WEBVTT - M&A Monday: IBM and Apptio, Aston Martin and Lucid 0:00:01.400 --> 0:00:02.120 From Marhard. 0:00:02.279 --> 0:00:06.680 We're Innovation Money and Power Collie in Silicon Vallet NBN. 0:00:07.040 --> 0:00:11.559 This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. 0:00:25.680 --> 0:00:28.640 And Ed Ludlow in San Francisco. Caroline hides off today. 0:00:28.680 --> 0:00:32.360 This is Bloomberg Technology. Coming up on the program, IBM's 0:00:32.400 --> 0:00:34.199 four point six billion. 0:00:33.880 --> 0:00:35.159 Dollar deal for Attio. 0:00:35.440 --> 0:00:38.720 We'll speak to the company's chief commercial officer about the acquisition. 0:00:38.800 --> 0:00:42.239 Is Big Blue goes on a buying spree seven deals 0:00:42.640 --> 0:00:46.400 this year, plus Aston Martin and Lucid strike a deal 0:00:46.440 --> 0:00:49.400 shares of the company's surge after the luxury names joined 0:00:49.440 --> 0:00:52.240 forces on the future of electric vehicles. We'll bring you 0:00:52.320 --> 0:00:54.760 the details and we get the outlook for tech stocks 0:00:54.920 --> 0:00:59.640 and crypto with Stonex Group chief strategist Kathrine Rooney Vera. 0:01:00.040 --> 0:01:01.600 It's going a state of play when it comes to 0:01:01.640 --> 0:01:05.320 markets really quickly. We're coming off the biggest weekly decline 0:01:05.560 --> 0:01:08.959 in technology shares since March that week where the banking 0:01:09.000 --> 0:01:11.840 crisis was unplaying in the session right now now that 0:01:11.840 --> 0:01:13.759 one hundred is soft by three tens and one percent. 0:01:13.760 --> 0:01:17.520 There's a big focus on the macro, on economics and 0:01:17.520 --> 0:01:20.319 what central banks around the world will continue to do 0:01:20.680 --> 0:01:23.520 in the face of inflation, some outperformance in the US 0:01:23.560 --> 0:01:25.960 listed shares of Chinese technology companies. To look at the 0:01:25.959 --> 0:01:28.560 Golden Dragon up by eight tens and one percent. We're 0:01:28.560 --> 0:01:31.560 hovering around three point seven percent on the US tenure yield. 0:01:31.600 --> 0:01:34.440 There was a move into bonds Thursday Friday last week 0:01:34.680 --> 0:01:37.679 at the expense of technology shares and then Bitcoin holding 0:01:37.680 --> 0:01:40.880 above thirty thousand US dollars per token. In terms of 0:01:40.920 --> 0:01:43.600 single movies, it's all about IBM. 0:01:43.920 --> 0:01:45.119 It's getting a bit of a boost. 0:01:45.160 --> 0:01:47.680 We're up kind of a percentage point there, or there's 0:01:47.720 --> 0:01:51.480 about on IBM shares. It's all about four point six 0:01:51.560 --> 0:01:54.360 billion dollar deal for Attio seventh of the year. It 0:01:54.440 --> 0:01:57.360 kind of fits in with IBM's Highbury cloud strategy. I 0:01:57.400 --> 0:01:59.920 want to get quick analysis and reaction on this deal 0:02:00.160 --> 0:02:04.160 from Bloomberg Intelligence senior technology analyst Anirag Rana. Anirag do 0:02:04.200 --> 0:02:11.920 you think this is a smart move by IBM. I 0:02:11.960 --> 0:02:15.000 think we might be having some trouble with Aniag right now. 0:02:15.320 --> 0:02:17.000 But what we can do is we can pivot and 0:02:17.000 --> 0:02:19.679 we get the inside scoop on what's happening with this deal. 0:02:19.680 --> 0:02:23.399 I want to bring a IBM Chief Commercial Officer, Rob Thomas, Rob, 0:02:23.440 --> 0:02:25.960 you kind of heard the preamble there. This is kind 0:02:26.000 --> 0:02:28.160 of a move that matches what you've done with red 0:02:28.160 --> 0:02:30.800 hat hybrid cloud strategy. But just give us the why 0:02:31.080 --> 0:02:33.440 and when you went shopping for Actio and. 0:02:33.560 --> 0:02:36.959 Thanks for having me. Great to be with you. CIOs, 0:02:37.000 --> 0:02:41.280 CEOs and CFOs are all trying to deal with technology 0:02:41.320 --> 0:02:46.320 complexity and technology spending. Think of app deal as a 0:02:46.480 --> 0:02:52.040 virtual command center to understand your technology spend, your cloud spend, 0:02:52.600 --> 0:02:55.760 and your labor spend. I would say time means everything. 0:02:55.800 --> 0:02:59.240 Is there a better time to have software that can 0:02:59.280 --> 0:03:01.760 do that type of analysis? I don't think so every 0:03:02.000 --> 0:03:05.360 company is thinking about how do I optimize my spend 0:03:05.480 --> 0:03:09.320 on technology reduce complexity. I think this is perfect time 0:03:09.360 --> 0:03:10.440 for what's happened in the market. 0:03:12.240 --> 0:03:16.360 You're taking otto from Vista Equity Partners. What role did 0:03:16.520 --> 0:03:17.840 Robert Smith play in this? 0:03:18.240 --> 0:03:20.560 Rob? Was he very active in negotiations? 0:03:20.600 --> 0:03:22.119 And can you give me a sense of how he 0:03:22.560 --> 0:03:24.920 financially benefits from what is an all cash deal? 0:03:25.040 --> 0:03:25.239 Right? 0:03:26.120 --> 0:03:29.280 Yeah? I think only they can answer the returns question. 0:03:29.760 --> 0:03:32.240 We've been partners with Aptio for a couple of years 0:03:32.400 --> 0:03:34.440 and so this is not a new management team. It's 0:03:34.480 --> 0:03:36.240 not a new company to us. We've been working with 0:03:36.360 --> 0:03:38.960 him for a number of years now. They were founded 0:03:38.960 --> 0:03:42.360 in two thousand and seven. And what attracted us to 0:03:42.400 --> 0:03:47.240 this space is that it's recurring revenues, it's software. These 0:03:47.280 --> 0:03:50.800 are big focuses for IBM. It's an attractive growth rate, 0:03:51.040 --> 0:03:53.640 it has all the attributes that we look for in 0:03:53.720 --> 0:03:57.360 a deal, and because we were users of the product 0:03:57.520 --> 0:03:59.720 and because we've been partners, we've got a pretty good 0:03:59.720 --> 0:04:02.000 idea of what it could do, which is what made 0:04:02.000 --> 0:04:04.520 this the right time, Rob. 0:04:04.520 --> 0:04:07.040 What does the deal tell us about strategy going forward? 0:04:07.160 --> 0:04:09.720 Seventh deal, there's a lot of emphasis on the kind 0:04:09.760 --> 0:04:12.520 of buying spree. Will you continue to be active in 0:04:12.640 --> 0:04:12.920 M and A. 0:04:14.160 --> 0:04:17.320 We are always active and open minded about M and A, 0:04:17.440 --> 0:04:19.080 Like you say, it's the seventh deal of the year, 0:04:19.680 --> 0:04:23.880 mix of consulting and software, and we're always looking for 0:04:23.920 --> 0:04:27.920 how to accelerate our strategy around how hybrid cloud and AI. 0:04:28.360 --> 0:04:30.560 As you may be aware, in May, we announced our 0:04:30.720 --> 0:04:33.800 generative AI platform, Watson X, so we're thinking about what 0:04:33.839 --> 0:04:37.080 are capabilities that we could bring into that. Another thing 0:04:37.120 --> 0:04:40.080 that was interested about app deal is they collect data 0:04:40.279 --> 0:04:44.680 that represents four hundred and fifty billion dollars of it spend. 0:04:45.000 --> 0:04:47.400 We think that is very unique in terms of how 0:04:47.440 --> 0:04:52.200 we can then help clients together to optimize and manage 0:04:52.240 --> 0:04:52.719 their spend. 0:04:54.000 --> 0:04:56.440 We're kind of calling this m and a Monday. There 0:04:56.440 --> 0:04:57.920 are some other deals out there as well, but it's 0:04:57.960 --> 0:05:01.440 been quiet, you know, in tech at least twenty twenty 0:05:01.480 --> 0:05:05.320 three so far. Do you see yourselves as being opportunistic therefore, 0:05:05.360 --> 0:05:08.200 in that sense taking advantage of kind of the lack 0:05:08.200 --> 0:05:09.320 of activity out there. 0:05:10.400 --> 0:05:12.080 I think you also have to be patient and you 0:05:12.120 --> 0:05:14.280 have to run a discipline process. To your point, if 0:05:14.279 --> 0:05:16.080 you look at the market, over the last couple of years, 0:05:16.120 --> 0:05:18.960 we've gone through adjustments around interest rates, so for a 0:05:19.040 --> 0:05:21.839 time it was hard to figure out deals that would 0:05:21.880 --> 0:05:24.279 make sense as we look at our financial model and 0:05:24.360 --> 0:05:27.120 what we want to do. But we're open minded that 0:05:27.120 --> 0:05:29.159 that will start to change, and this is a good 0:05:29.160 --> 0:05:32.880 example where we saw the right equation for a deal. 0:05:33.040 --> 0:05:35.320 But we'll continue to look. Really in the areas that 0:05:35.360 --> 0:05:43.640 we're focused on, hybrid cloud, automation, data, cybersecurity, sustainability. These 0:05:43.680 --> 0:05:45.760 are the areas that we're investing in aggressively. 0:05:46.839 --> 0:05:48.440 Of those, which is the priority. 0:05:48.520 --> 0:05:50.800 You know, a lot of emphasis right now in the 0:05:50.839 --> 0:05:54.160 field of artificial intelligence generative AI as well. 0:05:54.520 --> 0:05:56.400 Do you see yourselves prioritizing that. 0:05:57.560 --> 0:06:00.120 I think it's hard to pick one priority because if 0:06:00.120 --> 0:06:02.000 you link it back to app deio, this is about 0:06:02.000 --> 0:06:05.080 our thesis around automation, which started nearly two years ago, 0:06:05.320 --> 0:06:10.039 where we've done deals around robotic process automation, we've done 0:06:10.040 --> 0:06:13.359 deals around AI operations. This is kind of the third 0:06:13.400 --> 0:06:15.800 piece to the puzzle. So I wouldn't pick one or 0:06:15.839 --> 0:06:19.159 the other, but certainly there's a lot happening in generative AI. 0:06:19.640 --> 0:06:23.320 WATSONEX is about data, it's about building models, it's about 0:06:23.360 --> 0:06:26.680 models from IBM, it's about AI governance. So I would 0:06:26.720 --> 0:06:29.479 say all of those are potential spaces where today we're 0:06:29.560 --> 0:06:33.360 aggressively building, but we would also look to partner potentially. 0:06:34.279 --> 0:06:37.320 The final one on the markets, is there an advantage 0:06:38.040 --> 0:06:41.000 in going out into the private markets and doing deals 0:06:41.040 --> 0:06:44.160 with private business versus looking at some of the publicly 0:06:44.240 --> 0:06:46.039 traded piers of an antio. 0:06:47.480 --> 0:06:50.200 It's really not part of our criteria when we're looking 0:06:50.200 --> 0:06:53.279 at deals. We're looking more at strategic fit. What's the 0:06:53.320 --> 0:06:57.080 synergy as part of IBM where the ownership resides. It 0:06:57.160 --> 0:07:00.200 really is not anywhere in our criteria, because those all 0:07:00.400 --> 0:07:02.320 just things you'll have to work through regardless of where 0:07:02.360 --> 0:07:03.080 a company sits. 0:07:04.320 --> 0:07:07.240 Rob In this AI boom, there's going to be increased 0:07:07.320 --> 0:07:09.840 demand on the data center and compute side. What are 0:07:09.880 --> 0:07:13.520 you seeing there in the context of IBM in what 0:07:13.640 --> 0:07:15.600 times you'll need going forward as well? 0:07:16.880 --> 0:07:19.920 I would say, what's interesting, what's happening in compute. It's 0:07:19.920 --> 0:07:23.240 probably perfect for the strategy we set down three years ago, 0:07:23.640 --> 0:07:26.640 which is hybrid cloud, because with hybrid cloud, you can 0:07:26.760 --> 0:07:30.120 run your applications, you can manage your data, and you 0:07:30.160 --> 0:07:33.200 can do that across any cloud. So now clients with 0:07:33.240 --> 0:07:35.920 a hybrid strategy, which I think is almost every client now, 0:07:36.400 --> 0:07:40.000 they can choose the right price and right performance. 0:07:39.920 --> 0:07:42.080 Depending on what they want to do. 0:07:42.560 --> 0:07:46.480 If you're in just one cloud, you only have that flexibility, 0:07:46.560 --> 0:07:48.720 so you have to deal with increasing compute costs something 0:07:48.760 --> 0:07:51.560 like that. We think hybrid cloud is actually perfect for 0:07:51.640 --> 0:07:55.840 this moment because you can optimize your spend and the 0:07:55.920 --> 0:08:01.520 economics around how you deploy technology. 0:07:59.680 --> 0:08:03.160 And you'll selves in terms of capacity planning. From the 0:08:03.240 --> 0:08:05.320 data center perspective, how active you being. 0:08:06.720 --> 0:08:09.400 We're always thinking about what is coming next. But I 0:08:09.400 --> 0:08:11.920 would say it's beyond the data center. We announced with 0:08:12.040 --> 0:08:15.080 General Motors earlier this year work that we're doing around 0:08:15.320 --> 0:08:19.120 Linux on vehicles, So think of that as as edge computing. 0:08:19.440 --> 0:08:21.480 So I don't think it's just about data centers. It's 0:08:21.480 --> 0:08:25.240 about compute can happen anywhere from edge to public cloud 0:08:25.520 --> 0:08:30.000 to private cloud. We're looking to deploy capital smartly across 0:08:30.040 --> 0:08:30.600 any of those. 0:08:32.200 --> 0:08:34.640 I think the street really likes this At toodeal, you 0:08:34.679 --> 0:08:37.280 know a lot being complementary of how it fits in 0:08:37.320 --> 0:08:42.480 with your existing hybrid cloud strategy. But if there's one 0:08:42.520 --> 0:08:44.720 takeaway you want to leave investors with and why we 0:08:44.800 --> 0:08:46.760 care about, you know, what is it? What is it 0:08:46.760 --> 0:08:49.160 that you are sort of most excited about to get 0:08:49.200 --> 0:08:50.040 this deal closed on. 0:08:51.960 --> 0:08:54.800 Every client is trying to put more technology to work 0:08:54.840 --> 0:08:56.800 for their business, and there's this old rule of thumb 0:08:56.840 --> 0:08:59.640 that says maybe eighty percent is about keeping the lights 0:08:59.679 --> 0:09:04.120 on twenty percent for innovation. With app deal and IBM, 0:09:04.160 --> 0:09:06.400 I think we can change that to free up more 0:09:06.480 --> 0:09:10.640 dollars for innovation, and that will be just the start 0:09:10.760 --> 0:09:14.880 of creating more investments for hybrid cloud for AI. So 0:09:14.960 --> 0:09:17.240 this is really about unleashing innovation. 0:09:17.080 --> 0:09:21.200 Ultimately, IBM Chief Commercial Officer, Rob Thomas, Thank you so 0:09:21.280 --> 0:09:23.400 much for your time on that four point six billion 0:09:23.440 --> 0:09:23.920 dollar deal. 0:09:32.480 --> 0:09:33.839 Aston Martin banking on. 0:09:33.800 --> 0:09:37.040 A new partnership with luxury electric car maker Lucid to 0:09:37.040 --> 0:09:40.000 help lead its growth in the EV market. Lucid will 0:09:40.040 --> 0:09:41.839 receive more than two hundred and thirty million dollars in 0:09:41.880 --> 0:09:45.680 stock and cash in exchange for its battery components and 0:09:45.720 --> 0:09:46.360 other parts. 0:09:46.800 --> 0:09:47.640 Joining us to break. 0:09:47.520 --> 0:09:50.000 Things down Bloomberg Shaan Okaine, who covers all things EV 0:09:50.400 --> 0:09:53.160 and also for us out in Austin, Texas. I guess 0:09:53.240 --> 0:09:55.240 the best place to start shorwe is what does Aston 0:09:55.280 --> 0:09:56.120 Martin get out of this? 0:09:58.200 --> 0:10:01.320 They get them a clearer path to making an actual EV. 0:10:01.480 --> 0:10:03.880 This is something Aston Martin's bed at for a long time. 0:10:04.280 --> 0:10:06.360 You go back more than half a decade. They had 0:10:06.360 --> 0:10:09.280 actually partnered up with a Chinese technology company, le Echo, 0:10:10.400 --> 0:10:13.280 whose founder was making electric vehicles at the time, and 0:10:13.520 --> 0:10:16.320 that project sort of went nowhere. They almost got to 0:10:16.320 --> 0:10:19.000 the point of releasing that car. The repde and then 0:10:19.000 --> 0:10:23.320 sheld it basically after more strug came in and they've 0:10:23.360 --> 0:10:25.480 been kind of stumbling around ever since. He's been trying 0:10:25.480 --> 0:10:28.360 to write the ship there and raise money to move 0:10:28.400 --> 0:10:31.080 them into this new world. So this gives them really 0:10:31.120 --> 0:10:34.600 just a better view of something and honestly access to 0:10:34.840 --> 0:10:37.240 what is thought of as some of the sort of 0:10:37.360 --> 0:10:41.680 better powertrain components in an ev rate now right. 0:10:41.760 --> 0:10:43.760 You know Lucid, you and I have covered this company 0:10:43.800 --> 0:10:46.559 for a long time now, and Lucid's always leaned into 0:10:46.600 --> 0:10:50.360 the idea that they are a technology leader, right the 0:10:50.480 --> 0:10:53.600 energy density of the pack. And yet you know, Lucid 0:10:53.640 --> 0:10:56.520 can't get his own house in order from a production perspective. 0:10:57.800 --> 0:10:59.880 I guess for Lucid, what do they get out of it? 0:11:00.080 --> 0:11:01.720 They become a supplier of parts. 0:11:03.600 --> 0:11:05.480 Yeah, this is something of a return to form to them. 0:11:05.520 --> 0:11:07.600 I mean, remember, this is a company that was founded 0:11:08.360 --> 0:11:11.760 something like fifteen years ago as a battery manufacturer and 0:11:12.480 --> 0:11:16.239 ostensibly with the goal of becoming supplier as a TIVA 0:11:16.320 --> 0:11:18.839 and they were you know, it took them a long 0:11:18.880 --> 0:11:21.160 time before they actually decided to go out and try 0:11:21.200 --> 0:11:22.840 to make their own car and come up with this 0:11:22.960 --> 0:11:25.720 Lucid brand and that has obviously sort of flipped things 0:11:25.760 --> 0:11:29.640 around and sort of eaten that original goal to some respects. 0:11:29.720 --> 0:11:32.720 But now they're back in that role and it's something 0:11:32.720 --> 0:11:34.240 that they have talked about for a while. I mean 0:11:34.240 --> 0:11:35.720 when they were trying to raise money when they were 0:11:35.720 --> 0:11:38.400 still private, they weren't talk to just about everybody. They 0:11:38.400 --> 0:11:40.360 almost partnered up with Ford at one point, So this 0:11:40.440 --> 0:11:42.720 is something that I think has spent a long time coming. 0:11:42.400 --> 0:11:43.280 For them coming up. 0:11:43.360 --> 0:11:46.360 Japan's government unveiled its six billion dollar deal to buy 0:11:46.400 --> 0:11:49.680 out and take direct control of the world leader in 0:11:49.800 --> 0:11:50.400 chip making. 0:11:50.920 --> 0:12:02.600 This is bloomberg time for talking tech. 0:12:02.720 --> 0:12:06.640 First start education technology firm buid Us begun damage control 0:12:06.840 --> 0:12:10.200 after losing its auditor and three board members in a week. 0:12:10.360 --> 0:12:13.480 His billionaire founder reached out to investors to assure them 0:12:13.520 --> 0:12:17.400 that the Indian startup will finally release long delayed financials 0:12:17.400 --> 0:12:21.600 and strengthen its accounting processes. And Japan's government unveiled a 0:12:21.640 --> 0:12:23.920 six point three billion dollar deal to buy out and 0:12:23.960 --> 0:12:28.120 privatize JSR, taking direct control of the world leader and 0:12:28.200 --> 0:12:31.400 chip making. The move could help Tokyo expand its power 0:12:31.640 --> 0:12:35.880 over compounds essential for making advanced semiconductors like those in 0:12:35.920 --> 0:12:39.920 missile control systems and Apple's iPhones. Plus, JD dot Com 0:12:40.040 --> 0:12:43.360 aims to create what it calls an innovative retail division 0:12:43.400 --> 0:12:47.079 for groceries China's number two e commerce company plans to 0:12:47.120 --> 0:12:50.760 partner with seven Fresh supermarket chain and group buying platform 0:12:50.800 --> 0:12:54.160 Pinpin to deliver food to millions and rivals similar business 0:12:54.240 --> 0:12:56.240 models like Ali Barba. 0:12:56.280 --> 0:12:57.360 And speaking of. 0:12:57.400 --> 0:12:59.880 Ali Barba, the company panning to seek approval of it 0:13:00.000 --> 0:13:02.640 his own grocery arms spin off for listing from the 0:13:02.679 --> 0:13:05.440 Hong Kong Stock Exchange in two weeks. This according to 0:13:05.480 --> 0:13:09.720 hons Kong's Economic Times. Bloomberg's Isabelle Lee in New York 0:13:10.040 --> 0:13:12.080 with the latest tell me about this spinoff move? 0:13:12.600 --> 0:13:15.360 Hi Ted, Hi Ed, I'm sorry, tell thank you you 0:13:15.360 --> 0:13:17.520 were ed. We're good friends. So this has been the 0:13:17.559 --> 0:13:19.600 subject of talks for a while now, ever since the 0:13:19.720 --> 0:13:22.040 historic shakeup that Ali Baba has gone through when it 0:13:22.120 --> 0:13:25.360 said that it's big conglomerate will split into six Baby Baba's. 0:13:25.360 --> 0:13:27.720 It was announced earlier this year, so this is among 0:13:27.760 --> 0:13:29.840 the first in the pipeline. So many were expecting it 0:13:29.880 --> 0:13:31.480 to be toward the end of this year and it 0:13:31.559 --> 0:13:33.719 might just come into fruition. So it will list as 0:13:33.720 --> 0:13:35.880 early as two weeks, which is July or August, and 0:13:35.920 --> 0:13:39.480 it will go public in November. Apart from this grocery spinoff, 0:13:39.480 --> 0:13:42.320 we also have the logistics arm of Ali Baba Taiyo, 0:13:42.440 --> 0:13:45.240 so that's also looking to go public next year if 0:13:45.280 --> 0:13:46.520 things go as planned. 0:13:47.880 --> 0:13:50.720 Ted Ed you've been watching Ted Lasso. I know you have. 0:13:50.880 --> 0:13:54.480 It's okay, miss, I'm not worried about being much faken 0:13:54.559 --> 0:13:57.200 for Ted. Let's go back to the story we started 0:13:57.200 --> 0:14:00.320 on JD making a kind of obvious move right to 0:14:00.400 --> 0:14:01.400 take on Ali Baba. 0:14:01.400 --> 0:14:02.320 What's the latest there? 0:14:02.559 --> 0:14:03.520 So that is interesting. 0:14:03.640 --> 0:14:06.120 So JD had a big meeting last week and recently 0:14:06.160 --> 0:14:08.600 it said that it will create an independent arm. It 0:14:08.640 --> 0:14:11.520 will merge at seven Fresh, which is its grocery retail store, 0:14:11.559 --> 0:14:15.440 with other units to create something like the innovation retail 0:14:15.440 --> 0:14:17.360 that you said. So, I don't want to say it's 0:14:17.440 --> 0:14:20.840 meant to compete with Ali Baba's cursory is one off, 0:14:20.880 --> 0:14:23.280 but it does kind of look like that because to 0:14:23.400 --> 0:14:25.840 Ali Baba, it's kind of a lot of people compared 0:14:25.880 --> 0:14:28.520 to Sam's Club, because it's interesting. It has dine in, 0:14:28.880 --> 0:14:32.080 it has a delivery, and it has grocery all in one, 0:14:32.320 --> 0:14:34.680 and maybe that's what JD dot Com is looking to 0:14:34.760 --> 0:14:37.560 do as well, especially because last year China so growth 0:14:37.600 --> 0:14:40.080 really didn't pan out as people as expectors of maybe 0:14:40.080 --> 0:14:42.480 they're banking on this year with this new thing. They 0:14:42.520 --> 0:14:45.160 had a big meeting last week where they announced it 0:14:45.160 --> 0:14:47.960 it will create seven listed firms with market values of 0:14:48.000 --> 0:14:50.560 at least fourteen billion, and this is probably one of them. Men. 0:14:51.640 --> 0:14:54.120 I just was looking at the home the NASA Gonen 0:14:54.160 --> 0:14:56.840 Dragon China Index earlier and there was outperformance. You know, 0:14:56.840 --> 0:14:59.280 a lot of newsflow related to the US listed shares 0:14:59.520 --> 0:15:00.200 of China. 0:15:00.160 --> 0:15:02.320 Tech, you know Ali Barba JD. 0:15:02.880 --> 0:15:04.680 I think there is a lot of focus on the 0:15:04.720 --> 0:15:07.840 health of Chinese tech right now. In Ali Baba's case, 0:15:07.880 --> 0:15:11.000 what's the big one we're waiting on? You know, this restructuring, 0:15:11.080 --> 0:15:14.000 we had, the management changes. What is it that investors 0:15:14.040 --> 0:15:14.920 are most focused on. 0:15:15.560 --> 0:15:17.400 I think they're just really curious about how this will 0:15:17.440 --> 0:15:20.440 pan out, because again, this is Ali Baba. It's one 0:15:20.520 --> 0:15:23.320 of the first in China to do this ever since 0:15:23.400 --> 0:15:26.320 the intense crackdown we've seen from the government where they 0:15:26.360 --> 0:15:29.920 were getting angry at monopolies, saying that they're being reckless 0:15:29.920 --> 0:15:32.640 and all that. So Ali Baba's big move was why 0:15:32.760 --> 0:15:35.080 they see in this kind of a response to the government. 0:15:35.240 --> 0:15:37.560 It's hard to imagine that this happened just on their own, 0:15:37.640 --> 0:15:41.360 especially with the disappearance of Jack Moss. Likely this is 0:15:41.400 --> 0:15:43.480 with the blessing of the government. So that's what a 0:15:43.520 --> 0:15:46.040 lot of investors are looking for in China and outside. 0:15:46.080 --> 0:15:47.040 How will this play out? 0:15:47.120 --> 0:15:49.480 It's historic and maybe this will be the blueprint for 0:15:49.560 --> 0:15:52.800 other companies. Can JD follow it? Can other big rivals 0:15:52.800 --> 0:15:55.440 of Ali Baba? Probably follow it? Because this six Baby 0:15:55.440 --> 0:15:58.440 Baba's it's a lot of people are saying it may 0:15:58.480 --> 0:16:01.240 be good because it will make more nimble companies. They 0:16:01.280 --> 0:16:04.760 will have EHCEO board of directors and probably increase share value. 0:16:04.800 --> 0:16:07.200 Who knows, the six Baby bubbus might even be bigger 0:16:07.200 --> 0:16:09.400 than the big Ali Baba. As we know, big companies 0:16:09.640 --> 0:16:12.160 can move a bit slower, So that's really what people 0:16:12.200 --> 0:16:14.160 are looking up for. How this will play out down 0:16:14.200 --> 0:16:14.560 the line. 0:16:15.680 --> 0:16:18.440 Bloomberg News Isabelle Lea out in New York. Thank you 0:16:18.480 --> 0:16:30.160 so much. Welcome back to Bloomberg Technology. I'm Ed Ludlow 0:16:30.240 --> 0:16:32.160 in San Francisco. I want to get a quick check 0:16:32.200 --> 0:16:35.200 on the markets. We've sort of seen declines accelerate, particularly 0:16:35.200 --> 0:16:35.360 on the. 0:16:35.400 --> 0:16:36.200 NASDA one hundred. 0:16:36.200 --> 0:16:39.520 We're now softer by a percentage point at session lows. 0:16:40.280 --> 0:16:42.320 The story is that we're coming off the worst week 0:16:42.440 --> 0:16:45.320 for markets since March, and there's a lot of focus 0:16:45.400 --> 0:16:48.040 right now on the macro picture what the Fed will 0:16:48.120 --> 0:16:51.120 or won't do in terms of moving towards rate cutting, 0:16:51.160 --> 0:16:53.920 and there's a reevaluation on the timing of that that 0:16:53.960 --> 0:16:57.440 impacts the tech sector. Higher rates discount the present value 0:16:57.480 --> 0:16:59.360 of future cash flows. That's the story, and it has 0:16:59.400 --> 0:17:03.240 been for really long time. Some outperformance in semiconductor stocks. 0:17:03.280 --> 0:17:05.920 The Philadelphia Semiiconductor Index or socks up eight tenths or 0:17:05.960 --> 0:17:08.639 seven tenths of one percent, and the US tenure yield 0:17:08.640 --> 0:17:11.919 holding at around three point seven percent. Bitcoin still above 0:17:12.280 --> 0:17:15.560 thirty thousand US dollars, remember the story Friday hitting its 0:17:15.600 --> 0:17:18.399 highest level in one year. There are two movers to 0:17:18.480 --> 0:17:21.840 the downside that we're paying attention to, the first being Tesla, 0:17:22.320 --> 0:17:25.760 its declines also really accelerating beyond five percent now Goldman 0:17:26.119 --> 0:17:29.520 downgrading the stock too neutral from by the recent run 0:17:29.600 --> 0:17:31.080 up in the shares were up more than one hundred 0:17:31.080 --> 0:17:34.359 percent year to date, but also looking at other factors 0:17:34.400 --> 0:17:38.520 like the declining price of evs Mark Delaney moving probably 0:17:38.560 --> 0:17:40.920 the four fan list in about a week to downgrade 0:17:40.960 --> 0:17:44.560 that stock in Alphabet also downgraded at UBS too neutral 0:17:44.600 --> 0:17:48.120 from by near term monetization risks in the medium term, 0:17:48.480 --> 0:17:51.680 talking about this pivot to generative AI in the context 0:17:51.680 --> 0:17:53.679 of search and what that will do in terms of 0:17:53.720 --> 0:17:57.320 impacting AD inventories. That's all to say that we should 0:17:57.359 --> 0:18:01.240 zoom out and get more markets analysis and Catherine Rooney 0:18:01.320 --> 0:18:05.199 vera Chief Market Strategies as stone X Group. What happened 0:18:05.240 --> 0:18:07.679 last week? Right, you look at the NASA one hundred. 0:18:08.359 --> 0:18:11.560 We have the biggest weekly decline since March, the week 0:18:11.560 --> 0:18:15.119 where the banking crisis kind of unfolded. Bitcoin hits a 0:18:15.160 --> 0:18:19.280 one year high Friday. What was driving both of those things? 0:18:21.119 --> 0:18:25.080 Well, all signs point to the Federal Reserve driving most 0:18:25.160 --> 0:18:28.800 of the market action and the expectation of additional right 0:18:28.880 --> 0:18:33.040 hikes rate hikes being discounted after previous to that, the 0:18:33.040 --> 0:18:37.640 market had wholeheartedly embraced the idea of rate cuts being 0:18:37.680 --> 0:18:40.000 the next step for the Federal Reserve. 0:18:40.560 --> 0:18:42.320 The dot plot shows that the Fed. 0:18:42.240 --> 0:18:45.080 Is expecting two more hikes at twenty five business points each. 0:18:45.119 --> 0:18:49.200 But even today the markets are not believing the Fed 0:18:49.359 --> 0:18:53.000 and expecting one rate hike this week. I think economic 0:18:53.080 --> 0:18:55.679 data are going to be clutch in terms of market 0:18:55.680 --> 0:19:00.679 movement going forward, whether the economic data from for example, 0:19:00.720 --> 0:19:04.520 initial jobless claims, core PCE, the Supercore index, all of 0:19:04.520 --> 0:19:07.320 that coming out this week indicating whether or not the 0:19:07.359 --> 0:19:09.600 market is right or the FED has got it right. 0:19:10.119 --> 0:19:12.680 So I think that's where where the markets are focused, 0:19:12.760 --> 0:19:17.800 especially as you highlighted on the technical or the technology sector, 0:19:17.840 --> 0:19:21.480 which has been the foremost front runner of the rally 0:19:21.480 --> 0:19:22.600 that we've seen here to date. 0:19:23.720 --> 0:19:27.040 Catherine, what does the FED need to see in that 0:19:27.160 --> 0:19:32.800 data to move from hiking to pausing to eventually cutting rates. 0:19:34.359 --> 0:19:37.480 There has to be irrefutable evidence that the labor market 0:19:37.520 --> 0:19:40.320 is rolling over. There has to be a clear trend, 0:19:40.520 --> 0:19:43.840 not just this data dependency focused on one or two months, 0:19:43.880 --> 0:19:47.399 a clear trend with regard to the supercore, which is 0:19:47.400 --> 0:19:50.760 what the FED most looks at X shelter of course, 0:19:50.800 --> 0:19:53.280 which seems like it's going to start a trend lower. 0:19:53.520 --> 0:19:55.600 But there really has to be trends. 0:19:55.240 --> 0:19:59.440 With regard to getting to the two percent core PCE target. 0:19:59.600 --> 0:20:01.719 This is a FED that has grappled with credibility. 0:20:01.760 --> 0:20:06.560 Remember the fiasco with regard to transitory inflation overrunning the 0:20:07.160 --> 0:20:11.120 easing policy, for I think went long in the tooth 0:20:11.160 --> 0:20:14.200 by about a year. So I think the markets could 0:20:14.240 --> 0:20:20.520 be disappointed ed with regard to the Fed's propensity to 0:20:20.560 --> 0:20:24.320 prop up economic growth versus inflation. I think this is 0:20:24.320 --> 0:20:27.600 a FED that really needs to claw back some inflation 0:20:27.760 --> 0:20:32.000 fighting credibility and more likely than not will hike or 0:20:32.040 --> 0:20:35.040 hold rates at a terminal rate I estimate of five 0:20:35.119 --> 0:20:37.640 twenty five, but more likely five point fifty for an 0:20:37.640 --> 0:20:40.080 extended period of time, longer than what the market is 0:20:40.080 --> 0:20:43.960 currently discounting. That in itself is negative for stocks, negative 0:20:44.000 --> 0:20:48.240