Speaker 1: Bloomberg Audio Studios, podcasts, radio news from the heart of
Speaker 1: where innovation, money and power collide in Silicon Valley and beyond.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed ludlow.
Speaker 2: A Live from New York.
Speaker 3: I'm Caroline Hyde and I'm Jackie Devalis in Washington. This
Speaker 3: is Bloomberg Technology coming up.
Speaker 4: The FTC is charging ahead with the Biden antitrust probe
Speaker 4: of Microsoft. Will discuss what this means for Trump's new
Speaker 4: FTC chair and his scrutiny of tech giants. Plus Intel
Speaker 4: shares jumping following the news of a new CEO tasking
Speaker 4: Lipbutan with restoring the company's fortunes after a slump in
Speaker 4: earnings and market share, and a conversation with podcaster turned
Speaker 4: investor Harry stebbings On from twenty VC on how one
Speaker 4: hundred and twenty tech founders are joining his project to
Speaker 4: boost European startups. But first to check in on these markets,
Speaker 4: and we were raised yesterday's gains then as that one
Speaker 4: hundred currently off by about a percentage point after yesterday,
Speaker 4: we've got a bit of a reprieve and a push
Speaker 4: higher of more than a percentage point overall, we're once
Speaker 4: again filled with anxiety about US growth and about basically
Speaker 4: still selling some of your key winners, largely within the
Speaker 4: Magnificent seven. Go into some of the individual movers. Look
Speaker 4: the earnings flow still not living up to expectations. I'm
Speaker 4: looking at Adobe down crushed another eleven percent. This is
Speaker 4: that their fiscal first quarter delivered ten percent growth in
Speaker 4: revenue and lived up to expectations. But the current quarter
Speaker 4: that we're operating in, the guidance not good enough. The
Speaker 4: full year guidance remaining the same analysts wanted more.
Speaker 2: Many cut their price targets.
Speaker 4: Intel, though Sauls on the back of a new CEO,
Speaker 4: lip Boutwan, returns he was on the board before, and
Speaker 4: of course he did that turn around at Cadence. Will
Speaker 4: dig into that in a moment. But Microsoft just for
Speaker 4: about two ten percent, but is contributing to the points
Speaker 4: decline on the nasat one hundred. But what does it
Speaker 4: mean that the FTC is looking into that anti competition
Speaker 4: analysis Microsoft? Bloomberg reporter Josh Cisco is with us. You
Speaker 4: look at Microsoft from an FTC and anti competitive concern
Speaker 4: area here, Josh, what is it that the FTC is
Speaker 4: doing because we all thought a new Trump administration would
Speaker 4: mean maybe less struttinly on tech giants. It doesn't seem
Speaker 4: to be the case.
Speaker 5: Well, I mean from the beginning, since before Trump took office,
Speaker 5: both himself and his allies have made it pretty clear
Speaker 5: that tech is going to be a key focus of
Speaker 5: their enforcement and regulatory efforts. It's we're still a little
Speaker 5: sort of uncertain about how exactly that will play out,
Speaker 5: but this is the fact that they are picking up
Speaker 5: this investigation and carrying it forward from the end of
Speaker 5: the Biden administration is a major sign that they're going
Speaker 5: to keep keep an aggressive stance against the tech sector.
Speaker 3: Remind us what other cases this FTC commissioner is inheriting
Speaker 3: from the Biden administration, because this could potentially offer clues
Speaker 3: as to how those might result in as well.
Speaker 5: Yeah, so he's got a bunch of stuff both on
Speaker 5: the competition anti trust and sort of the consumer protection
Speaker 5: side as well that the agency does both enforcement in
Speaker 5: both areas.
Speaker 6: They're going to trial.
Speaker 5: Next month against Meta in a case that was first
Speaker 5: filed actually in the initial Trump administration in December twenty
Speaker 5: twenty to break up META, and that's finally going to
Speaker 5: trial in April that was sort of filed at the
Speaker 5: end of Trump's first term, and then FTC chair under Biden,
Speaker 5: Lena Khan, she carried that forward. They also have a
Speaker 5: lawsuit against Amazon. They could potentially lead to major divestitures
Speaker 5: of Amazon's business. That's not going to trial for about
Speaker 5: a year and a half. There's another loss of your
Speaker 5: challenging Amazon's prime subscription business and how how the FTC
Speaker 5: says it doesn't allow consumers to cancel easily.
Speaker 6: Those are just a few of the big ones.
Speaker 4: Yeah, and interesting that resources is an issue, is why
Speaker 4: they delay the Amazon investigation, Josh, that you've been reporting on.
Speaker 4: But the context here is one where also the DOJ
Speaker 4: seems to still be going after that Google investigation and
Speaker 4: some of the really pretty tough remedies that they're eyeing
Speaker 4: to ensure that Google doesn't seem in some way a
Speaker 4: limitation on competition. From the context of overall this administration,
Speaker 4: it looks as though big tech is not getting off
Speaker 4: the hook here, particularly when it comes to AI.
Speaker 6: Yeah, I think that's true.
Speaker 5: I mean some of the regulatory stuff around AI safety
Speaker 5: and other guardrails that's a little bit sort of up
Speaker 5: in the air, but I think they've made it clear
Speaker 5: so far that they want to see more than two
Speaker 5: or three companies sort of dominate the technology, from Nvidia
Speaker 5: and chips to Microsoft and open Ai and sort of
Speaker 5: more end user applications. It is, I think, at least
Speaker 5: for now, going to be a major focus.
Speaker 3: That's Bloomberg's Josh Cisco, thanks so much for joining us
Speaker 3: for more on Microsoft and the broader tech market. Rischi Jaluria,
Speaker 3: RBC Capital Market Software Equity Research Managing Director joins us. Now, RACI,
Speaker 3: this isn't the first time that Microsoft is dealing with
Speaker 3: a more strict FTC. Is this latest development sparking you
Speaker 3: to kind of change the risk calculus that you were
Speaker 3: embedding in your modeling for the coming year or are
Speaker 3: you mostly brushing it off?
Speaker 7: Yeah, thanks so much for having me. Look, I don't
Speaker 7: want to say I'm brushing it off, but I do
Speaker 7: feel like the potential impacts we've been prepared for this.
Speaker 2: This is something that has been.
Speaker 7: Talked about for a while. And remember I mean Microsoft
Speaker 7: obviously historically under Bill Gates and later Steve Vahmer had
Speaker 7: gotten themselves on a little bit of hot water when
Speaker 7: it came into antitrust, but under Satian Adela, it's definitely
Speaker 7: been a kinder, gentler Microsoft that has very much embraced interoperability,
Speaker 7: embraced coopetition, and I think we see that playing out here.
Speaker 7: You know, they have they obviously were very early to
Speaker 7: invest in open ai, and they've really gone all in
Speaker 7: on gen Ai become an AI first company. But you
Speaker 7: actually notice over the past several years Micro or really
Speaker 7: sorry pass up of quarters. Microsoft has been diversifying, right,
Speaker 7: They've been building relationships with other vendors. At the same time,
Speaker 7: open Ai themselves has been diversifying where they have their
Speaker 7: own relationship with OCI and including with Stargate. They have
Speaker 7: their own relationship with Core. We've per the reports out there,
Speaker 7: and so really feels like Microsoft is doing the right
Speaker 7: things to show that they're not abusing their position, you know,
Speaker 7: in terms of the relationship with open ai, and I
Speaker 7: think it becomes tougher to make an antitrust case against
Speaker 7: Microsoft with the openI relationship when there is that level
Speaker 7: of interoperability and the other competitors have these sort of
Speaker 7: similar relationships. You think about Amazon with Anthropic, you think
Speaker 7: about Oracle with Coher, even Google buying Deep mind a
Speaker 7: long time ago, and that's a foundation for their AI efforts.
Speaker 7: So I think it's going to be a tough argument
Speaker 7: to make against Microsoft on the anti trust given all
Speaker 7: of these moves.
Speaker 4: Rashid, It is interesting, though, when you think back to
Speaker 4: the inauguration of the current president, how many technology leaders, CEOs,
Speaker 4: founders were there and many felt that we were coming
Speaker 4: into a different type of feel for business. But will
Speaker 4: that be the case, or any of these companies ever
Speaker 4: going to be able to do decent M and A again,
Speaker 4: or any of these companies going to be able to
Speaker 4: dislodge the overall time investment that they have to make
Speaker 4: in proving they're not anti competitive.
Speaker 7: Yeah, Look, I think we're probably going to be in
Speaker 7: a better environment for M and A. I think it'll
Speaker 7: be hard to get away with these sort of acquisitions
Speaker 7: that we saw maybe a decade ago or so of
Speaker 7: you know, Facebook buying Instagram and then WhatsApp and you know,
Speaker 7: Microsoft making some of these big blockbuster acquisitions.
Speaker 2: But I still think we're.
Speaker 7: Going to be in a more favorable environment for M
Speaker 7: and A. And I think you know, there's going to
Speaker 7: be scrutiny on there to prove that there's power to
Speaker 7: prove that, you know, to maybe try to keep the
Speaker 7: big tech companies in check and in line. But I
Speaker 7: still think that the idea of splitting up companies divesting assets,
Speaker 7: that's going to be more unlikely under the new administration.
Speaker 7: To me, this is kind of just a continued show
Speaker 7: of wanting to keep them again in line.
Speaker 3: Appreciate how do we reconcile the fact that President Trump
Speaker 3: has really almost anointed certain tech companies to be the
Speaker 3: shepherds of AI competitive need here in the US. You
Speaker 3: have Oracle Open AI as part of the Stargate deal.
Speaker 3: Could that shield the companies that have stakes in those
Speaker 3: particular companies a little bit more from you know, some
Speaker 3: of the FTC scrutiny that we're seeing, or will we
Speaker 3: see kind of this broader scrutiny across tech overall?
Speaker 7: I think we're going to see broader scrutiny across tech,
Speaker 7: you know, as opposed to at least over the past,
Speaker 7: or at least relative to the.
Speaker 2: First Trump administration.
Speaker 7: But I think it'll be equivalent to what we saw
Speaker 7: during the Biden administration and maybe taking that one step forward,
Speaker 7: I do think very much there is a relationship angle
Speaker 7: to all of this.
Speaker 8: So I think your instinct.
Speaker 7: And the question is accurate, right, that that companies that
Speaker 7: have maybe ties to the administration, you know in somewhere,
Speaker 7: or at least work constructively with them, are going to.
Speaker 8: Be a little bit more protected.
Speaker 7: And so I think it's in a lot of these companies'
Speaker 7: interests at least have a good working relationship with pieces
Speaker 7: of them. But remember the FTC is its own independent entity,
Speaker 7: right and they you know, even if the chair is
Speaker 7: appointed by the Trump administration, the way they act should
Speaker 7: be fully independent.
Speaker 1: You know.
Speaker 7: Again, I think that the case comes down, especially for Microsoft,
Speaker 7: to prove that there's some sort of competitive harm, to
Speaker 7: prove that they are abusing their position, that there are
Speaker 7: anti trust concerns. And the more work we do on that,
Speaker 7: the more we see the moves that both Microsoft and
Speaker 7: open ai are making independent of each other, the diversifying,
Speaker 7: the embracing of interoperability, the harder I think it is
Speaker 7: to make it case for anti trust here.
Speaker 4: So Rishi, we then returned just more broadly to fundamentals
Speaker 4: for the software companies that you cover at the moment,
Speaker 4: Microsoft being one of them, but you'll cover a whole
Speaker 4: host I think of Box, I think of Salesforce, I
Speaker 4: think of Oracle. Software hasn't been as punished as hardware,
Speaker 4: but we are reevaluating our previous winners, Rishi, And at
Speaker 4: this moment, do you think that we're hitting a bottom
Speaker 4: after the setoff of this week.
Speaker 8: Yeah.
Speaker 7: Look, I think this big sale off that we've had
Speaker 7: over this week and really in software over the past month.
Speaker 7: You're right, hasn't been punished as much as the hardware names,
Speaker 7: but there's been a lot of names that I cover
Speaker 7: that our high quality business is down thirty percent over
Speaker 7: the past month on really no fundamental news. In our mind,
Speaker 7: it is creating some really great buying opportunities, you know.
Speaker 7: I think, Yeah, some of the big guys like Salesforce
Speaker 7: and into It, I think are our interesting year. Even
Speaker 7: going a little bit more down the cap spectrum. I
Speaker 7: think HubSpot, which is actually a competitor to Salesforce, super
Speaker 7: attractive name, down thirty percent.
Speaker 2: It's one of our favorite names here.
Speaker 7: Mango dB, which I look at as the next gen
Speaker 7: Oracle in the database space, really compelling, you know, with
Speaker 7: this thirty five percent draw down that we've seen over
Speaker 7: the past month. So I do think it is creating
Speaker 7: some buying opportunities because remember software, you know, let's see
Speaker 7: what happens with the broader macro environment of the economy.
Speaker 7: But software is very much a tariff proof sector, and
Speaker 7: I think that's an important point to keep in mind
Speaker 7: as you think about all the rhetoric around tariffs and
Speaker 7: trade wars.
Speaker 3: That's Rishi Juluria of RBC Capital Markets, thank you so
Speaker 3: much for joining us. Still coming up, Open Ai shares
Speaker 3: its suggestions for AI policy with the Trump administration. We'll
Speaker 3: have all those details when we come back, Caroline.
Speaker 4: Meanwhile, we've got to keep an eye on what's happening
Speaker 4: with Intel while the rest of the market fools. Once again,
Speaker 4: Intel outperformance by fifteen percent. Why le Boutan returns to
Speaker 4: the company was on the board until August twenty twenty four.
Speaker 4: Of course, he did the turnaround for Cadence, and now
Speaker 4: his task to turn around Intel to improve its market capitalization.
Speaker 2: This is blue meg technology.
Speaker 4: Opening Eye has responded to a Trump administration request to
Speaker 4: share ways to boost US competitiveness in the global artificial
Speaker 4: intelligence race to tell us what they came out with
Speaker 4: and begs Seth Egerman finely enough.
Speaker 2: Less regulation seems to be the vibes.
Speaker 9: It's shocking. It's a real wish list of a deregulatory
Speaker 9: and heavy investment vibe here. Basically, Opening Eye is saying
Speaker 9: we want laxer rules on copyright, we want more infrastructure investment.
Speaker 9: And perhaps the most surprising thing is they're asking for
Speaker 9: a little bit more protection and relief from the patchwork
Speaker 9: of hundreds of state AI bills out there, saying the government,
Speaker 9: you're kind of weigh in here and say, if we've
Speaker 9: worked with you in providing access to our models to review,
Speaker 9: then give us a little bit of leniency on the
Speaker 9: many AI bills out there in the country.
Speaker 3: Seth talk to us about what that patchwork currently looks like,
Speaker 3: because a lot of these are still underway, and it's
Speaker 3: interesting that they use the word preemption because it hasn't
Speaker 3: exactly happened yet, but it kind of alludes to the
Speaker 3: fact that they want that shield. How many bills out
Speaker 3: there are they afraid of?
Speaker 9: You know, there's hundreds of believe the number was something
Speaker 9: like seven hundred iggy currently in discussion right now. These
Speaker 9: range from bills around you know, deep fakes and bias
Speaker 9: and AI systems to something like the controversial legislation that
Speaker 9: we saw moving through California last year that open I
Speaker 9: was vehemently opposed to. That said we might have civil
Speaker 9: liability here if you have, you know, critical harms from
Speaker 9: your AI models.
Speaker 8: It's clear OPENII is not so.
Speaker 9: Happy with that, despite having previously said they're in favorite regulation.
Speaker 9: They just want it to be from the federal government,
Speaker 9: which has done nothing much to do.
Speaker 4: The minute you said copyright, it made me think of
Speaker 4: what's happening in Europe and the UK in particular.
Speaker 2: We've already seen jd Vance been.
Speaker 4: Put out to Europe to try and fight the good
Speaker 4: fight and say go away with your regulations. But ultimately
Speaker 4: the US is one case. How much do they want
Speaker 4: the US government to do their bidding abroad as well?
Speaker 9: Yeah, it does sound like open is basically saying we
Speaker 9: want you to go out there and advocate for the
Speaker 9: fair use regime that they have been begging on for
Speaker 9: the last couple of years, saying that we have our
Speaker 9: right to use training data that might be copyright it
Speaker 9: because it's fair use. We're seeing that other markets outside
Speaker 9: the US are much more restrictive on that front, and
Speaker 9: it faces lawsuits in numerous countries and it could be
Speaker 9: critical to how they developed this technology.
Speaker 2: Seth.
Speaker 3: Another thing that Opening Eye added to their wish list
Speaker 3: is that they want to use government held data like
Speaker 3: healthcare data to train their models.
Speaker 2: How do we think that's going to go over It's.
Speaker 9: Going to go swimmingly. I'm sure no, I mean, I
Speaker 9: think again. The point is if copyright becomes too strict
Speaker 9: and they have a harder time getting the robust amount
Speaker 9: of data that they need to build new models, they're
Speaker 9: hoping the government can step in and provide a wealth
Speaker 9: or resource of other data. I'm sure not everyone will
Speaker 9: be comfortable having their healthcare information be used to feed these.
Speaker 3: Models, though, Bloomberg Seth Figureman, thank you so much for
Speaker 3: joining us. Turning to shares of Adobe that are sinking
Speaker 3: today after the company gave a disappointing outlook for revenue growth.
Speaker 3: For more on that, an aer Agrana of Bloomberg Intelligence
Speaker 3: joins us now to discuss INNEROG sales in the current
Speaker 3: quarter are expected to be between five point seven to
Speaker 3: seven billion to five point eight two analysts.
Speaker 2: Were projecting five point eight.
Speaker 3: It's really not that far off, So help us understand
Speaker 3: what investors are worried about.
Speaker 2: Here. Is it the execution or the competition.
Speaker 10: Yeah, I've been surprised about the reaction also because you know,
Speaker 10: if you look at it, they reaffirmed their guidance for
Speaker 10: the full year and frankly speaking, in the current environment,
Speaker 10: nobody knows how the economy shapes up. That's not bad
Speaker 10: at all, you know. From our side. They did give
Speaker 10: out a lot more details about their AI initiative.
Speaker 6: The thing where the Adobe is It is.
Speaker 10: Probably the most controversial stock in software right now. The
Speaker 10: valuation it has been a last i would say year
Speaker 10: and a half or so. I haven't seen that. I
Speaker 10: don't even know going back, you know, fifteen twenty years,
Speaker 10: it was always trading at a premium to some of
Speaker 10: the marque names.
Speaker 6: The big issue with Adobe.
Speaker 10: Is people are worried about their core creative business and
Speaker 10: what would the future of that business be. Because of
Speaker 10: free tools, you know, we can develop videos or pictures
Speaker 10: on the fly.
Speaker 6: Then why would you need Adobe? Now?
Speaker 10: I think that's way simplified risk. They have a very
Speaker 10: very strong mote around their products. But again, it's going
Speaker 10: to take a while before people get comfortable.
Speaker 6: With this story.
Speaker 4: I feel that was the story even in the hardware
Speaker 4: names that we saw of last week. Marvel got crushed
Speaker 4: even when ultimately I lived up to expectations. But if
Speaker 4: your forecast is in any way off down you go
Speaker 4: in this in market environment, an K. What else does
Speaker 4: Adobe need to be doing in terms of also fighting
Speaker 4: off the perception that it's really hard to get rid
Speaker 4: of subscriptions and ultimately that they're not getting backed for
Speaker 4: the bart for the customer.
Speaker 10: Yeah, I think you know, frankly speaking, all they need
Speaker 10: to do is steady execution over the next twelve to
Speaker 10: twenty four months and put this risk to rest that
Speaker 10: they will get disrupted because of AI. I think that
Speaker 10: is the single most important thing for them. They keep
Speaker 10: on giving more information about how AI is enhancing their business.
Speaker 6: That's going to be there.
Speaker 10: But one of the things I caught from you know,
Speaker 10: the stock reaction today is that market still seems to
Speaker 10: be in a notion of accelerating growth for the entire
Speaker 10: software industry, which is actually not a good thing for
Speaker 10: the earning season that's coming up, because given where we
Speaker 10: are in the economic uncertainty, I don't think there's going
Speaker 10: to be that much seat growth going forward, or at
Speaker 10: least in the near term, which means a lot more
Speaker 10: volatility for these software names going into next quarter or
Speaker 10: next month.
Speaker 4: I love that you're pointing us towards the next earning
Speaker 4: season where we're still wrapping up. This one never ends.
Speaker 4: Anama Granta of bloem Megan Intelligences, so good to have you.
Speaker 4: Thank You's talk about potential IPOs and what this market
Speaker 4: volatility means for them. Just think of Core Weave. We've
Speaker 4: been talking about a lot initial public offering, one of
Speaker 4: the most hotly anticipated stock launches this year.
Speaker 2: Will it go ahead?
Speaker 4: What does it mean for the investor based mark client
Speaker 4: CEO zero Capital joins us now twenty five million dollars.
Speaker 2: Worth of shares of core Weave.
Speaker 4: You are a publicly traded bench fund basically, and you
Speaker 4: disclosed holdings that you have and ultimately your vision for
Speaker 4: these businesses core Weave.
Speaker 2: Will it go public?
Speaker 4: Do you think in this market?
Speaker 8: Yeah?
Speaker 11: So.
Speaker 12: Sero Capital is a publicly traded fund that invests in
Speaker 12: in venture backed companies. We invested in core Weave about
Speaker 12: a year ago. We found that it's a pretty unique property.
Speaker 12: As you've been reporting and everybody's been reporting, I've never
Speaker 12: in the forty years i've been in the business seed
Speaker 12: and a supply demand and balance in any sort of anything,
Speaker 12: and the idea of the need for compute and the
Speaker 12: supply of compute was so offset in core. We've sat
Speaker 12: right in the place to take advantage of that, so
Speaker 12: we made an investment. It is the largest investment we've
Speaker 12: ever made at Cero Capital in the fourteen years that
Speaker 12: we've been investing, and we're really excited about the IPO.
Speaker 12: We think that obviously market volatility isn't great for the
Speaker 12: IPO market. I'm sure you've all been speaking a lot
Speaker 12: about out that, but I do think that their business
Speaker 12: model is so strong, their growth is so strong that
Speaker 12: the market's going to appreciate appreciate it, and I think
Speaker 12: that we will have the opportunity to go public in
Speaker 12: this market.
Speaker 4: I mean, the market was a little anxious about the
Speaker 4: fact that they're so dependent on a couple of key clients,
Speaker 4: Microsoft being notably one of them.
Speaker 2: How do they prove that diversification.
Speaker 4: There aren't that many hyperscalers out there that need this
Speaker 4: sort of compute, but they need to show that they
Speaker 4: can serve more than just two key right.
Speaker 12: So I think you start with the point that Microsoft
Speaker 12: obviously is a risk factor in the fact that they're
Speaker 12: such a large customer and they do service some of
Speaker 12: the other larger technology type companies, but there aren't that
Speaker 12: many that actually needed It's sort of like looking at
Speaker 12: the health insurance industry. There's a handful of health insurers
Speaker 12: that supply for everybody. In this case, Core Weave supplies
Speaker 12: compute for the folks that need it, and as compute
Speaker 12: becomes less expensive and more the be able to diversify
Speaker 12: their customer base, which I'm sure they'll.
Speaker 8: Be able to do.
Speaker 3: Mark, how are you advising your portfolio companies, particularly those
Speaker 3: that haven't gone public yet. Are there certain sectors that
Speaker 3: should avoid the public markets and just stay private for now?
Speaker 12: Well, I think one of the reasons we built this
Speaker 12: company fourteen years ago is companies wanted to stay private longer,
Speaker 12: and that has certainly proved out. When we first started,
Speaker 12: so there was under one hundred companies that were worth
Speaker 12: over a billion dollars, there was under twenty companies worth
Speaker 12: over a billion dollars. Now there's hundreds of them that
Speaker 12: are worth over a billion dollars, and being public is
Speaker 12: something that's not for any everybody, and I think companies
Speaker 12: that want to go public have to understand the merits
Speaker 12: of going public. I think the advent of the secondary market,
Speaker 12: as well as the tender market that is available now
Speaker 12: for these larger companies allows these larger companies to stay
Speaker 12: private longer and allow them make a determination when it's
Speaker 12: appropriate for them to go public if they it all
Speaker 12: need to go public.
Speaker 4: Look, you've invested before in the key winners of Facebook, Twitter,
Speaker 4: Snap Spotify, Lift, but you're also in open Ai. Would
Speaker 4: you ever envisage that open Ai would do anything but
Speaker 4: stay private for the time being. They can access deep
Speaker 4: troves of capital, but they must be one of the
Speaker 4: most sought after holdings for the retail community and indep
Speaker 4: people who can't access private funds.
Speaker 12: Sure you know open Ai, which is widely reported, is
Speaker 12: in the process of going from a not for profit
Speaker 12: to for profit.
Speaker 4: Can you support that?
Speaker 8: I think that's appropriate.
Speaker 12: I think if they want to continue to aggregate capital
Speaker 12: in the way that they need to do to continue
Speaker 12: on their mission to build out what is a phenomenal company,
Speaker 12: they're going to need a more normalized capital structure to
Speaker 12: do that.
Speaker 2: That's smart. Client, CEO of Cerro Capital, Thank you so much.
Speaker 2: For joining us.
Speaker 4: Welcome back to Blue meg Techology.
Speaker 2: I'm Caroine Hide in New York and I'm Jackie Devalas
Speaker 2: in Washington. Let's check in on these markets.
Speaker 4: Once again, the trade wars, the anxiety, this time between
Speaker 4: Europe and US, styling back up grue. Sentiment is pushed
Speaker 4: back lower. After yesterday, We've got a reprieve with a
Speaker 4: lower than expected CPI reading, But once again we're under
Speaker 4: pressure on the NASAK one hundred off by one point
Speaker 4: thirty percent, completely erasing yesterday's games. We move under the
Speaker 4: hood though, of who is outperforming, because most of the
Speaker 4: Magnificent Seven are on the downside, dragging lower on a
Speaker 4: points perspective. But look at Intel to the rescue. It's
Speaker 4: from a points contributor, one of the best performers on
Speaker 4: the upside.
Speaker 2: We're up fifteen percent.
Speaker 4: And why because lip Broutan comes back not as a
Speaker 4: board member but actually as CEO starting next week. Bluemeg's
Speaker 4: Ian King has been following the trails and tribulations of Intel.
Speaker 4: Is he the right man to steer this company back
Speaker 4: to good fortune?
Speaker 13: I mean, the reaction tells you that people are clearly
Speaker 13: happy about that. Whether it's a case of them being
Speaker 13: happy that Intel have just got somebody in that crucial
Speaker 13: seat at a crucial time for the company, or whether
Speaker 13: it's because they're enthusiastic about his capabilities and his fit
Speaker 13: for the role. We'll see how that plays out of
Speaker 13: the long term, but certainly today people are very happy
Speaker 13: about that.
Speaker 3: Ian talk to us about what this has looked like
Speaker 3: in the past. Because this is the fourth permanent CEO
Speaker 3: over the last seven years, Our investors.
Speaker 2: Going to look for something more other than just a
Speaker 2: new person on the.
Speaker 3: Job because the company also has some support from the
Speaker 3: Trump administration. But what other questions are still open about
Speaker 3: whether they can actually execute on this to stay relevant.
Speaker 13: Yeah, I mean that is the giant question here, and
Speaker 13: we don't have an answer in terms of what direction
Speaker 13: he's going to choose.
Speaker 8: It's whether.
Speaker 13: Bhutan has come in as a CEO who's going to
Speaker 13: try to make him tell what it once was which
Speaker 13: was dominant in this industry, or whether he's a caretaker
Speaker 13: who's going to preside over it being broken up. We
Speaker 13: didn't really get the answer to that and the things
Speaker 13: that he put out there publicly yesterday, and that's going
Speaker 13: to be something that people will be really focused on.
Speaker 4: And the chip sacked money in When is this eight
Speaker 4: and a half billion dollars potentially going to come its way?
Speaker 4: What do you make of his interactions going forward with
Speaker 4: the current administration do you think yeah?
Speaker 13: I mean that is a wild card for anybody in
Speaker 13: the CEO role in the semiconductor industry, whether it's trade,
Speaker 13: whether it's the Chips Act or anything like that. But
Speaker 13: all along the Chips Act has been a very structured
Speaker 13: situation where you have to build these plants, you have
Speaker 13: to equip them, you have to start production, otherwise you
Speaker 13: don't get the money. You know, it's very much a
Speaker 13: mild post kind of triggered events. So they'll have to
Speaker 13: do what they said they were going to do or
Speaker 13: they won't get the money anyway, regardless of whether President
Speaker 13: Trump turns against the Act.
Speaker 2: Or not, it's Bloomberg's Ian King. Thank you so much
Speaker 2: for joining us.
Speaker 3: Next, Janet we from RBC Brewin Dolphin, head of market Analysis. Thanks,
Speaker 3: thank you so much for joining us. Let's talk keep
Speaker 3: talking about the semiconductor space here. Intel is one big player,
Speaker 3: but I want to understand how you're thinking about the
Speaker 3: space coming off of a really busy week that got
Speaker 3: rattled by tariffs and other announcements the trip and Science
Speaker 3: Act as another How are you thinking about the space
Speaker 3: and the catalyst going forward?
Speaker 6: Hi, thanks for having me.
Speaker 11: I think over the longer term, AI would remain a
Speaker 11: very relevant theme and a very key driver for the
Speaker 11: semiconductors industry and the whole ecosystem. So on that, we're
Speaker 11: still very confident on the psycho outlook. There's still plenty
Speaker 11: of support for that, but unfortunately, we're in a very
Speaker 11: complex and st microeconomic landscape at the moment, where you know,
Speaker 11: companies with the most complex supply chains are likely to
Speaker 11: be at risk, and that is included the semiconductor sector.
Speaker 11: So unfortunately, given the micro back job, these stars are
Speaker 11: not doing well at the moment. But I think that
Speaker 11: valuations have become more attractive for the sector as a whole,
Speaker 11: and I do believe that if you pick the leaders
Speaker 11: across the semiconductor ecosystem, you are likely to still do
Speaker 11: pretty well for the longer term.
Speaker 2: Is Intel a leader?
Speaker 4: I know whether it's an individual name perspective, but would
Speaker 4: you put that company alongside some of the winning formulas
Speaker 4: that we see of late with the in videos at
Speaker 4: the top of the list.
Speaker 11: So for now, probably not. We have to await more
Speaker 11: strategic direction from the new CEO. I think Intel Face
Speaker 11: is a bunch of challenges regardless of who is in charge.
Speaker 11: Basically on the design front is you know, it's lagging
Speaker 11: our companients like Nvidia and am D, and you know,
Speaker 11: as a foundry business is also you know, it's direction
Speaker 11: is not clear and they really have to revive that
Speaker 11: boundary business in order to secure its position in the sector.
Speaker 11: So I guess we'll just have to wait and see.
Speaker 11: Apparently the market is very enthusiastic about the new.
Speaker 2: CEO, Jenna.
Speaker 3: Let's talk about software for a moment, because we had
Speaker 3: a guest earlier this morning kind of tell us that
Speaker 3: these software names are a little bit more insulated from
Speaker 3: a lot of the tariff woes that we're seeing other
Speaker 3: names really get battered by.
Speaker 2: Would you agree with that?
Speaker 3: How much more of that protection do some of those
Speaker 3: names get?
Speaker 11: Yeah, I would tend to agree with that. I think
Speaker 11: in terms of the supply chain impact, I think obviously
Speaker 11: the hardware the industrial sector would be more badly heat
Speaker 11: where the software it would be fundamentally less heat. So
Speaker 11: I would agree on that point. But obviously, given the
Speaker 11: various macro uncertainties that we have, ultimately a lot of
Speaker 11: these software companies, if you look at the megacap tech
Speaker 11: companies there, they're still heavily uh exposed to domestic US
Speaker 11: economy in terms of say advertising, cloud revenue, et cetera.
Speaker 11: Ultimately is still dependent on the business cycle. I mean
Speaker 11: oarguably less cyclical, less sensitive, but it's still dependent.
Speaker 8: And obviously the valuations have.
Speaker 11: Come off because of the sentiment ed So I guess
Speaker 11: in the term, I think it is best to stay
Speaker 11: cautious because we still have potentially a range of uncertainty
Speaker 11: coming from the reciprocal towerfront that is going to heat
Speaker 11: the sentiment channel.
Speaker 3: The reason I'm curious is because more recession fears have
Speaker 3: started to come to the foe, and when we think
Speaker 3: about the tech sector, you know, we don't really remember
Speaker 3: the fact that all of these software names, many of them,
Speaker 3: and thinking like the social media companies are sensitive to
Speaker 3: that digital advertising, how much of that is vulnerable to.
Speaker 2: The swings in the economy.
Speaker 3: Could there be more vulnerability there going forward if these
Speaker 3: recession fears do play out.
Speaker 11: Yes, I think there's not only some risks because what
Speaker 11: we are saying now is basically the heat by the
Speaker 11: sentiment channel. We haven't really actually seen too much of
Speaker 11: the hat to actual earnings and the real economy. I mean,
Speaker 11: there is recession anxiety, but I wouldn't still put that
Speaker 11: at a central case. But if that eventually did play out,
Speaker 11: I think there could be more to go in terms
Speaker 11: of the hit to the earnings outlook. So that would
Speaker 11: be quite bad to these companies because advertising, I think
Speaker 11: is very cyplical. They probably the first to be cut.
Speaker 11: If a company wants to reduce the spending and if
Speaker 11: consumer confidence is falling, then consumers are going to tighten
Speaker 11: the belt and spend less. That that's all going to
Speaker 11: hit all these companies eventually. But I think, as I said,
Speaker 11: it's currently still the sentiment that is, you know, playing out.
Speaker 11: There is not really real hits to the earnings yet.
Speaker 11: We just have to wait and see.
Speaker 3: And what about overseas because some of the woes here
Speaker 3: in the United States might be a gain for let's
Speaker 3: say Chinese stocks. It seems like every time a new
Speaker 3: model comes out of China, it sends US tech stocks
Speaker 3: really freaking out, especially those with exposure to AI. How
Speaker 3: are you thinking about positioning outside of the US.
Speaker 11: Yeah, I think there's certainly more enthusiasm or in Chinese
Speaker 11: tech stocks. I think mainly it's because sentiment has been
Speaker 11: way too depressed and basically a lot of obasease investors
Speaker 11: have written of Chinese tech for a while, and there's
Speaker 11: suddenly a bunch of good news, including some shift in
Speaker 11: a tone from the politician, a bit more welcoming tone,
Speaker 11: a bit more supportive to the private sector, and of
Speaker 11: course the innovation in AI and bordling out of using
Speaker 11: AI in various sectors in China. So I would say,
Speaker 11: in a new trauma, I think is reasonable to feel
Speaker 11: more optimistic. I think there could still be more influence
Speaker 11: going into that sector. But I think we have to
Speaker 11: be a bit more cautious because we understand Chinese stock
Speaker 11: market is very volatile and you know, a lot of
Speaker 11: retail participation. I don't think this time would change. I
Speaker 11: think that's still a lot of volatility and profit takeing
Speaker 11: activity if the index continues to go on from here.
Speaker 11: So I think we've got to be a bit more
Speaker 11: careful here.
Speaker 3: Seems like forever ago that the market was freaking out
Speaker 3: about deep seek and all of a sudden with some
Speaker 3: earnings that have come out, CAB backs has been reaffirmed.
Speaker 3: Investors seem assured that maybe we're a little bit past this.
Speaker 3: Do you still see the deep seek fear showing up anywhere,
Speaker 3: if that's something that's going to drive the market going forward.
Speaker 6: Yeah.
Speaker 11: The thing is that I think fundamentally we are of
Speaker 11: the view that deep six appearance. It shows that these
Speaker 11: models can be run in a more efficient way and
Speaker 11: thereby lowing the cost of running it and training, and
Speaker 11: thereby eventually it would e stimulate the demand if the
Speaker 11: cost goes down, so more people would be using it.
Speaker 11: So not only that's going to be beneficial for the
Speaker 11: whole sector, but at the same time, the thing is
Speaker 11: we don't know yet, and if you look at the
Speaker 11: latest earnings results from say Nvidia, you won't be able
Speaker 11: to see that impact yet. Actually it's more more distant
Speaker 11: in the future whether the hyperscalers are going to reduce
Speaker 11: their capital spending because of the more efficient models. So
Speaker 11: there's a lot of questions that are yet to be answered.
Speaker 11: But I think from our view, if you look back
Speaker 11: at history of the semiconductors of our cost impact demand,
Speaker 11: usually when costs are lowered, then eventually demand actually grows exponentially.
Speaker 11: But of course you have to also consider that the
Speaker 11: tie is going to be shared by potentially more players,
Speaker 11: So I think just focusing on say one or two
Speaker 11: particular leaders is potentially more risky. That's why our strategy
Speaker 11: is always to get exposure to a whole range of
Speaker 11: the stocks in the semiconductor ecosal stump, we don't have.
Speaker 3: A crystal Baldoy Janet Janet Mooly from RBC brewin Dolphin,
Speaker 3: thank you so much for joining us.
Speaker 2: More coming up next. This is Bloomberg time now for
Speaker 2: talking tech.
Speaker 4: First up, SpaceX is the layed its mission to bring
Speaker 4: back two struck stock or astronauts from the International Space
Speaker 4: Station due to an issue with ground equipment, and the
Speaker 4: mission would have launched a new crew to the ISS
Speaker 4: brought back those two astronauts the maroon since last year.
Speaker 4: Now the launch has been rescheduled to place no earlier
Speaker 4: than tomorrow evening. Plus, Ali Baba has launched a new
Speaker 4: version of its quad AI agent incorporating chat what deep
Speaker 4: Thinking and tasket secution features in one app. Now What
Speaker 4: utilizes Ali Baba's own reasoning models and is the latest
Speaker 4: attempt by the company to keep pace with China riveals
Speaker 4: and shares a Delivero. They're falling today as much as
Speaker 4: ten percent in London trading. That says most since all
Speaker 4: the way back in twenty twenty two. The food delivery
Speaker 4: company gave an earnings forecast that disappointed investors and comes
Speaker 4: just days after I announced it would exit the Hong
Speaker 4: Kong market.
Speaker 3: Jackie, the head of Ali Baba Group's original core business,
Speaker 3: says the use of various AI applications are having a
Speaker 3: profound impact on the company. Earlier this week, Alibaba dot
Speaker 3: COM's president Quo Jong told Bloomberg exclusively its vendors are
Speaker 3: having an easier time finding.
Speaker 2: New markets for their goods.
Speaker 14: Take a listen, take the buyer as example. So if
Speaker 14: we think about the search volume for the information or
Speaker 14: for a product, as in the search volume for the
Speaker 14: information parts.
Speaker 8: Ten times than the products park. So think about it.
Speaker 14: If you want to start a business, you will not
Speaker 14: specifically go to a products or go to a kind
Speaker 14: of suppliers. You will come up on this idea like
Speaker 14: it was trending and with a specific kind of textile
Speaker 14: you're going to use in your product, and then it's
Speaker 14: kind of the big business plend Then it's come to
Speaker 14: the products. So now using AI have this kind of
Speaker 14: multi round the dialogue kind of search a lot of people.
Speaker 14: Now it's more easy to do business online. And for
Speaker 14: the sellers we see current our kind of for agent
Speaker 14: these tools, it's already better than sixty or seventy percent
Speaker 14: of the seller if they are new on olib dot
Speaker 14: com in terms of the conversion rate for the customer
Speaker 14: engagement and for the product management.
Speaker 15: But how many businesses I think there's around two hundred
Speaker 15: thousand smsider on the platform. How many businesses are actually
Speaker 15: using AI today?
Speaker 14: So currently the weekly active sellers are more than one
Speaker 14: hundred percent, so it's more than half of the sellers
Speaker 14: is already equipped by this agent based tools. And for
Speaker 14: the buyer side, actually we want the AX. From last
Speaker 14: November until now, there are accumulately more than one million users.
Speaker 8: Is using using this AI based power search.
Speaker 15: How much do you feel the competitive pressure on AI
Speaker 15: given the amount of innovation that's.
Speaker 2: Coming from China.
Speaker 14: Okay, so first of all, we think there's a lot
Speaker 14: we can do so far. For example, we talk about
Speaker 14: the reasoning models, but based on language there's a lot
Speaker 14: on the modimodel multimodel stuff that we can do and
Speaker 14: later on, like you can based on anything.
Speaker 8: An image, a video or a.
Speaker 14: File that you uploaded the fail that the reasoning model
Speaker 14: can help you to interpret and to a upon. So
Speaker 14: all those kinds of sill we still believe there's a
Speaker 14: huge space to grow and we can leverish the most.
Speaker 14: I mean the models from matter, from deepsy, from art
Speaker 14: cloud to Chailman.
Speaker 8: So all these models actually.
Speaker 14: Can help us to boost the capability of the applications
Speaker 14: that we believe. Application actually is the key here and
Speaker 14: why we think we can do it here we can
Speaker 14: do better than others. Is not going to be a
Speaker 14: few tools that play for the people answer the easy questions.
Speaker 14: You need to be highly integrated into the big scenarios
Speaker 14: like global trade is a thirty treating US dollar business.
Speaker 14: I don't think any other business is larger than this.
Speaker 14: So if we can apply AI in this business and
Speaker 14: helping a lot of SMBs, so who cannot participate in
Speaker 14: the global trade and now they can, so as think
Speaker 14: this is a big success for us.
Speaker 15: A lot of people are expecting industry consolidation or AI
Speaker 15: consolidation in China this coming year. How many winners do
Speaker 15: you see in the AI space in China?
Speaker 14: So actually, for that part, I can only speak of
Speaker 14: my opinion. So if you ask this question in January
Speaker 14: plenty twenty five, as seeing that nobody can anticipate it,
Speaker 14: there's a company called Diepsick.
Speaker 8: I think you ask this question in March.
Speaker 14: I don't think that anybody can antipates to what's going
Speaker 14: to happen in April as well. This industry is moving
Speaker 14: so fast and a lot of people doing a lot
Speaker 14: of innovations. We just need to focus on what are
Speaker 14: the right problems we need to tackle as people in
Speaker 14: this technology domain. I don't think anybody can anticipate what's
Speaker 14: going on for this year.
Speaker 4: Alibaba dot Com president Quosine speaking exclusively with Bluemeg's Annabelt Drowners.
Speaker 4: Let's just take a quick check on Apple shares year today.
Speaker 4: Their erosion in market capitalization is to the tune of
Speaker 4: about half a trillion dollars a fifteen percent wipeout is
Speaker 4: actually far worse. And then as that one hundred which
Speaker 4: is off about eight percent, why is it underperforming? There
Speaker 4: is a myriad of risks which round Rosseella really writes
Speaker 4: about to our audience today, talking about the wives of tariffs,
Speaker 4: about the uncertainty in China, about the AI offerings really
Speaker 4: fizzling of course of late, the SERI concerns, and then
Speaker 4: there's that lucrative partnership with Google parent Alphabet and whether
Speaker 4: or not those payments will still come for exclusive access
Speaker 4: to Google Search within the iPhone. Well, let's talk all
Speaker 4: about Apple and maybe the way in which is trying
Speaker 4: to offset some of these headwinds, the affordable iPhone sixteen
Speaker 4: and e howforfordable actually is it? Mark German is beginning
Speaker 4: his hands on some of the products, and Bloomberg writes
Speaker 4: about how it's kind of a tough sell at this
Speaker 4: price point.
Speaker 16: Mark, Yeah, to your point, it's not affordable enough. At
Speaker 16: six hundred dollars. It puts it basically at the very
Speaker 16: high end the budget range, right, But it's specifications, one camera,
Speaker 16: it's processing, its AI capabilities really puts it sort of at.
Speaker 8: The bottom barrel of budget phones.
Speaker 16: You can get Android phones for a couple hundred dollars less,
Speaker 16: particularly overseas, where you're getting three or four cameras, where
Speaker 16: you're getting better AI features, where you're getting better displays,
Speaker 16: you're getting higher resolution panels with improved frame rates for scrolling,
Speaker 16: you're getting better gaming, etc. So they have a lot
Speaker 16: of competition there, and it continues to be mind boggling
Speaker 16: that they abandoned that three to.
Speaker 6: Four hundred dollars price point.
Speaker 16: I really think something like that, while out of the
Speaker 16: typical Apple premium range, would have helped them tremendously with growth,
Speaker 16: particularly for services in places like India, Southeast Asia, Eastern Europe.
Speaker 4: To your point, when you first reported about this products
Speaker 4: coming out, the idea was actually it was very like
Speaker 4: and iphoned sixteen. There wasn't really much you were having
Speaker 4: to leave on the table by not going down to
Speaker 4: this particular phone. So will they ever bring anything out
Speaker 4: in that price range that you think could tempt more
Speaker 4: of an emerging market purchaser.
Speaker 16: I would never say never, but my belief is that
Speaker 16: the plan is eventually to bring the price down of
Speaker 16: this particular model. Right today it's six hundred dollars, but
Speaker 16: maybe in a year and a half, two years from now,
Speaker 16: maybe I'll get it down to the five hundred dollars
Speaker 16: price range. At that point, it's going to be even
Speaker 16: more outdated specification wise, but from a price point perspective,
Speaker 16: it'll actually be quite a bit more compelling. It would
Speaker 16: put it squarely in the same price range as the
Speaker 16: Google Pixel A series. Right they have the eight A
Speaker 16: eight right now, they have the nine A coming. This
Speaker 16: is an annual thing. They do a lower end pixel phone,
Speaker 16: so better competition there. The concern is right for Googles,
Speaker 16: no one's really buying the Pixel phones as great as
Speaker 16: they are.
Speaker 6: For Apple, they're at.
Speaker 16: Least getting some momentum because this is a phone. It's
Speaker 16: not going to get switchers, but it's a phone that's
Speaker 16: going to be able to upgrade from older iPhones. So
Speaker 16: from that standpoint it's compelling for some people. But they
Speaker 16: have the opportunity to do something even bolder, even bigger,
Speaker 16: even cheaper.
Speaker 4: Well, for now, we still wonder what's happening in terms
Speaker 4: of the generative AI integration, Apple Intelligence, Siri as well.
Speaker 4: There's a lot going on for this particular company. Mark German,
Speaker 4: as always, you can break it down for us, thank you.
Speaker 4: Let's just return to what is a key mover on
Speaker 4: the day, though, because at last the relief floods the
Speaker 4: market that Intel has a single CEO for the law term.
Speaker 4: The interim CEOs go back to their day jobs as
Speaker 4: CFO and chief a product. We're up fourteen percent as
Speaker 4: lip Boutang comes back to the business, can he be
Speaker 4: a turnaround king for Intel as he was for Cadence Designs.
Speaker 4: That does it for this edition of Bloomberg Technology. Do
Speaker 4: not forget to check out our podcast. You can find
Speaker 4: it online on the terminal as well as Apple, Spotify,
Speaker 4: and iHeart.
Speaker 2: This is Bloomberg Technology.