8: Yeah, And you raise a good point, which is it's
Speaker 8: important to say that he can afford this. Of course
Speaker 8: many times over third richest man in the world he
Speaker 8: has got more than.
Speaker 5: Enough assets to be able to cover this, but historically.
Speaker 8: Ellison's has relied on debt to finance money of his investments,
Speaker 8: his lifestyle purchases. Currently about thirty percent of his Oracle
Speaker 8: stake is pledged to secure loans, which he uses to
Speaker 8: raise cash and fund his many lifestyle purchases. He has
Speaker 8: a really extensive real estate portfolio. You may remember even
Speaker 8: earlier this year. It feels like a lifetime ago, but
Speaker 8: he put up a big chunk of the equity for
Speaker 8: his son David's acquisition of National Amusements, the acquisition of Paramount.
Speaker 8: So should he need to raise cash down the line,
Speaker 8: of course, selling shares would be one option if he's
Speaker 8: called on to backstop this steal, which again would constitute
Speaker 8: a pretty significant change from his his strategy over the
Speaker 8: past few decades, or potentially increasing the size of those loans,
Speaker 8: which is something that the Oracle board would need to
Speaker 8: go through a review process of to give the okay.
Speaker 3: Just like Tesla learn when El muskport now X was
Speaker 3: Twitter Dolan sloan. It's great reporting, go and check it
Speaker 3: out on all things billionaires. But let's talk a little
Speaker 3: bit more about the potential bid or deal of Paramount, binding,
Speaker 3: Water Brothers, Discovery, and indeed Netflix to the legal stakes
Speaker 3: of the Megamedia mergers. Fiona Scott Morton, Professor of Economics
Speaker 3: over at the Yale University School of Management and adjunct
Speaker 3: professor of Yale Law School, is with us. Now let's
Speaker 3: just go back to whether or not any of these
Speaker 3: will get through regulatory approval. Let's start with Paramount buying
Speaker 3: Warner Brothers Discovery.
Speaker 2: Does it cut legal mustard?
Speaker 9: Do you think, well, all three of the bidders, remember
Speaker 9: there was Comcast in there to begin with, have overlapped
Speaker 9: with Warner Brothers. If you think about three buckets of
Speaker 9: say content, production, streaming, and then channels or networks, they
Speaker 9: a overlap and Paramount in particular has a lot of
Speaker 9: production studio kinds of assets, particularly because of course Paramount
Speaker 9: merges with sky Dance first, so that's a big issue
Speaker 9: for them, and they have a significant share of streaming
Speaker 9: as well.
Speaker 3: You served as Deputy Sistant Attorney General for Economic Analysis,
Speaker 3: chief Economist, you can basically helped with anti trust division
Speaker 3: in your time. When ultimately it comes down to it,
Speaker 3: as courts are going to say, who's the competitor here.
Speaker 2: Do you think it's right that.
Speaker 3: They bulk in YouTube and new ways of consuming content,
Speaker 3: even TikTok versus us all be on linear, certainly on cable.
Speaker 9: Yes, I think this is the tricky thing for the
Speaker 9: paramount BID. I mean, we all understand what producing content is,
Speaker 9: and I think we have a pretty good grip on
Speaker 9: who does that and why it's different and what sort
Speaker 9: of market there is there. Streaming, however, is much trickier
Speaker 9: because we have user produced funny cat videos, we have
Speaker 9: user produced videos that actually sustain those users in terms
Speaker 9: of income. We have professionally produced short things, professionally produced
Speaker 9: long things, and so we're getting a kind of a
Speaker 9: continuum of content, and that includes YouTube, as you point out,
Speaker 9: which has a big chunk of that continuum. And it's
Speaker 9: going to be very difficult to draw the line on
Speaker 9: what is what we call the relevant market, which in
Speaker 9: antitrust is what matters because that's where you get head
Speaker 9: to head competitors.
Speaker 3: It feels as though Netflix, for its part, which thus
Speaker 3: far is meant to be the front runner for buying
Speaker 3: Warner Brothers, or at least the streaming and the studio
Speaker 3: side of it, they've tried to front run this sort
Speaker 3: of argument by making clear they think the market competitors
Speaker 3: are YouTube and they are TikTok and they are just
Speaker 3: where are eyeballs at? Who do they need to convince
Speaker 3: in this because many would say, oh, the Allisons have
Speaker 3: got the air of the administration, but really it's the
Speaker 3: courts that's right.
Speaker 9: The president can say he wants the Ellisons to have it,
Speaker 9: and he can say that about his friends or the
Speaker 9: people who give him money, or silence the voices that
Speaker 9: he doesn't want to hear. But ultimately, we have a
Speaker 9: law in the United States that can be enforced not
Speaker 9: only by the public, the federal public authorities, but the
Speaker 9: states and actually buy private plaintiffs as well. And so
Speaker 9: if there's some harm to competition and that can be
Speaker 9: shown by a state or a private plaintiff, then they
Speaker 9: can go to court and try to block the transaction
Speaker 9: just like the federal government can. And indeed we have
Speaker 9: seen states coalitions of states being very active and antitrust
Speaker 9: lately when they have felt that the federal government is
Speaker 9: not doing a good job.
Speaker 3: Fear and a Scott Morton, I'm a feeling this story
Speaker 3: is going to run. So we get to have you back,
Speaker 3: Yale University School and Management. We appreciate your expertise. It's
Speaker 3: been a wild year in crypto. Despite big regulatory wins,
Speaker 3: hasn't been kind to everyone, even as prices and interest
Speaker 3: surged early on. Billionaires tied to the space they're chatting
Speaker 3: very different paths. Setting into twenty twenty six, let's state
Speaker 3: the vinkle of twins. They saw their fortunes pressured as
Speaker 3: Gemini Space Station continues to face losses after the exchange's
Speaker 3: shares for one sixty percent following September IPO. On the
Speaker 3: other side, Jeremy Elaire's Circle benefited from growing adoption of
Speaker 3: its USDC stable coin, helped by clearer regulation, and the
Speaker 3: shares have almost tripled since listening in June, although you
Speaker 3: can see they're well off their previous highs. Meanwhile, let's
Speaker 3: talk my novograts. Galaxy Digital has actually seen some sort
Speaker 3: of a rebound alongside bitcoins gains earlier in the year,
Speaker 3: but it has had a tough stretch. Then there's Michael
Speaker 3: Saylor's wild ride as too, as the Strategy founder doubled
Speaker 3: down on his high conviction bitcoin bet, further tying his
Speaker 3: wealth to the token's price wings his net worth has
Speaker 3: collapsed almost forty percent this year. So what next for
Speaker 3: crypto in twenty twenty six?
Speaker 2: Not just the billionaires.
Speaker 3: Nisa Colleens, Stillmark Managing.
Speaker 2: Partners, says she's going to see momentum.
Speaker 3: She writes, we expect to continued progress through increased MNA activity,
Speaker 3: expanded entrepreneurial innovation, and a deeper, more robust base of
Speaker 3: both retail and institutional uses. She joins us Now, for you,
Speaker 3: at least reflecting on twenty twenty five, what was the
Speaker 3: biggest landmark move?
Speaker 2: Was it institutional adoption?
Speaker 10: Well, twenty twenty five was one of the most consequential
Speaker 10: years in bitcoin's history, not because of price appreciation, but
Speaker 10: because of structural progress, and that includes policy, product, and
Speaker 10: institutional adoption. Across all of these fronts, Bitcoin moved meaningfully
Speaker 10: into the mainstream as an embedded part of the financial system,
Speaker 10: and twenty twenty six will be able to take advantage
Speaker 10: of that foundation.
Speaker 11: What does advantage look like, Well, what it looks like
Speaker 11: is recent regulatory clarity and an effort by regulators and
Speaker 11: policy makers to acknowledge bitcoin as part of the financial
Speaker 11: system and to lay the foundational groundwork in terms of
Speaker 11: policy so that the US can continue to lead both
Speaker 11: in terms of innovation distribution as well as institutional adoption
Speaker 11: that can provide efficiencies and gains for US based institutions
Speaker 11: from bitcoin, the acid and bitcoin technologies at.
Speaker 3: Least reminds us of that quickly, just remind us where
Speaker 3: we are on policy. Because Genius Act tick, that helps
Speaker 3: sable coins and pass through Congress. But the Clarity Act
Speaker 3: what will that give us if India does get through
Speaker 3: the Senate.
Speaker 10: So in addition to the Genius Act passing this year,
Speaker 10: we've seen advancement of the What the Clarity Act attempts
Speaker 10: to do, or aims to do, I should say, is
Speaker 10: to create a framework for bitcoin and other digital assets
Speaker 10: can create clarity as well as consumer protection and can
Speaker 10: offer definitions of what these digital assets are. So, for example,
Speaker 10: we expect that bitcoin will be defined as a commodity
Speaker 10: along with other decentralized assets under the purview of the CFTC,
Speaker 10: and that will help drive institutional adoption both in terms
Speaker 10: of institutionals institution's.
Speaker 12: Own interaction with bitcoin, but.
Speaker 10: Also institutions comfort with distribution bitcoin to their own clients.
Speaker 2: We've got but a minute left.
Speaker 3: But your put photo is so interesting because it's all
Speaker 3: around the bitcoin ecosystem and one of us energy focused.
Speaker 2: How is that playing and also this need for energy
Speaker 2: and power in the AI era as well.
Speaker 12: That's right.
Speaker 10: So we began the year talking about bitcoin and the
Speaker 10: intersection of bitcoin with other critical trends, and that included
Speaker 10: AI and energy infrastructure. What we've seen as the year
Speaker 10: comes to an end is an acknowledgment or recognition of
Speaker 10: the opportunity at the intersection of bitcoin and energy. We've
Speaker 10: seen this with large transactions such as those advanced by
Speaker 10: major AI stakeholders seeking energy development and looking for a
Speaker 10: way to drive efficiencies and especially in terms of pace
Speaker 10: of development, including through partnership with bitcoin miners and bitcoin
Speaker 10: mining development institutions.
Speaker 3: At Least, it's been great as always getting your take
Speaker 3: throughout the year of twenty twenty five and very much
Speaker 3: looking forward to checking in with you in twenty twenty
Speaker 3: six as well. And apologies for a technical glitch we
Speaker 3: had throughout that interview at least Clean, We thank you
Speaker 3: so much of still Mark, Welcome back to Bloomberg Tech.
Speaker 3: Let's check in on these markets for you as we
Speaker 3: head towards one is a very shortened week.
Speaker 2: We're up two tens percent on the Nasdaq one hundred.
Speaker 3: At the moment, stock's actually driving near all time highs,
Speaker 3: very close on the S and P five hundred as well,
Speaker 3: four straight session agains. We've got some renewed appetite for
Speaker 3: tech in particular. This is even as the US economy
Speaker 3: span the fastest that we've seen in two years four point.
Speaker 2: Three percent analyzed pace.
Speaker 3: But does that mean the FED won't cut as much?
Speaker 3: Maybe that's why Bitcoin's under pressure. We're off by five
Speaker 3: ten percent on cryptot eighty eight hundred and twenty eight.
Speaker 3: It's expected to have a down year. Telly what's also
Speaker 3: had a down month, and also we're down on the day.
Speaker 3: The last quarter has been pretty painful for some of
Speaker 3: these neo clouds. Core we've off by three percent, but
Speaker 3: off way almost forty percent in the last trading quarter.
Speaker 3: Neibeus is another neocloud, basically these new types of companies
Speaker 3: that come out to offer compute for the ever necessary
Speaker 3: need for AI or off by two percent on NEBBEUS
Speaker 3: alphabet though at one point two percent, as it's actually
Speaker 3: really thinking about the energy side of this AI equation
Speaker 3: and it bought, of course, a power company. We saw
Speaker 3: yesterday intersect power to be able to offer more climate
Speaker 3: friendly energy for its AI needs, and that's been a
Speaker 3: big theme for the year, and data centers energy demands
Speaker 3: is one that we keep on intersecting with Bloomberg. Josh Saul,
Speaker 3: who covers energy, been highlighting the strain that it's all
Speaker 3: wimputing on the power grid. So I'm interested as to
Speaker 3: if you flect on twenty twenty five how energy markets
Speaker 3: were disrupted by the AI glut gold market rush that
Speaker 3: we saw.
Speaker 5: It absolutely changed so much.
Speaker 13: We've never seen so much money rushing into the power sector.
Speaker 5: The numbers are are just wild.
Speaker 13: I mean, the four biggest tech companies spending three hundred
Speaker 13: and forty four billion dollars this year. The power sector
Speaker 13: expects to invest one point one trillion over the next
Speaker 13: five years on the power grid in order to both
Speaker 13: work on decaying infrastructure but also to connect all these
Speaker 13: new data centers.
Speaker 3: And they will get the financing from the end need
Speaker 3: or are they having to turn to the consumer.
Speaker 2: As well to help finance all this infrastructure? Is the
Speaker 2: government who pays.
Speaker 3: For the one point whatever trillion dollars?
Speaker 2: It is of improvement.
Speaker 13: Tech companies kick in a lot of money, and utilities
Speaker 13: especially have been good about setting up contracts where they
Speaker 13: get paid whether or not the tech companies use that
Speaker 13: much power over time, so there's some built in protection
Speaker 13: for customers there.
Speaker 5: But when tech drives up.
Speaker 13: The wholesale cost of electricity, that cost is then passed
Speaker 13: on to consumers, so they do see some upward pressure
Speaker 13: on bills from that.
Speaker 3: Many anticipating in the twenty twenty six midter this is
Speaker 3: going to come a lot about that. You saw issues
Speaker 3: in New Jersey, We've got it in Virginia those areas
Speaker 3: of data center build up.
Speaker 2: Are you seeing the utilities.
Speaker 3: And power companies also trying to get an easy regulatory environment.
Speaker 3: I mean, we've talked a lot about fast tracking of
Speaker 3: these big projects. If they've got a lot to put
Speaker 3: money into.
Speaker 13: It's hard because utilities, for sure want to hook up
Speaker 13: the data centers.
Speaker 5: That's a huge new customer for them.
Speaker 13: That's like seven hundred thousand people just moving to their
Speaker 13: territory who wouldn't want that business. But it can be
Speaker 13: tough for them because if it makes prices go up,
Speaker 13: that gets consumers mad, that gets regulators and politicians focused
Speaker 13: on the issue, and you can have what we saw
Speaker 13: in Georgia where regulators are voted out and new regulators,
Speaker 13: democratic regulators who are expected to be less friendly to
Speaker 13: the power company are voted in.
Speaker 3: Josh, So can I have a busy twenty twenty six
Speaker 3: thanks of breaking down what has been a wild ride
Speaker 3: for twenty twenty five.
Speaker 2: Let's talk more.
Speaker 3: About that impact of energy demand on the tech industry.
Speaker 3: Jason Oxman's with US President CEO of the Information Technology
Speaker 3: Industry Council. You represent some of the biggest players in
Speaker 3: the AI domain. I'm thinking of video open AI, a
Speaker 3: lot of the demand for compute or indeed the supplies
Speaker 3: to compute. Jason, what are you seeing in terms of
Speaker 3: the regulatory equation changing to help speed up some of
Speaker 3: this infrastructure investment.
Speaker 14: Well, great to be back with you, Carolina, and your
Speaker 14: absolutely right. Policymakers are paying a lot of attention to
Speaker 14: this issue and the demand created by the construction of
Speaker 14: new data centers demands new access to energy sources. Look,
Speaker 14: we've seen over the last few decades under investment in
Speaker 14: the energy grid, under investment in alternative forms of energy,
Speaker 14: and there are a lot of moves afoot here in
Speaker 14: Washington to address those issues. The biggest one that I've
Speaker 14: seen in recent weeks and that we're supporting, is something
Speaker 14: called the Speed Act, which Congress moved through the House
Speaker 14: on its last day here last week. The Speed Act
Speaker 14: would invoke regulatory reforms to speed up the permitting process
Speaker 14: for construction of new energy projects. It would reduce some
Speaker 14: regulatory burden on those construction projects. It takes years and
Speaker 14: years to put new energy on the grid. Those grid
Speaker 14: modernization efforts take a lot of time and effort and
Speaker 14: financial resource. The one piece that Washington is trying to
Speaker 14: address is reducing the regulatory burden to make sure we
Speaker 14: can make those investments that we need to make. Data
Speaker 14: centers are not new. You mentioned Northern Virginia. They've been
Speaker 14: a data center hub for decades. Two thirds of the
Speaker 14: world's Internet traffic passes through Northern Virginia because it's been
Speaker 14: a traditional hub. But we're seeing the new construction of
Speaker 14: data centerplace new energy demands, and as you noted, policymakers
Speaker 14: are trying to take action and make it move more quickly.
Speaker 3: Well, what about the checks and balances than are needed?
Speaker 3: Because I think very much we've been reporting a lot
Speaker 3: about new players coming on the scene, companies that have
Speaker 3: never built data centers before.
Speaker 2: I mean, boy Oracle itself.
Speaker 3: I mean, one of the biggest data center infrastructure investors
Speaker 3: out there at the moment, has never actually formally built
Speaker 3: a data center of its own.
Speaker 2: So how do get a lot of other ownerships?
Speaker 14: You know, a lot of partnerships are happening. You'll recall
Speaker 14: in January on day two of the Trump administration, project Stargate,
Speaker 14: which Oracle was involved in, also involved SoftBank, open A
Speaker 14: other companies that are more traditional investors in these kind
Speaker 14: of projects. Data centers have been around for a long time,
Speaker 14: but a lot of new companies are getting into it.
Speaker 14: As your graphic and your conversation with Josh showed, only
Speaker 14: about eighteen percent of the current demand for data centers
Speaker 14: is from the tech industry. Financial services other related industries
Speaker 14: are also building data centers, and I think, as you noted,
Speaker 14: there's a lot of attention being paid by consumers to
Speaker 14: this issue. They don't want to see their power bills
Speaker 14: go up as a results of these investments in data centers,
Speaker 14: and that's why we're pursuing these alternative projects. You've seen
Speaker 14: tech companies like Microsoft invest in nuclear power. We're trying
Speaker 14: to move forward with small module reactors that can power
Speaker 14: these data centers. And I do think it's important for
Speaker 14: consumers to understand.
Speaker 12: The value to the US economy, the value to job growth.
Speaker 14: It was this great report that Vanguard put out last
Speaker 14: week that said that job growth in AI affected industries
Speaker 14: is one point seven percent, job growth in non AI
Speaker 14: affected industries zero point eight percents, so twice the job
Speaker 14: growth in AI effected industries.
Speaker 12: This has an enormous economic benefit.
Speaker 14: Need to make sure these data centers are constructed, that
Speaker 14: AI can continue to power the US economy, power wage
Speaker 14: growth and the like. But there are some things that policymakers,
Speaker 14: like the Speed Act can do to help move these
Speaker 14: projects forward.
Speaker 3: Well, many would say that actually that job's growth is
Speaker 3: short term in nature. You need a lot of engineers
Speaker 3: a lot of builders to build them, but actually don't
Speaker 3: mean that many people to manage a data center, which
Speaker 3: once it's up and running, And there's that short term,
Speaker 3: long term perspective as well, when you think about the
Speaker 3: inclimate impact, how much are the big tech companies really
Speaker 3: realizing the responsibility when they're having to bring up all
Speaker 3: this compute and power.
Speaker 2: They're also seeing their emissions go up into the right.
Speaker 14: Well, I think you're right about the long term versus
Speaker 14: the short term. It does create a lot of construction jobs,
Speaker 14: a lot of jobs to build these data centers, and
Speaker 14: there are also jobs created in the data centers themselves.
Speaker 12: But I think the long term effect.
Speaker 14: Is really what does AI mean for improving productivity and
Speaker 14: creating not only the job growth but also the wage growth.
Speaker 14: That Vanguard report that came out last week that I
Speaker 14: mentioned also noted that wage growth in AI related industries
Speaker 14: this was three point eight percent versus point seven percent
Speaker 14: in non AI related industries. That wage growth is enormously important.
Speaker 14: It's what's made possible by the data center. So you're right,
Speaker 14: the data centers themselves create a lot of construction jobs.
Speaker 14: We're going to see that continue to move forward. But
Speaker 14: it's what the data centers do. They're buildings that contain
Speaker 14: the future of technology for the country, and the AI
Speaker 14: servers that are in there and the services that are
Speaker 14: powered for consumers and for productivity for businesses is really
Speaker 14: what we need to be focused on going forward, and
Speaker 14: that's the real.
Speaker 12: Benefit of all of this.
Speaker 3: It's a global theme, and we're seeing servers and the
Speaker 3: GPUs that go inside them being put up everywhere. Now
Speaker 3: there's a story, a really deeply reported story out today
Speaker 3: from Bloomberg around Nvidia and the potential that we are
Speaker 3: seeing chips GPUs from Nvidia get into China's hands, maybe
Speaker 3: through middle parties, And there's some concerns that Megaspeed in particular,
Speaker 3: it's a single, poor based company might have been making
Speaker 3: that able. Jason, how much your companies thinking about diversion
Speaker 3: of chips and how much are they comping down on it?
Speaker 14: Well, I think it's important to remember that in the
Speaker 14: reporting that you're talking about, that in Vidia didn't do
Speaker 14: anything wrong, that there was no actual evidence that any
Speaker 14: chips were diverted. But it's an investigation of one of
Speaker 14: Nvidia's customers, which I think will play out by government.
Speaker 14: But the broader question that you asked is an important one.
Speaker 14: This is the question of national security and economics security
Speaker 14: and where they overlap. The Biden administration took a very
Speaker 14: clear approach to this, which I think was the wrong approach,
Speaker 14: quite frankly, and that was to cut off access to
Speaker 14: the world to US technology. What Trump administration has done
Speaker 14: has recognized that there are enforcement matters that will occasionally
Speaker 14: arise that they need to look into, and they will
Speaker 14: do that. But as a general matter, the US economy
Speaker 14: benefits in the US consumers benefit if the world can
Speaker 14: buy American technology. This is a race against China, and
Speaker 14: cutting off China and denying China access to technology really
Speaker 14: just provides an incentive for China to bypass the US
Speaker 14: market and build its own technology for the world. Denying
Speaker 14: US companies the access to the global market is the
Speaker 14: wrong approach. There are certainly national security questions that need
Speaker 14: to be answered. They are enforcement matters that need to
Speaker 14: be addressed on occasion. But as a broader matter, the
Speaker 14: idea as the Biden administration did, and I think did wrong,
Speaker 14: of cutting off the world's access to American technology, not
Speaker 14: just China, but the rest of the world. That was
Speaker 14: what the Biden administration did. That's the wrong approach. We
Speaker 14: need to make sure that we recognize that the success
Speaker 14: of American economic activity, the success of American technology, is
Speaker 14: dependent on America having access to the rest.
Speaker 1: Of the world.
Speaker 3: Very briefly, what about the approach being taken from federal
Speaker 3: versus state regulation of AI. The actual large language models
Speaker 3: new Act here in New York and in California.
Speaker 2: But are we ever going to getting clarity from a
Speaker 2: federal level.
Speaker 14: Yeah, there were more than one hundred AI laws adopted
Speaker 14: at the state level this year, and there are more
Speaker 14: than one thousand bills pending heading into twenty twenty six. Look,
Speaker 14: technology is best deployed not with fifty different regulatory regimes applicable,
Speaker 14: but one common regime. And this is another thing that's
Speaker 14: on our twenty twenty six roadmap. President Trump just signed
Speaker 14: an executive order tasking the administration with proposing legislation to
Speaker 14: Congress that will replace those fifty potential separate regimes with
Speaker 14: one federal regime. We think that's the right way to
Speaker 14: go because technology doesn't necessarily need to stop at state borders.
Speaker 12: We want to have one uniform.
Speaker 14: National regime rather than a patchwork of fifty regimes. That'll
Speaker 14: be better for the technology, it'll be better for consumers
Speaker 14: and businesses that want to make use of that technology.
Speaker 12: That something we're really helping happens in twenty twenty six.
Speaker 3: Jason Nxman, come join us again in twenty twenty six.
Speaker 2: Until then, have a very happy holiday.
Speaker 3: CEO of Information Technology Industry Council, we thank you. One
Speaker 3: of the biggest questions facing investors in twenty twenty six
Speaker 3: and beyond is whether the billions being spent on AI.
Speaker 2: Infrastructure will pay off.
Speaker 3: Bank of America CEO Brian Monorhans But yesterday with my
Speaker 3: colleague David.
Speaker 2: Weston said it was starting to see the impacts kickin.
Speaker 15: The A investment has been building during the year. It
Speaker 15: is probably a bigger contributor next year in the years beyond,
Speaker 15: and so if you look at the data center build out,
Speaker 15: which is one of the ways that evidence itself, that's
Speaker 15: a big deal. If you look at customer client spending,
Speaker 15: like US spending on AI, that's higher it was last year.
Speaker 15: But frankly, overall spending levels are shifting towards that not
Speaker 15: necessarily growing at a mid single digit rate type of numbers.
Speaker 15: So I think that's part why the reason we feel
Speaker 15: constructive for next year. We think AI spending continues. We
Speaker 15: think there's benefits the American taxpayer from tax rebates, lower
Speaker 15: taxes due to the tax built going through and being
Speaker 15: effective for next year. And we think the expense expensing
Speaker 15: and other bonuses for businesses are good. So all that
Speaker 15: leads to our confidence that we go from basically at
Speaker 15: two percent type of growth letter level this year plus
Speaker 15: or minus up to two point four percent, which is
Speaker 15: all due to that. And AI is kicking and more
Speaker 15: and more, and so it's not only tributable to AI,
Speaker 15: but that's having a marginal impact. That's pretty strong.
Speaker 16: So much of the American economy is supported by the consumer,
Speaker 16: and you at Back of America have a really powerful
Speaker 16: viewpoint into the American consumer. How's the American consumer doing?
Speaker 16: Because it has been very strong. There have been some
Speaker 16: people saying it's starting to slow down.
Speaker 5: You have to step back.
Speaker 15: We look at American consumers, seventy million consumers putting four
Speaker 15: and a half trillion dollars plus into the American economy
Speaker 15: every year, and we've tracked the way that goes in
Speaker 15: the American county for many years. And so in the
Speaker 15: third quarter it was up about five percent of last year.
Speaker 15: As we look at the fourth quarter here so far
Speaker 15: in October November, i'd say it in a four to
Speaker 15: four and a half percent, which is very consistent with
Speaker 15: a very solid growing economy. You know, at the end
Speaker 15: of the day, it's going to work against wage growth
Speaker 15: and we see in the underlying consumers we have wage growth.
Speaker 15: I either paychecks are going up, and so the labor
Speaker 15: markets flattened out a little bit in terms of job
Speaker 15: growth and things like that. It's normalizing in terms of unemployment,
Speaker 15: but you still see underlying wage growth. So the American
Speaker 15: consumer spending a fours percent more November this year versus
Speaker 15: November last year is a very solid backdrop. The credit
Speaker 15: quality American consumer is strong. And then you hear a
Speaker 15: lot about this discussion about different rates of growth among
Speaker 15: different income tursiles or third.
Speaker 5: So we look at the.
Speaker 15: Bottom third, middle third, and top third American income people
Speaker 15: in the Bank of American customer base, we do see
Speaker 15: differences either higher income and middle income or growing faster.
Speaker 15: But even the lower income third is still growing. And
Speaker 15: that's all good. And that means why is that true?
Speaker 15: Companies are employing people, they're paying people. Now, the labor
Speaker 15: market's got a little soft and as we look forward
Speaker 15: to four point five four point six unemployment that is
Speaker 15: gotten worse so to speak. You know, it was the
Speaker 15: beginning year. But frankly, this.
Speaker 5: Goes back to the normalization question.
Speaker 15: If you look at the tenure average unemployment a twenty
Speaker 15: year to thirty year or forty year it's five and
Speaker 15: six percent, you know, as you go back through time,
Speaker 15: and so a four and a half to four point
Speaker 15: six unemployment rate is a very strong relative unemployment rate.
Speaker 15: It's just a lot of years it's been below four
Speaker 15: and a half percent, has actually been in the last
Speaker 15: ten years. So people are very used to numbers now
Speaker 15: which were part of the tightness and labored in the
Speaker 15: twenty seventeen eighteen nineteen era, and you had the pandemic
Speaker 15: and it retightened, and so it's normalizing. But we feel
Speaker 15: good about all that in the consumers in pretty good shape.
Speaker 2: Thankry Macaci.
Speaker 3: Obrian Weynhan speaking to bluemeg's David Weston and coming up
Speaker 3: new details and the decisions behind Tesla's door design. Those
Speaker 3: electric doors are now in a spotlight following at least
Speaker 3: fifteen fatalities or.
Speaker 17: On that next a blue meg Tech, a decision made by.
Speaker 3: Tesla executives a decade ago. It's being linked to fatalities
Speaker 3: in car crashes now. The incidents have prompted increased scrutiny
Speaker 3: of Tesla's electric doors, triggering lawsuits over whether.
Speaker 2: The design can leave passengers trapped. Take a look.
Speaker 18: Tesla for years has built its reputation on being a cool, safe,
Speaker 18: good looking car maker.
Speaker 19: Tesla's engineered to be the safest card in the world,
Speaker 19: and to be fair to them, they have done very
Speaker 19: well on US crash tests. They often get five star ratings.
Speaker 19: Flush door handles were very much part of the aesthetic
Speaker 19: and the engineering. You know, it looks very cool.
Speaker 2: For so many years.
Speaker 18: People who drive Tesla's love their Tesla's. They think their
Speaker 18: cars are safe, but these accidents reveal that there's actually
Speaker 18: something bigger going on.
Speaker 20: When you push this button, says it sagal to the
Speaker 20: twelvel barriers say okay, pop the door opened. Now, if
Speaker 20: you have no TWELEVEO power, the first thing you're going
Speaker 20: to do is push this button over and over again.
Speaker 20: You're going to stop freaking out and realize this thing
Speaker 20: isn't working. In my opinion, this isn't terribly obvious that
Speaker 20: this opens the door. This is not a physical lever.
Speaker 20: This does not pull a cable. The actual way that
Speaker 20: you open a Tesla is you use this unmarked square
Speaker 20: right here. That's how you open it.
Speaker 12: Is that the same on every model of Deeslo.
Speaker 20: It is not the same.
Speaker 12: What if you're in the backseat.
Speaker 20: Now, the backseat is a scary part.
Speaker 18: So in the front seat there by the handle. In
Speaker 18: the back seats, they might be under the rug, or
Speaker 18: behind a speaker grill, or behind the trim on the
Speaker 18: door or I actually found one in a model. Why
Speaker 18: it was in the door pocket under a plastic flap.
Speaker 2: A lot of Tesla owners themselves.
Speaker 18: Don't know that these manual releases exist.
Speaker 19: You can design the best vehicle in the world, but
Speaker 19: you have to also think about what happens to a
Speaker 19: human being after a crash. You are panicking and you're
Speaker 19: going to go to that muscle memory. And for most
Speaker 19: of us, muscle memory is like an old car where
Speaker 19: you just open the door.
Speaker 3: And we now have more reporting on that decision making
Speaker 3: process behind the dual design. According to multiple accounts from sources,
Speaker 3: the electric door handle was demanded by Tesla CEO in
Speaker 3: a musk despite safety warnings.
Speaker 2: Let's get more on this. We've been about.
Speaker 3: BusinessWeek columnist Max Chafkin goes back a decade and it
Speaker 3: really goes back to almost this era of very sleep
Speaker 3: design where less is more.
Speaker 21: Yeah, and this is a design aesthetic that comes from
Speaker 21: Elon Musk. So in certain ways, it's very interesting that
Speaker 21: he was involved in these conversations because this looks like
Speaker 21: a mistake in retrospect, we're.
Speaker 5: Seeing these deaths.
Speaker 21: You know, Tesla's has said it's working on redesigns, there
Speaker 21: are inquiries and so on. It's not surprising that Musk
Speaker 21: was involved in this, because he's involved in sort of
Speaker 21: all aspects of the cars design. On the other hand,
Speaker 21: it's interesting because you do because again this is this
Speaker 21: kind of undercuts some of the claims that the company
Speaker 21: has made about the safety of its vehicles.
Speaker 3: There's this line in the story that basically is what
Speaker 3: Mars said is the best part is no part, right,
Speaker 3: And so this desire for something that was good looking
Speaker 3: and sophisticated and sci fi.
Speaker 2: But it's not just test as I have them.
Speaker 3: Everyone else talked to this designs ecesthetic as well.
Speaker 21: Yeah, this has spread to the entire auto industry. You've
Speaker 21: seen in a lot of higher end cars, many evs,
Speaker 21: as well as some gas cars. It's not only you know,
Speaker 21: sort of attractive from a design point of view, although
Speaker 21: I think people have.
Speaker 2: Different points of view.
Speaker 21: It's also less expensive because fewer parts you know, means
Speaker 21: you know, less cost and that's one of the things
Speaker 21: that Tesla has been very successful at making cars with
Speaker 21: much fewer parts. They have this famously vertically integrated you know,
Speaker 21: manufacturing system. It's help, it's allowed them to cut costs. Obviously,
Speaker 21: you see their their their potential problems when you diverge
Speaker 21: from the way the auto industry has done things for
Speaker 21: a really long time.
Speaker 2: Now.
Speaker 3: Chief designer has been on Bloomberg and said that they're
Speaker 3: looking to change things up.
Speaker 2: How quickly will that get into new models? And what
Speaker 2: about the old models.
Speaker 3: That usually we see an update through software upgrade?
Speaker 21: Right, Well, so Tesla has said, you know, unlike other men,
Speaker 21: unlike other automakers, they're continuously updating their cars. So in theory,
Speaker 21: I suppose they could get this done pretty quickly. Though again,
Speaker 21: this is not as simple as a software update. This
Speaker 21: is going to require tooling, It's going to require factories,
Speaker 21: retrofits potentially in cars. The Stumber story Bloomberg Bran earlier today,
Speaker 21: you know, mentions a similar example around the shifter in
Speaker 21: I believe it was the Model X or the Model Y,
Speaker 21: where they took away the column that you used and
Speaker 21: replaced it with a button that didn't work out. They
Speaker 21: had to retrofit that so you could see something similar here.
Speaker 21: Although this is not something that's going to be taken
Speaker 21: care of overnight.
Speaker 3: Mean Well shares no record highs as it seemed more
Speaker 3: of a robotaxi humanoid robot kind of a company right now. Max,
Speaker 3: great to get your take on what has been a
Speaker 3: theme throughout twenty twenty five. This deep investigation into teslatle
Speaker 3: handles by Bloomberg. Now, that does it for this edition
Speaker 3: a Bloomberg Tech. Don't forget to check out our podcast
Speaker 3: hand on the terminal, as well as online on Apples, Spotify,
Speaker 3: and iHeart from New York, This is Bloomberg