WEBVTT - Chip Stocks Slide as Apple Demand Surges 0:00:02.520 --> 0:00:04.200 Bloomberg Audio Studios. 0:00:04.670 --> 0:00:05.380 Podcasts. 0:00:05.750 --> 0:00:06.260 Radio. 0:00:06.720 --> 0:00:07.110 News. 0:00:12.990 --> 0:00:16.530 Bloomberg Tech is live from the heart of Silicon Valley 0:00:17.050 --> 0:00:19.310 with Ed Ludlow in San Francisco. 0:00:22.100 --> 0:00:24.440 This is Bloomberg Tech. Coming up, chip makers set for 0:00:24.460 --> 0:00:28.400 their longest losing streak since 2008, leaving investors questioning the 0:00:28.480 --> 0:00:31.980 prospects for the AI trade. Plus, shipping estimates for Apple's 0:00:32.080 --> 0:00:36.090 iPhone Duo slip into January, within minutes of the company 0:00:36.150 --> 0:00:40.589 opening pre-orders today. And the age of flying cars is here, kinda. 0:00:40.790 --> 0:00:44.810 Tesla reveals its long-delayed roadster sports car, showcasing a prototype 0:00:45.090 --> 0:00:50.690 with air thrusters that flipped mid-air. Well, when the chips 0:00:50.750 --> 0:00:54.110 are down, US semiconductor stocks falling again, putting the sector 0:00:54.130 --> 0:00:56.090 on track for an ape straight day of losses or 0:00:56.150 --> 0:01:00.770 matching a run since 2008, the longest losing streak since 2008. 0:01:00.770 --> 0:01:04.759 The Philadelphia Semiconductor Index has lost almost $ 2 trillion over 0:01:04.819 --> 0:01:09.400 those eight sessions, including today. And almost $ 2 trillion being 0:01:09.440 --> 0:01:12.240 wiped out is kind of something worth noting. Investors are 0:01:12.280 --> 0:01:15.360 confronting investors. a growing list of concerns. What are those concerns? 0:01:15.640 --> 0:01:17.520 We start with the chip sell-off and bring in Bloomberg 0:01:17.540 --> 0:01:21.190 Tech Equities reporter, Ryan Vlastelica. Go through what's happening, how 0:01:21.250 --> 0:01:23.230 broad the sell-off is, and then we'll get into some 0:01:23.250 --> 0:01:25.810 of the factors behind it. Hey, Ed. 0:01:26.250 --> 0:01:28.750 So this has been a very widespread sell-off. We've really 0:01:28.790 --> 0:01:32.230 seen weakness across the board within the semiconductor space. 0:01:32.510 --> 0:01:34.090 It really speaks to how. 0:01:33.860 --> 0:01:36.880 There's been a real shift in sentiment toward the AI 0:01:36.959 --> 0:01:40.360 trade right now. We've seen a lot more concerns about 0:01:40.400 --> 0:01:43.330 the level of debt that's being used to finance this build-up. 0:01:43.340 --> 0:01:46.470 There's some concerns still about the ROI side of things. 0:01:46.730 --> 0:01:49.870 There's some concern about how long is this spending story 0:01:50.130 --> 0:01:53.250 going to remain intact, especially as are we going to 0:01:53.290 --> 0:01:56.860 continue to see people lifting their capex in the coming years, 0:01:56.900 --> 0:01:59.560 which is what people have gotten accustomed to in terms 0:01:59.580 --> 0:02:02.320 of supporting all of this chipmaker growth. These are all 0:02:02.340 --> 0:02:04.520 sort of like questions that have really been percolating in 0:02:04.560 --> 0:02:07.540 the background almost since the start of the AI boom. 0:02:07.560 --> 0:02:10.930 And we've seen these sort of retreats and corrections and 0:02:10.970 --> 0:02:13.829 even bear markets before that This one, however, does seem 0:02:13.910 --> 0:02:17.169 pretty lengthy. It's pretty broad-based. It's pretty deep as far 0:02:17.210 --> 0:02:20.370 as the levels that we've seen companies coming off of 0:02:20.389 --> 0:02:20.870 their highs. 0:02:21.810 --> 0:02:24.910 You know, there is the sort of macro events of 0:02:24.950 --> 0:02:28.710 the week. And when I'm reading the Bloomberg across our coverage, 0:02:28.830 --> 0:02:32.680 higher rates as it relates to both sort of like 0:02:32.700 --> 0:02:35.880 the impact evaluations, but this idea that the AI build-out 0:02:36.060 --> 0:02:39.000 is spending on chips, right? And the financing of those 0:02:39.060 --> 0:02:45.760 projects is also... sensitive to a higher rate environment. Talk 0:02:45.780 --> 0:02:46.260 to me about that. 0:02:47.220 --> 0:02:49.940 Yeah, so higher rates means a higher cost to service 0:02:50.060 --> 0:02:52.690 all of this debt. Now, probably the major story of 0:02:52.750 --> 0:02:56.810 the week is CoreWeave. So many concerns about that company, 0:02:57.210 --> 0:02:59.310 its level of debt. We saw that the cost of 0:02:59.389 --> 0:03:02.870 insuring against default really spiked this past week. That's kind 0:03:02.910 --> 0:03:05.290 of at the epicenter of what is going on right now. 0:03:05.590 --> 0:03:08.109 And there's concerns about what if this snowballs and you 0:03:08.150 --> 0:03:12.049 have a company that is having difficulty servicing all this debt, 0:03:12.210 --> 0:03:14.510 rates keep rising and it becomes harder for them to 0:03:14.570 --> 0:03:16.880 do this build out, which requires chips, that makes it 0:03:16.919 --> 0:03:19.160 harder for them to generate revenue, which makes it harder 0:03:19.200 --> 0:03:21.280 for them to service their debt. It just goes on 0:03:21.320 --> 0:03:23.500 and on like that. That's really the concern right now. 0:03:23.540 --> 0:03:26.310 I'll say there's plenty of people who think that demand 0:03:26.340 --> 0:03:29.250 for AI and chips is still so strong that it's 0:03:29.270 --> 0:03:32.389 going to avert some kind of downward spiral. But this 0:03:32.430 --> 0:03:34.609 is really what people are concerned about right now. They're 0:03:34.630 --> 0:03:37.320 trying to assess how solid are some of these companies? 0:03:37.580 --> 0:03:40.080 What really is the outlook? Is AI demand going to 0:03:40.100 --> 0:03:43.840 be strong enough to help alleviate some of these worst 0:03:43.880 --> 0:03:46.800 case scenarios, especially in an environment that might be less 0:03:46.840 --> 0:03:48.890 favorable given higher rates and so forth? 0:03:50.230 --> 0:03:53.770 Thank you very much. Taiwan is looking to build more 0:03:53.790 --> 0:03:56.510 of its AI supply chain here in the US. The 0:03:56.550 --> 0:03:59.950 government plans to help fund industrial parks for Taiwanese suppliers, 0:04:00.230 --> 0:04:02.810 starting with a complex in Texas that could cost as 0:04:02.850 --> 0:04:05.230 much as $ 4 billion. The goal is to bring more 0:04:05.270 --> 0:04:09.030 of the companies that supply NVIDIA, TSMC, other hardware makers 0:04:09.410 --> 0:04:12.380 onto US soil, with Taiwan planning more than one site 0:04:12.780 --> 0:04:15.940 across the country. OK, let's get back to these markets. 0:04:16.060 --> 0:04:19.140 Is this just a reset or a warning sign for 0:04:19.160 --> 0:04:21.320 the broader AI trade? David Barnson is the founder and 0:04:21.339 --> 0:04:23.740 chief investment officer of the Barnson Group, and he's been 0:04:23.800 --> 0:04:26.619 warning about the risk of a blow off top in tech, 0:04:26.779 --> 0:04:31.820 arguing that valuations have become disconnected from the returns companies 0:04:32.080 --> 0:04:36.260 are actually generating specifically from AI. David, good morning to you. 0:04:36.279 --> 0:04:38.880 Welcome to the show. Eight straight days of selling in chips, 0:04:39.279 --> 0:04:41.520 an index that's still up 60 percent year to date. 0:04:42.440 --> 0:04:44.600 Is this the beginning of some sort of reckoning? 0:04:45.339 --> 0:04:47.260 Well, July thought it. 0:04:47.220 --> 0:04:49.060 Was going to be, and then it ended up kind 0:04:49.100 --> 0:04:51.919 of recovering a bit in September. So I'm hesitant to 0:04:52.060 --> 0:04:53.890 call a certain timing element. 0:04:54.210 --> 0:04:56.410 I do know this. It's a wake-up call. It's a 0:04:56.450 --> 0:04:57.289 reality check. 0:04:57.330 --> 0:05:01.110 People need to understand that not only are these things very, 0:05:01.170 --> 0:05:04.630 very overpriced and run up, but they are dependent on 0:05:04.680 --> 0:05:07.640 a whole lot of things continuing that may not continue. 0:05:09.080 --> 0:05:10.560 There are lots of factors, and all of these things 0:05:10.600 --> 0:05:12.190 are kind of true at once, right? So you're looking 0:05:12.210 --> 0:05:15.750 at valuations and then higher rates relevant to valuations. You're 0:05:15.770 --> 0:05:18.909 looking at the projects themselves in the real world, higher 0:05:18.970 --> 0:05:22.250 rate sensitivity for the financing of those projects, and then 0:05:22.290 --> 0:05:25.240 there's the kind of AI returns bit. bucket number three, 0:05:25.779 --> 0:05:28.460 like is the return there? Which of those three do 0:05:29.060 --> 0:05:29.960 you focus on most? 0:05:30.279 --> 0:05:32.480 Well, all of them matter. They're all interconnected. 0:05:32.520 --> 0:05:34.520 It's sort of a Venn diagram where they overlap with 0:05:34.560 --> 0:05:34.940 each other. 0:05:34.980 --> 0:05:36.990 But to your question, it's by far the last. 0:05:37.060 --> 0:05:39.890 And the reason is that nobody can answer the last question. 0:05:40.430 --> 0:05:43.089 What those returns will be, what the return on invested 0:05:43.130 --> 0:05:45.070 capital is going to be, when it's going to come, 0:05:45.190 --> 0:05:48.099 how it's going to come, who it's going to accrue to, 0:05:48.279 --> 0:05:51.960 and what the revenue model and earnings model will ultimately be. 0:05:52.339 --> 0:05:55.080 Not to the semiconductors, not to the pick and shovel companies, 0:05:55.320 --> 0:05:58.710 but to the entire AI ecosystem, the end user. That 0:05:58.790 --> 0:06:00.950 continues to be a big mystery. This is not me 0:06:00.970 --> 0:06:03.429 being pessimistic. I'm not suggesting there won't be pessimism. 0:06:03.710 --> 0:06:04.589 A path to profits. 0:06:04.630 --> 0:06:09.030 I'm suggesting investors right now are investing without knowledge as 0:06:09.089 --> 0:06:10.170 to what that is. 0:06:10.310 --> 0:06:11.690 That to me is very murky. 0:06:12.450 --> 0:06:16.640 Hey, what you just said, you're channeling, I believe you're 0:06:16.680 --> 0:06:20.039 in a hock tan, right? You saw that headline that 0:06:20.120 --> 0:06:23.880 the Broadcom CEO likened AI investing to being in a 0:06:23.940 --> 0:06:28.340 casino where investors set high expectations, but don't have a 0:06:28.460 --> 0:06:31.220 full picture necessarily in his view of what they're investing in. 0:06:31.850 --> 0:06:33.690 Do you see that in the behavior of your colleagues 0:06:33.730 --> 0:06:34.370 in the markets? 0:06:34.630 --> 0:06:36.870 There's absolutely no question, and I don't just see it 0:06:36.910 --> 0:06:39.430 with retail investors or people that they think are a 0:06:39.450 --> 0:06:43.050 little bit less informed or experienced. I see it even 0:06:43.089 --> 0:06:46.980 with significant money managers on the buy side. You saw 0:06:47.040 --> 0:06:49.760 in September a lot of long-only managers that are, I'm 0:06:49.779 --> 0:06:52.619 talking about people running hundreds of billions of dollars coming 0:06:52.660 --> 0:06:55.680 back in spades into a trade that they felt they 0:06:55.700 --> 0:06:58.000 had missed out on, and now all of a sudden 0:06:58.360 --> 0:06:59.540 their timing has proven to. 0:06:59.500 --> 0:07:00.620 Not be very astute. 0:07:00.640 --> 0:07:00.839 Right. 0:07:02.020 --> 0:07:03.300 Let's be clear about something. 0:07:03.540 --> 0:07:07.250 Oracle is down 65% from its high last year, and 0:07:07.290 --> 0:07:10.550 they just had their biggest year of revenues you could imagine. 0:07:11.190 --> 0:07:15.950 And they have 200% debt to equity. CoreWeave has 700% 0:07:15.950 --> 0:07:21.130 debt to equity. It's down about 50% from its all-time 0:07:21.190 --> 0:07:26.510 high with significant negative earnings. There's a lot of uncertainty 0:07:26.550 --> 0:07:29.820 in those types of companies. And when we isolate the 0:07:29.900 --> 0:07:32.520 risk to thinking it's just these semis that you point 0:07:32.600 --> 0:07:36.300 out are still up 60%, they were up 100%. At 0:07:36.440 --> 0:07:40.340 some point, it does trickle down to the entire ecosystem. 0:07:40.600 --> 0:07:48.130 Everything becomes interconnected eventually. And that's the story of history. You. 0:07:49.910 --> 0:07:53.120 Like this, what people call alternate trade, alternate AI trade. 0:07:53.540 --> 0:07:55.500 I struggle to see what's different about it. So like 0:07:55.620 --> 0:07:58.080 Blackstone has been a really interesting case study this week. 0:07:58.320 --> 0:08:02.080 We went really big on that story yesterday. But Blackstone 0:08:02.140 --> 0:08:05.850 is just basically involved in the asset class that is compute. 0:08:06.630 --> 0:08:10.010 So instead of buying into the chips directly, you say, 0:08:10.030 --> 0:08:12.550 look at Blackstone. Make the connection for me. 0:08:12.850 --> 0:08:14.890 Well, remember, it's not a trade for me. I've owned 0:08:14.930 --> 0:08:18.980 Blackstone since 2011. We're up about 15 times, and we 0:08:19.040 --> 0:08:21.080 intend to own it. 0:08:21.040 --> 0:08:21.960 For many more years. 0:08:22.420 --> 0:08:26.560 If AI didn't exist, if data center didn't exist, Blackstone 0:08:26.610 --> 0:08:29.270 as an asset allocator is there to collect fees and 0:08:29.330 --> 0:08:33.530 collect carry. on real estate, infrastructure, credit, and equity, and 0:08:33.570 --> 0:08:36.370 they're the best in the world at it. In my opinion, 0:08:36.650 --> 0:08:40.210 their ability to gather assets and generate consistent returns for 0:08:40.250 --> 0:08:44.550 institutional and private wealth investors has been remarkable. Now, right now, 0:08:44.610 --> 0:08:46.710 they're heavy in a lot of the data center investing, 0:08:46.929 --> 0:08:48.500 but who's getting the best terms? 0:08:48.770 --> 0:08:50.480 Who has the lowest cost of capital? 0:08:50.540 --> 0:08:52.760 Who has the best history of work throughs when there 0:08:52.880 --> 0:08:55.699 is distress? It is Blackstone, so I think it's a 0:08:55.740 --> 0:08:59.099 great risk adjusted trade, but it will be volatile, Their 0:08:59.140 --> 0:09:00.920 stock price issues this year. 0:09:00.760 --> 0:09:03.580 Are not really related to AI vulnerabilities. 0:09:03.620 --> 0:09:06.960 They're related to a lot of the chatter around private credit, 0:09:07.000 --> 0:09:11.230 which I think is largely misunderstood. So if AI goes away, 0:09:11.330 --> 0:09:14.370 Blackstone is still a fee generator. We're talking about the 0:09:14.429 --> 0:09:17.950 management company, not investing necessarily in some of the funds. 0:09:18.010 --> 0:09:19.849 Now, those could be good funds or bad funds. 0:09:20.190 --> 0:09:23.670 But my point is the management company is a non-capital 0:09:23.700 --> 0:09:25.640 intensive fee collecting machine. 0:09:27.110 --> 0:09:30.010 David Bunsen, Chief Investment Strategist of the Bunsen Group. Great 0:09:30.030 --> 0:09:32.270 to have you back on the show. Thank you very much. Okay, 0:09:32.330 --> 0:09:35.520 coming up, shipping estimates for Apple's iPhone Duo slip into 0:09:35.640 --> 0:09:39.040 January within minutes of the company opening pre-orders. We've got 0:09:39.059 --> 0:09:48.640 the details. This is Bloomberg Tech. Apple's first foldable iPhone 0:09:48.720 --> 0:09:50.680 isn't even on the shelves yet, and it's already getting 0:09:50.740 --> 0:09:55.210 hard to find. Pre-orders for the 1,999 iPhone Duo opened 0:09:55.230 --> 0:09:58.790 this morning, with shipping dates slipping into January within minutes 0:09:59.170 --> 0:10:02.500 as launch day starts. quickly sold out. Bloomberg's consumer tech editor, 0:10:02.510 --> 0:10:04.220 Dana Wallman's with us. I mean, there's kind of two 0:10:04.250 --> 0:10:06.920 separate issues. One is that if there was any stock 0:10:06.940 --> 0:10:09.020 that you could get today on pre-order for next week, 0:10:09.260 --> 0:10:09.699 it's gone. 0:10:11.559 --> 0:10:12.079 Absolutely. 0:10:12.160 --> 0:10:15.819 So seemingly quite a few disappointed iPhone fans this morning, 0:10:15.860 --> 0:10:19.500 not necessarily coming away empty-handed, but really needing some delayed gratification. 0:10:20.260 --> 0:10:24.170 I refreshed the pre-order page just before coming on this program, 0:10:24.250 --> 0:10:28.670 and right now shipping dates are estimated at January 25th, so. 0:10:28.890 --> 0:10:30.030 About three months from now. 0:10:30.750 --> 0:10:34.350 And that was true even for people who tried really 0:10:34.410 --> 0:10:36.550 promptly to get an order. Two of our staffers here 0:10:36.600 --> 0:10:39.400 at Bloomberg tried to place an order promptly at 8 a.m. 0:10:39.700 --> 0:10:42.900 and quickly saw the shipping date slip back and back 0:10:43.260 --> 0:10:47.559 now to January. But for those who were able to 0:10:47.600 --> 0:10:51.890 get it for the October 23rd, arrival date, they seem 0:10:51.929 --> 0:10:53.130 very few in number. 0:10:53.470 --> 0:10:53.970 Seems rare. 0:10:54.710 --> 0:10:57.590 I know that some of the carriers, T-Mobile, Verizon, AT & T, 0:10:57.770 --> 0:10:59.530 maybe you could have, if you were quick, you could 0:10:59.550 --> 0:11:01.910 have got one in December. But this is like demand, right? 0:11:01.929 --> 0:11:03.910 It's a story about demand. And I know that our 0:11:03.929 --> 0:11:07.800 colleagues in BI now maybe actually have revised how many 0:11:07.980 --> 0:11:09.820 units they think that this could hit. 0:11:11.360 --> 0:11:13.500 They didn't revise it, but they did say that Apple 0:11:13.559 --> 0:11:19.100 could well surpass Bloomberg Intelligence's earlier estimates. And also did 0:11:19.220 --> 0:11:21.450 note that the people likeliest to buy these are the 0:11:21.490 --> 0:11:27.650 sort of very high-tech, techie, early adopters, enthusiasts who normally 0:11:27.670 --> 0:11:31.010 would have gone for Apple's iPhone Pro line, let's say. 0:11:31.490 --> 0:11:34.510 So these aren't necessarily net new Apple fans who just 0:11:34.570 --> 0:11:36.350 woke up one day and said, oh, I think I'll 0:11:36.390 --> 0:11:38.290 buy an iPhone. I think I'll try an Apple phone 0:11:38.309 --> 0:11:40.550 for the first time. These are probably already people who 0:11:40.590 --> 0:11:43.230 would have bought the iPhone Pro line. So one thing 0:11:43.250 --> 0:11:47.699 that Bloomberg Intelligence noted is that those people are indeed 0:11:47.770 --> 0:11:51.609 switching to iPhones. the iPhone Duo, that is really going 0:11:51.690 --> 0:11:55.780 to significantly push up the average selling price for iPhones 0:11:56.380 --> 0:11:59.920 going forward. And they had some interesting numbers there that 0:11:59.940 --> 0:12:02.819 took into account both people switching from the iPhone Pro 0:12:02.860 --> 0:12:03.880 and the iPhone Pro Max. 0:12:03.900 --> 0:12:08.990 Bloomberg's Dana Wallman, thank you very much. Let's take a 0:12:08.990 --> 0:12:24.870 look to the future. Yes. Yes, that is a Tesla 0:12:26.150 --> 0:12:31.530 in the air. Tesla finally unveiled its long-delayed Roadster, and 0:12:31.570 --> 0:12:35.949 Elon Musk kind of went full Evel Knievel. The prototype 0:12:36.030 --> 0:12:39.150 jumped over cars, flipped through the air, and used cold 0:12:39.210 --> 0:12:43.050 gas thrusters developed with SpaceX engineers to help control it 0:12:43.130 --> 0:12:45.990 in flight. And if you're wondering whether these pictures are real, 0:12:46.490 --> 0:12:49.650 Musk actually brought out the live audience. He said, to 0:12:49.740 --> 0:12:52.939 prove that this wasn't AI. Tesla says the Roadster can 0:12:52.980 --> 0:12:56.500 go from zero to 60 in under a second. The 0:12:56.540 --> 0:13:00.610 top end rocket version can fly, but it won't be 0:13:00.630 --> 0:13:04.700 approved for public roads in most jurisdictions at least. The 0:13:04.740 --> 0:13:07.520 picture certainly set social media alight, and judging by the reaction, 0:13:07.660 --> 0:13:12.860 plenty of grown-ups were watching this with the enthusiasm of kids. But, 0:13:13.080 --> 0:13:15.739 and it's a big but, after years of delays, there's 0:13:15.780 --> 0:13:21.120 still a wait. Production isn't expected until 2028. Tesla shares, meanwhile, 0:13:21.450 --> 0:13:25.410 now down six-tenths of 1%. They had been pretty much stagnant. 0:13:25.570 --> 0:13:29.130 markedly higher earlier in the sessions for some investors this 0:13:29.190 --> 0:13:31.309 was about more than a flying car it is yet 0:13:31.410 --> 0:13:35.770 another example of the two must companies working increasingly closely 0:13:35.850 --> 0:13:39.859 together amid speculation that very soon and eventually they will 0:13:39.900 --> 0:13:44.160 merge joining us bloomberg's max chafkin uh okay give me 0:13:44.280 --> 0:13:46.760 uh your watch party last night i'm sitting there with 0:13:46.820 --> 0:13:49.100 my two-year-old uh what do you make. 0:13:49.000 --> 0:13:53.090 Of it I thought it was a great show, and 0:13:53.190 --> 0:13:57.390 Elon Musk is still, you know, despite the controversy that's 0:13:57.410 --> 0:14:00.510 swirled around him, despite the challenges that Tesla's had over 0:14:00.550 --> 0:14:04.059 the last couple of years, an amazing showman. I don't 0:14:04.100 --> 0:14:06.340 think this is really a car launch at all. I mean, 0:14:06.360 --> 0:14:10.380 this is a promotional event for Tesla's stock. 0:14:10.860 --> 0:14:12.479 And to a lesser extent. 0:14:12.400 --> 0:14:14.420 For the possible merger, as you said, Ed, which I 0:14:14.460 --> 0:14:16.700 think is the real, you know, to the extent that 0:14:16.730 --> 0:14:20.550 there's really news here, it's the way in which the 0:14:20.630 --> 0:14:23.790 company is promoting its connections to SpaceX in a way 0:14:23.830 --> 0:14:26.690 that feels like part of the beginning of a sales 0:14:26.770 --> 0:14:27.970 pitch for a merger. 0:14:29.700 --> 0:14:32.280 There was the note this week from the Barclays analyst 0:14:32.300 --> 0:14:35.330 who basically, you know, deduced that because an annual general 0:14:35.350 --> 0:14:39.150 meeting for Tesla need happen by early December, you know, 0:14:39.210 --> 0:14:43.090 that a merger announcement could happen before then. You know, 0:14:43.350 --> 0:14:47.730 you've been writing about Elon Musk in particular. Elon Musk, 0:14:47.750 --> 0:14:50.390 the entrepreneur, the showman for quite a long time. As 0:14:51.850 --> 0:14:55.650 a feat of engineering, the idea that Elon Musk and others, 0:14:55.790 --> 0:14:59.700 you've got to give credit to teams, does this. there 0:14:59.750 --> 0:15:01.380 is still something impressive about it, right? 0:15:01.460 --> 0:15:01.880 Surely. 0:15:02.080 --> 0:15:03.200 Frankly, I don't know. 0:15:03.420 --> 0:15:07.780 I mean, I definitely don't know enough about attaching thrusters 0:15:07.880 --> 0:15:11.480 to automobiles to know how, whether this could have been 0:15:11.500 --> 0:15:13.660 done 10 years ago or 20 years ago or 30 0:15:13.660 --> 0:15:17.270 years ago. I think the audacity, Ed, like you're saying, 0:15:17.890 --> 0:15:21.989 of doing this in a demo with customers as part 0:15:22.010 --> 0:15:24.070 of a product that supposedly. 0:15:23.530 --> 0:15:24.720 Will launch in 2028. 0:15:24.710 --> 0:15:26.730 That is a long time, by the way, in terms 0:15:26.770 --> 0:15:30.630 of Elon Musk timelines, just given the company's track record 0:15:31.170 --> 0:15:32.820 already as sort of missing deadlines. 0:15:33.480 --> 0:15:34.520 So I think you're right. 0:15:34.540 --> 0:15:37.100 I mean, I think it's impressive and no one is 0:15:37.120 --> 0:15:40.600 going to take that away from Tesla or SpaceX. I'm 0:15:40.620 --> 0:15:42.880 just not entirely sure what it adds up to. And 0:15:42.900 --> 0:15:45.200 I think when you look at the stock market reaction, 0:15:45.600 --> 0:15:48.680 He released a flying car. And as you said, Ed, 0:15:48.770 --> 0:15:51.370 the stock is down right now. So, you know, I 0:15:51.410 --> 0:15:53.150 don't know what to make of that, except that I 0:15:53.190 --> 0:15:56.930 think most investors, including some of the company's fans, were 0:15:56.970 --> 0:15:57.580 not that impressed. 0:15:58.380 --> 0:16:00.440 There's a lot of skepticism out there, but there is 0:16:00.500 --> 0:16:03.220 also a lot of sort of wonder at the engineering 0:16:03.260 --> 0:16:05.240 of it. Bloomberg's Max Chafkin. Great to have you on 0:16:05.260 --> 0:16:05.880 the show. Thank you. 0:16:08.810 --> 0:16:10.970 It's time now for Talking Tech. I'm Yahaira Ana. And 0:16:11.050 --> 0:16:14.410 first up, Tencent says third-party AI models on its cloud 0:16:14.450 --> 0:16:19.790 platform showed unexpected behavior. Researchers found rogue AI agents probing 0:16:19.870 --> 0:16:25.050 protected systems and trying to bypass anti-bot protections. Tencent says 0:16:25.370 --> 0:16:29.350 there's no evidence of deliberate targeting or access to private systems, 0:16:29.770 --> 0:16:34.050 and it's working on strengthening its controls. Plus, the UK 0:16:34.150 --> 0:16:38.900 antitrust watchdog has proposed tougher oversight over Microsoft. The agency 0:16:38.920 --> 0:16:42.700 said Microsoft's dominance in business software comes from making it 0:16:42.720 --> 0:16:46.350 harder for customers to switch. It plans to decide early 0:16:46.450 --> 0:16:50.010 next year whether to begin intervening in areas like cloud 0:16:50.050 --> 0:16:54.270 licensing and security software. Microsoft, for its part, said it 0:16:54.310 --> 0:16:58.900 disagreed with the decision. And President Trump's AI task force 0:16:58.960 --> 0:17:02.600 will commission a report on the technology's risks and develop 0:17:02.620 --> 0:17:07.169 protocols for warnings about breaches, hacks or other issues. The 0:17:07.210 --> 0:17:11.290 super intelligence force will also establish a committee to coordinate 0:17:11.330 --> 0:17:14.030 with law enforcement. That's all according to the White House. 0:17:14.190 --> 0:17:14.250 Ed. 0:17:15.070 --> 0:17:18.290 Okay, thank you, Yajaira. AI is a major force in 0:17:18.310 --> 0:17:21.889 the 2026 US midterms. Industry groups are spending hundreds of 0:17:21.990 --> 0:17:25.189 millions of dollars to elect candidates who might write the 0:17:25.290 --> 0:17:28.130 rules governing the technology. Listen to this. 0:17:30.200 --> 0:17:32.699 There's always a lot on the minds of voters, and 0:17:32.720 --> 0:17:36.820 this critical midterm is no exception. But one issue is 0:17:36.900 --> 0:17:41.119 cutting across party lines, touching upon the economy, environment, and 0:17:41.200 --> 0:17:43.380 possibly the future of humanity. 0:17:44.130 --> 0:17:46.540 All we've heard about is how big AI will be. 0:17:46.700 --> 0:17:49.700 Poll after poll after poll shows that there's a lot 0:17:49.720 --> 0:17:53.100 of anxiety among the general population about AI and what 0:17:53.140 --> 0:17:54.400 it's going to mean for their futures. 0:17:54.540 --> 0:17:58.090 And it's coinciding with this populist undercurrent that has defined 0:17:58.140 --> 0:18:02.130 these midterms. Leadership on the issue has been scattered and divided. 0:18:02.270 --> 0:18:03.270 Self-regulation. 0:18:03.369 --> 0:18:04.010 Regulatory voice. 0:18:04.130 --> 0:18:06.790 We're leading China in AI, and frankly, I want to 0:18:06.810 --> 0:18:09.310 keep it that way, because whoever wins, AI wins. 0:18:09.470 --> 0:18:11.530 There's a fight right now over who writes the rules 0:18:11.609 --> 0:18:14.369 of AI. It's a battle for the soul of the 0:18:14.450 --> 0:18:15.070 AI industry. 0:18:15.869 --> 0:18:19.090 And this battle is having profound effects on how Americans 0:18:19.270 --> 0:18:20.090 elect their leaders. 0:18:20.810 --> 0:18:23.880 This midterm, not only being the most expensive midterm ever, 0:18:23.910 --> 0:18:26.500 but the most expensive election ever in the United States, 0:18:26.720 --> 0:18:30.220 well over $ 11 billion spent on advertising. And part of 0:18:30.240 --> 0:18:33.679 that is being fueled by these new AI super PACs 0:18:33.720 --> 0:18:36.260 that are spending heavily in primary elections. 0:18:36.460 --> 0:18:40.470 AI-aligned political groups have raised close to $ 300 million for 0:18:40.609 --> 0:18:41.310 the midterms. 0:18:41.470 --> 0:18:42.330 This is the. 0:18:42.970 --> 0:18:47.730 unlimited sums of money coming from corporate America, potentially outweighing 0:18:47.790 --> 0:18:50.810 the voices of everyday Americans in the political process. 0:18:51.090 --> 0:18:51.760 Nobody panic. 0:18:52.100 --> 0:18:55.820 American democracy will totally survive the bottomless money pit of 0:18:55.840 --> 0:18:57.360 AI campaigning, right? 0:18:57.380 --> 0:19:04.560 It's going to change elections forever. Okay, you can catch 0:19:04.600 --> 0:19:07.760 that full doc on the Bloomberg terminal and Bloomberg.com. AI 0:19:07.800 --> 0:19:09.939 isn't just an issue voters are thinking about. It's a 0:19:09.980 --> 0:19:14.710 tool that's being used to target them. Russian disinformation operators 0:19:14.770 --> 0:19:18.030 are deploying an army of bots to inflate view counts 0:19:18.350 --> 0:19:22.129 on AI-fabricated video clips. Bloomberg's Stephanie Baker has been leading 0:19:22.170 --> 0:19:27.510 our reporting and investigation into this. The Russians have... had 0:19:27.750 --> 0:19:31.740 been active, I will say, in prior US elections. You 0:19:31.780 --> 0:19:33.840 and I have discussed that over a number of years. 0:19:34.220 --> 0:19:35.340 What is new this time? 0:19:36.820 --> 0:19:37.000 Right. 0:19:37.240 --> 0:19:40.340 They've tried this going back to at least 2016. They're 0:19:40.359 --> 0:19:44.730 not attacking ballots or voting systems directly. And in past cases, 0:19:44.790 --> 0:19:48.170 it's been mostly about stirring the pot across the political divide. 0:19:49.310 --> 0:19:53.290 In the past few years, they've focused primarily on presidential 0:19:53.330 --> 0:19:56.230 and vice presidential candidates. This year, they're going after the 0:19:56.290 --> 0:20:02.149 midterms and focusing exclusively on Democrats. in the majority of 0:20:02.380 --> 0:20:09.160 state and governor races across the country using AI-fabricated videos 0:20:09.980 --> 0:20:16.050 of leading Democratic candidates and celebrities allegedly attacking the Democratic 0:20:16.130 --> 0:20:21.090 Party And they're impersonating major media outlets, including Bloomberg News, 0:20:21.109 --> 0:20:22.550 The New York Times, CNN. 0:20:22.950 --> 0:20:24.119 They've done that before. 0:20:24.580 --> 0:20:28.780 What we have documented is this network of bots that 0:20:28.880 --> 0:20:34.379 is driving up view counts, artificially inflating these stories to 0:20:34.420 --> 0:20:37.240 make it look like they're more popular than they really are. 0:20:38.440 --> 0:20:41.930 Can you just very quickly define bot? I guess somebody 0:20:41.970 --> 0:20:43.950 that doesn't know, what are we talking about? 0:20:44.970 --> 0:20:49.449 These are automated accounts, and a lot of the accounts 0:20:49.510 --> 0:20:53.810 that we documented posting these stories were dormant for years. 0:20:54.470 --> 0:20:58.470 They had very few followers. They were either tweeting about 0:20:58.810 --> 0:21:03.600 crypto or in Japanese. And then suddenly they would post 0:21:03.680 --> 0:21:06.159 one of these videos and it would get tens of thousands, 0:21:06.200 --> 0:21:08.730 if not hundreds of thousands of views. So that's a 0:21:08.750 --> 0:21:12.290 real sign of bot activity. Now, X has cracked down 0:21:12.570 --> 0:21:16.810 on these bots. It just said that it suspended 13,000 0:21:16.810 --> 0:21:22.890 accounts connected to foreign influence operations by Russia, Iran, and China. 0:21:22.990 --> 0:21:26.450 But of course, as soon as one bot gets taken down, 0:21:26.490 --> 0:21:28.710 a new one appears. And I've kind of likened it 0:21:28.850 --> 0:21:31.210 to the disinformation equivalent of drone warfare. 0:21:32.410 --> 0:21:34.629 And very quick, Stephanie, is it just X or is 0:21:34.670 --> 0:21:36.710 this the full spectrum of social platforms? 0:21:37.560 --> 0:21:41.080 They are posting on Blue Sky and TikTok, but X 0:21:41.160 --> 0:21:44.440