Speaker 1: From the heart where Innovation, money and power colle in
Speaker 1: Silicon Valley, NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed loved Love.
Speaker 3: I'm Karen hide A Bloomberg's Voltec quarters in New York.
Speaker 3: Ed Ludlow is on assignment. This is Broomberg Technology coming up.
Speaker 3: T SMC shares jump the most. It's February despite a
Speaker 3: global slump and chip demand and warnings of softness but
Speaker 3: size of stabilization. We discuss Tesla risking margins in order
Speaker 3: to boost sales volumes. The company has been cutting car
Speaker 3: prices on a near monthly basis, and Elon Musk hinted
Speaker 3: and more cuts to come. And SpaceX is one step
Speaker 3: closer to getting humans to Mars after getting its starship
Speaker 3: off the ground. We'll break down the surprise ending to
Speaker 3: the historic launch the first. As always, we check in
Speaker 3: on these markets and as you see, we're actually getting
Speaker 3: some reprieve to some of the individual movers today. We
Speaker 3: wanted to go more broad to start, but I'll go
Speaker 3: in on the micro for the first and foremost. IBM
Speaker 3: currently up nine tens percent as it gave a forecast
Speaker 3: for annual revenue in line with analyst projections delivering of
Speaker 3: cautiously optimistic sign perhaps amid this uncertain economy, LAM Research
Speaker 3: up seven point seven percent, really managing to outperform as
Speaker 3: some of those China curbs aren't impacting the company quite
Speaker 3: as much as it had anticipated. Remember this has come
Speaker 3: as we have breaking news that Biden is to unveil
Speaker 3: China investment curbs before the G seven summit in May.
Speaker 3: We moved back to the broader in the season nasdakov
Speaker 3: by five tenths seven percent. We're still worried about the economy.
Speaker 3: The headwinds we see actually signs more of those recessionary
Speaker 3: headwinds upon us, some of the jobless claims coming in
Speaker 3: higher than expecting, some of those business macro data not
Speaker 3: ringing quite so strong. Today. We see the two year
Speaker 3: yield therefore fall on the back of perhaps potential for
Speaker 3: the Federal Reserve not have to hike quite so far
Speaker 3: so fast. We're at four point one six bitcoin as
Speaker 3: we see some risk aversion down by two and a
Speaker 3: half percent. Now, all of this is as we try
Speaker 3: to digest what's happening in LAM Research on the higher
Speaker 3: side of things in terms of chips. But what we
Speaker 3: saw interestingly is moved some TSMC in particular actually rising
Speaker 3: even though perhaps we saw well signs of concern around
Speaker 3: this business, seeing am places to say, is here with us,
Speaker 3: just walk us through the ADRs of TSMC up even
Speaker 3: though what we're still bottoming when it comes to the
Speaker 3: chip cycle. According to the CEO.
Speaker 4: Yeah, and the results were much better than feared. You
Speaker 4: could see their pricing actually grew eleven percent, even though
Speaker 4: way for shipments were down fifteen percent. But the pricing
Speaker 4: held up quite nicely, which is reflected in the gross margin.
Speaker 4: So compare TSMC's gross margin versus microns. Microns was the
Speaker 4: worst quarter in the history of the company negative thirty
Speaker 4: one percent in the case of TSMC, two to three
Speaker 4: hundred basis point decline, and the pricing, like I said,
Speaker 4: held up very well. So and they didn't cut capex
Speaker 4: ahead of the ear there will speculation they're going to
Speaker 4: cut their capex. That didn't happen. The room for the
Speaker 4: reaffirm the capex for this year.
Speaker 3: And the reason they're spending is because they have to
Speaker 3: diversify their own supply chain for their end user, largely
Speaker 3: because of what Joe Biden's doing in terms of executive
Speaker 3: orders to target China US relations.
Speaker 4: Absolutely, they have to open overseas fabs. One in Arizona,
Speaker 4: one in Japan. They're talking about, you know, production being
Speaker 4: live by twenty twenty four, So clearly they are diversifying.
Speaker 4: They have no choice, and that is where the gross
Speaker 4: margin impact may show up, because those fabs aren't going
Speaker 4: to be as profitable as the ones they have in
Speaker 4: Taiwan right now. So that's the longer term risk they
Speaker 4: have because as they diversify their locations and the factories,
Speaker 4: it will have an impact on their pricing and you
Speaker 4: know the cost structure. So clearly that's a risk. But
Speaker 4: they have the visibility and the commemits from their you know,
Speaker 4: strategic partners like Apple, like Nvidia, these are the customers
Speaker 4: of PSMC, and they have visibility for you know, demand
Speaker 4: on like the three nanometer node, the two nanimeter node,
Speaker 4: they will run at full utilization. I'm worried about Intel
Speaker 4: and you know what will happen to them because of
Speaker 4: what we solve with Micron. And I think if you
Speaker 4: are diversified right now, you are in a good spot.
Speaker 4: TSMC's exposure to high performance computing was forty four percent
Speaker 4: of their revenue. Remember smartphones was the largest segment. Now
Speaker 4: it's high performance computing. That's where the AI chips come
Speaker 4: into play. And I think if you're not diversified right
Speaker 4: now as a chip manufacturer, you have a problem.
Speaker 3: So you push us perfectly forward. It's trying to sort
Speaker 3: of read the tea leaves when an IBM is out
Speaker 3: there saying, actually, we're a bit more upbeat despite and
Speaker 3: you know, slowing and headwind economy. We've got companies. You
Speaker 3: just have to be in the right place at the
Speaker 3: right time to weather this current quarter right.
Speaker 4: Absolutely, Autos again, Bryce autos revenue grew thirty eight percent.
Speaker 4: Is still small, but it could be the next high
Speaker 4: performance computing segment. Remember high performance computing was much smaller
Speaker 4: three years back. So that's where if you're a manufacturer
Speaker 4: you need to diversify. And I think Intel that's what
Speaker 4: they need to show when they report earnings.
Speaker 3: Don't tell me Internet of Things is actually becoming a
Speaker 3: reality man, deep thing. We love them on there, just
Speaker 3: pushing us forward to what you need to be worried
Speaker 3: about with the next set of earnings. Let's go from
Speaker 3: chips to evs now in terms of earnings and Tesla
Speaker 3: actually down quite hard today after its first quarter margins
Speaker 3: were hit by a slew of price cuts.
Speaker 5: While we reduced prices considerably in early Q one, it's
Speaker 5: worth noting that our operating margin remains among the best
Speaker 5: in the industry. We've taken a view that pushing for
Speaker 5: higher volumes and a larger fleet is the right choice
Speaker 5: here versus a lower volume and higher margin.
Speaker 3: Let's bring in the Wesley Group managing partner and former
Speaker 3: Tesla board member Steve Wesley for more on this. So
Speaker 3: is this the right course of action short term pain
Speaker 3: for long term market share?
Speaker 6: Well, I think it absolutely is.
Speaker 7: I mean, look at the solid Q and results record
Speaker 7: deliveries sold to four hundred twenty three thousand units on
Speaker 7: a way to doing one point nine to two million
Speaker 7: units this year. That's studying twenty three point three billion
Speaker 7: in revenues, slightly above forecast net profit two point five
Speaker 7: billion for the fifteenth consecutive profitable quarter, share price up
Speaker 7: fifty one percent for the year. Aren't argue with those numbers,
Speaker 7: but I think they're doing the right thing, cutting costs,
Speaker 7: expanding market share.
Speaker 6: That is a smart move.
Speaker 3: I mean, as you say, revenue is rising it raise
Speaker 3: twenty four percent. But you say it's hard to argue,
Speaker 3: but investors are arguing they're cutting the overall market capitalization
Speaker 3: of this company on the day pretty hard. What do
Speaker 3: you think investor has got wrong? Do they just get
Speaker 3: too ambitious in the short term?
Speaker 7: I think there is probably a bit of a billion's
Speaker 7: in the marketplace. But I think as people step back
Speaker 7: and look at this, as Elon said, this is essentially
Speaker 7: one of the most profitable auto companies in the world.
Speaker 7: They can afford to trigger a global price for it,
Speaker 7: and that is just what they're doing. They're taking price cuts,
Speaker 7: prices down six times this year, already twice more in
Speaker 7: the last thirty days. That's stunning. But they can afford
Speaker 7: to do it. Others can't. What's interesting here people need
Speaker 7: to understand, they say, is there a demand issue?
Speaker 6: Absolutely not. The entire world is going all electric.
Speaker 7: Customers bought ten million electric vehicles last year. They're projected
Speaker 7: to be at twenty million vehicles a year within just
Speaker 7: three years, so there's not going to be a shortage
Speaker 7: of demand. Elon I think is smart. He's buying market
Speaker 7: share when they can, and I think that move's.
Speaker 6: Going to pay off.
Speaker 3: I mean it's worth reatrating yet operating margin is down,
Speaker 3: but it's still above eleven percent. You look at GM's
Speaker 3: that's just six point six percent. You look at Forwards,
Speaker 3: that's just four percent. What is there any concern around
Speaker 3: Elon and his navigation of this company at the moment,
Speaker 3: He's meant to be giving us the Cyberdrup production pretty soon,
Speaker 3: but he is still kind of distracted, it feels like,
Speaker 3: with what's going on with Twitter, and he's also got
Speaker 3: a space company that is running and making big strides
Speaker 3: on Well.
Speaker 7: Look, who knows how distracted he is. Just looking at
Speaker 7: the numbers, you've got to be pleased. Where the car
Speaker 7: company that's going from one point three to one million
Speaker 7: in vehicle sales last year to one point nine or
Speaker 7: two million this year. Factually, they're just growing faster than
Speaker 7: anybody else out there. Second, because Tesla has been smarter
Speaker 7: and executed better on the profitability issue because of three things. First,
Speaker 7: to bring battery production in house that lowers costs. Second,
Speaker 7: the clear Leader and what's called Ota software. They're miles
Speaker 7: ahead of anybody else on that. Third, the clear Leader
Speaker 7: and the robotization of the manufacturing process. They get cars
Speaker 7: produced in a fraction of the time of others. What
Speaker 7: does that lead to two ex The gross margins of
Speaker 7: Old So I get three ex. The gross margins of Toyota,
Speaker 7: almost five x the gross margins of Ford. Now those
Speaker 7: numbers will come down a little bit, but as long
Speaker 7: as he can expand the Tesla name, I think Tesla's
Speaker 7: going to be looking awfully good.
Speaker 6: Ian's a move.
Speaker 7: That may hurt him a little bit for the short term,
Speaker 7: but it's going to pay big dividends for the long term.
Speaker 3: Steve, you talk about how demand is not the issue here.
Speaker 3: I just want to bring in another viewpoint from a
Speaker 3: key senior equity strategist that federated Hermes. That's one Linda Distil.
Speaker 3: Just have it Listen to what she had to say.
Speaker 8: As we know in these last couple of years with COVID,
Speaker 8: first she couldn't find a car, and then there were
Speaker 8: too many cars, you know, there was a glut of
Speaker 8: used cars, et cetera. And so now and now we
Speaker 8: have Tesla saying basically saying, we'll sacrifice margins in the
Speaker 8: name of using this factory space that we have. So
Speaker 8: as long as the consumer still has money, then yeah,
Speaker 8: that's a blessing. That's a piece of disinflation, and they'll
Speaker 8: probably take them up on it too.
Speaker 3: Anything Steve would make you second guess that the consumer
Speaker 3: has money, not at all.
Speaker 7: Look, I generally agree with what she said, but what
Speaker 7: you've got to remember here is when Tesla first bout
Speaker 7: out the Model three, for example, all out the door,
Speaker 7: it was about a sixt car. Today it's at forty thousand,
Speaker 7: and with government stimulus, it's really down to and state
Speaker 7: stimulus that are also available down to about thirty two
Speaker 7: to thirty three thousand. This is getting pretty close to
Speaker 7: where Honda Accord is. At those prices, there is not
Speaker 7: going to be any demand issue, and I think that's
Speaker 7: why long term, Elon's making the right move.
Speaker 3: What do you want to see from Elon in terms
Speaker 3: of his own investment now in terms of continuing to
Speaker 3: expand production, because when they had their sort of great
Speaker 3: master plan that they just came out with earlier this year,
Speaker 3: it felt like some of the production levels were just extraordinary.
Speaker 6: Well they are extraordinary.
Speaker 7: You've got to look at most of the other competitors,
Speaker 7: GM four, they have one or two EV plants up
Speaker 7: and running. Tesla already has four gigafactories, a new one
Speaker 7: in moderate coming which will be up literally in less
Speaker 7: than twelve months. New battery plants in Shanghai and later
Speaker 7: have already online. So Tesla, simply put, is just moving
Speaker 7: faster than other You got to give them credit for that.
Speaker 7: Just look at the numbers of comparison. You know, in
Speaker 7: the honorable mentioned category of Bard announced ten thousand evy
Speaker 7: unit sales compared to four hundred and twenty three thousand
Speaker 7: for Tesla General Motors at twenty thousand. They're not catching up,
Speaker 7: they're falling further behind. The fascinating news if we step
Speaker 7: back and look at it is the major competitors to
Speaker 7: Tesla are two Chinese companies, buyd and Sais.
Speaker 6: This is a global changing of the guard, and.
Speaker 7: I think investors should look back and see really three things. First,
Speaker 7: Tesla's extending their lead. Second, the Chinese are coming quickly,
Speaker 7: and third, a lot of these smaller firms Canoe and
Speaker 7: Fisker and so on Lordstown, they're just going to have
Speaker 7: a hard time making the cut. I think Ewe is
Speaker 7: pressing consolidation in the industry, and I think he's going
Speaker 7: to be the winner when all is said and.
Speaker 3: Done, Steve, I just want to drill it on that
Speaker 3: really interesting point about China. We know that actually some
Speaker 3: Chinese demands and frustrated by the price cuts, but the
Speaker 3: Chinese investment is there. We know commitment to Shanghai, for example,
Speaker 3: not only with car production but battery production. Are you
Speaker 3: worried about geopolitics here? We just hear that President Biden
Speaker 3: will unveil China investment curbs before the G seven summit.
Speaker 3: He doesn't want US companies like Tesla investing in China.
Speaker 6: Yeh, Look, there's a tailor two cities here.
Speaker 7: On the upside, China's the world's largest auto market, and
Speaker 7: Tesla has moved quickly put to manufacturing facility there, and
Speaker 7: Tesla is killing it in China.
Speaker 6: The flip side of that curve is, if there's.
Speaker 7: Ever a real estrangement, a geopolitical crisis, and anything like
Speaker 7: what happened in the Ukraine where Russia nationalized a lot
Speaker 7: of our companies, Tesla would be in a world of
Speaker 7: hurt because forty percent of their capacity comes from China today.
Speaker 7: But in the meantime, if you want to win in
Speaker 7: the auto industry, you've got to be playing in China.
Speaker 6: It is the largest market in the world.
Speaker 7: World seven of the top ten bigger selling evs are
Speaker 7: Chinese names. So right now, Tesla's played the game well.
Speaker 7: And I think if you're elin Mask, you have to
Speaker 7: be going to bed every night playing praying that the
Speaker 7: cord work with China doesn't get worse.
Speaker 6: Right now, he's looking awfully smart. We'll see.
Speaker 3: I'm not sure he's in a bed. I think he's
Speaker 3: on a sofa somewhere on a Twitter. Obviously, we'll be
Speaker 3: in the factory maybe when he gets his few hours asleep.
Speaker 3: We thank you so much, the Wesley Group managing partner,
Speaker 3: Steve Wesley, They're great to have you. Meanwhile, let's talk
Speaker 3: about it. President Joe Biden aiming to sign an executive
Speaker 3: order in the coming weeks there will limit investment in
Speaker 3: key parts of China's economy by US businesses. And that's all.
Speaker 3: According to sources, the administration has been debating the measure
Speaker 3: for almost two years now, and it plans to take
Speaker 3: action before a summit of the Group of Seven that's
Speaker 3: true to start on May nineteenth. In Japan. SpaceX's Starship
Speaker 3: Rocket I didn't quite complete its mission on a second
Speaker 3: launch attempt starship appeared to explode in the sky several
Speaker 3: minutes after lifting off from the facility over at Bocachico
Speaker 3: in Texas. More on these events, we joined Bublomgg's law
Speaker 3: and Grush, who was just at the launch site earlier,
Speaker 3: and Elon Musk himself set expectation. He said, look, as
Speaker 3: long as we don't blow up the launch pad, and
Speaker 3: they didn't know they didn't.
Speaker 9: They actually got pretty far away from the launch pad,
Speaker 9: and I will say from the ground it was a
Speaker 9: spec spectacular site well before the explosion happened. I mean,
Speaker 9: we could feel the rumble in our chest of those
Speaker 9: thirty three engines. Though I think when I looked at
Speaker 9: the livestream later not all of those thirty three engines
Speaker 9: you can see on the screen were actually a light.
Speaker 10: So there were some engine problems. I think apparently we'd
Speaker 10: like some more confirmation from SpaceX. But yes, they did.
Speaker 9: Get valuable data, hopefully just from being able to clear
Speaker 9: the launch pad.
Speaker 10: But yeah, something didn't quite go right.
Speaker 9: Around two and a half minutes into flight, the stages
Speaker 9: were host to separate and instead the rockets.
Speaker 10: Seemed to vere wildly for.
Speaker 3: Sit there. Oh, I think we're taking some hits on
Speaker 3: this line, Lauren, I'll just ask one more question and
Speaker 3: hopefully your line stabilizes a little bit. But SpaceX did
Speaker 3: say the experience a rapid unscheduled disassembly before stage separation,
Speaker 3: So nuance there push us forward. We knew that there
Speaker 3: was a delay. They then came on four twenty, which
Speaker 3: we know is a key day for you, a musk
Speaker 3: in many ways. What do we expect next? A little
Speaker 3: bit more description of what went wrong and then the
Speaker 3: next test light.
Speaker 10: I guess yeah.
Speaker 9: For me personally, I really want to know what actually
Speaker 9: caused the mishap, you know, why did the stage separation
Speaker 9: not occur as planned?
Speaker 10: What was going on with those engines that appeared to
Speaker 10: be out?
Speaker 9: And then also I'd like to know from SpaceX whether
Speaker 9: or not, you know, the rocket broke up on its own,
Speaker 9: or if they terminated the rocket personally with the flight
Speaker 9: termination system. It's a system they can use to blow
Speaker 9: up the rocket to protect you know, the un public.
Speaker 9: And then yes, you know, how will they incorporate the
Speaker 9: lessons learned from this flight into the next flight that
Speaker 9: they do, which I believe Elon said would happen in
Speaker 9: the next few months. So very much, looking forward to
Speaker 9: the timeline, and then I'll show the root cars of
Speaker 9: this issue.
Speaker 3: Extraordinary. We continue to keep across all of it with
Speaker 3: our own layngrase. We thank you so much for making
Speaker 3: the time. Meanwhile, let's turn our attention to the financial
Speaker 3: world for a moment, because the American Express set aside
Speaker 3: well a little bit more cash to cover any possible
Speaker 3: loan losses as the economy starts to slow. That did
Speaker 3: ultimately weigh on some of the earnings. Even though the
Speaker 3: CEO would say, look, this is just a normalization. Shares
Speaker 3: fell despite expending volume still climbing fourteen percent. I got
Speaker 3: to have a chat with ceosd squay about investments in
Speaker 3: financial technology in particular, and he said, no, we had
Speaker 3: AI in our models forever, in our credit models and
Speaker 3: our four models. How we market to our customer. Where
Speaker 3: we're thinking about AI even more now is in our
Speaker 3: customer service. And of course sort of maybe chuckle with
Speaker 3: the fact that look, the new technology a couple of
Speaker 3: years ago was all about blockchain. Now it's all about
Speaker 3: new tech that is GPT. And he in particularly is
Speaker 3: saying they're looking at the stuff for a while, and oh,
Speaker 3: we'll just have to do it in a controlled way
Speaker 3: and make sure you find the right business case. Have
Speaker 3: much more on what anx CEO had to say a
Speaker 3: little bit later in the two pm hour mean while
Speaker 3: coming up and look at today's big take, which I
Speaker 3: have to say exposes the dangers of TikTok's algorithm to
Speaker 3: troubled teams. This is a Bloomberg Today's Bloombog big take.
Speaker 3: It's an emotional one. It sheds light on the ways
Speaker 3: in which TikTok's personal feed can actually be a never
Speaker 3: ending stream of anxiety of negativity. As part of her
Speaker 3: series on TikTok and it's trust and safety issues Bloombags,
Speaker 3: Olivia Carvill writes that the app's algorithm has led teenagers
Speaker 3: down rabbit holes related to self harm, to depression, human suicide.
Speaker 3: Lisa Say Olivia joins me now and it's heart wrenching
Speaker 3: this story a mother having to after the death of
Speaker 3: her child, look at what terms he searched for on
Speaker 3: an app such as TikTok, He's search for Batman, basketball, weightlifting.
Speaker 3: What did he get instead?
Speaker 1: What Chase nescal was seen as a stream of content
Speaker 1: about anxiety, depression, unrequired love, self harm and in some
Speaker 1: cases suicide. I actually watched this account and it's still
Speaker 1: sending their content today. It was really difficult to see
Speaker 1: what he would have seen in to try and put
Speaker 1: yourself in the shows of a teenage boy watching never
Speaker 1: ending streams of really sad videos.
Speaker 3: What there for does this say about an algorithm that
Speaker 3: in many ways people turn to TikTok for joy, for hilarity,
Speaker 3: for fun. Why is this happening to vulnerable teenage children?
Speaker 1: And that's what his parents kept asking is they thought
Speaker 1: TikTok was about creating joy, that's the company's slogan. They
Speaker 1: thought it was funny, happy dance videos. And when I
Speaker 1: went to meet them in Long Island earlier this year,
Speaker 1: they asked that question of where are the happy videos?
Speaker 1: You know, we were looking at his account together and
Speaker 1: what it's still being sent today and there are no
Speaker 1: happy videos coming through. TikTok said that it has worked
Speaker 1: on this specific issue, and it's been working on it
Speaker 1: for years, trying to break up repetitive videos about sad topics,
Speaker 1: whether that's depression or eating disorders or suicide related content.
Speaker 1: But effectively, what this account shows us is that those
Speaker 1: efforts have fallen short. In some cases they haven't worked.
Speaker 3: TikTok have responded. You've had a spokesmen in particular speech
Speaker 3: to you seeing they're committed to safety the well being
Speaker 3: of its users, but especially teens. Researchers and child's coologists.
Speaker 3: They're getting more and more anxious about this, aren't they?
Speaker 3: What steps? Can anything be done? From a regulatory perspective?
Speaker 3: Where next goes in your reporting journey?
Speaker 1: Well, I think one of the biggest concerns for child
Speaker 1: psychologists and researchers is that we're seeing this looming youth
Speaker 1: mental health crisis. We're seeing new data showing that kids
Speaker 1: are experiencing higher levels of hopelessness, of suicidal thoughts, of anxiety,
Speaker 1: and alongside that we're seeing explosive use of social media.
Speaker 1: So while causation is very hard to prove, the correlation
Speaker 1: is right there in front of us, and that begs
Speaker 1: the question of what more can be done. TikTok isn't
Speaker 1: the only platform that has a recommendation engine that is
Speaker 1: pushing harmful content to kids, and one of the calls
Speaker 1: that we've seen time and time again from researchers is
Speaker 1: given us transparency, let us study your algorithm. Let us
Speaker 1: understand how it works, what drives it, what powers it.
Speaker 1: Right now, these companies aren't willing to provide that kind
Speaker 1: of transparency to researchers, and that is frustrating the academic community.
Speaker 1: They feel locked out from studying a phenomenon that is
Speaker 1: impacting millions of kids around the world.
Speaker 3: Olivia, you keep bringing us transparency and we thank you
Speaker 3: for it. It's an amazing read, heart wrenching one. Olivia
Speaker 3: Carvill Welcome back to remote technology. I'm Caroline Hider, New York.
Speaker 3: Let's go quick check on these markets for you, because
Speaker 3: we are still under pressure from a big tech perspective.
Speaker 3: Now it's that one hundred coming off of its lows.
Speaker 3: We're still off by a quarter of percent. We're worried
Speaker 3: about economic gloom, the jobless claims to king Hire, some
Speaker 3: of the business, macro data not looking quite as pretty.
Speaker 3: So instead of that bad news being good news in
Speaker 3: terms of the FED, today's bad news is bad news
Speaker 3: and we're worried about the economy. Money off the table,
Speaker 3: we take money off out of Microsoft, off by a
Speaker 3: quarter of percent, not big move. Remember, just after the
Speaker 3: World yesterday, We've got some news that Elon Musk was
Speaker 3: potentially threatening Microsoft with a lawsuit over Twitter's data use
Speaker 3: when it's training its AI algorithms. But we're off by
Speaker 3: a quarter of percent. More broadly with the market today,
Speaker 3: Alphabet Cherzo on the flip side. Remember they've sort of
Speaker 3: been the underdog when it comes to AI, but Alphabet
Speaker 3: seems to be on the rise a little bit. Maybe
Speaker 3: plan to use generative AI to create ad campaigns according
Speaker 3: to the ft or up one and a quarter. Let's
Speaker 3: move it on to look at the other previous area
Speaker 3: of exuberance when it came to tech, and it was
Speaker 3: all about crypto. Of course, Bitcoin off by two point
Speaker 3: three percent, were sub thirty thousand afterwards. Been a spectacular
Speaker 3: run up so far this year. Maybe some calm coming
Speaker 3: out of as we start seeing some resiliency to the
Speaker 3: financial market, in particularly the banking market here in the
Speaker 3: United States. There's those earnings come in and we see
Speaker 3: a little bit of weakness just in the world of
Speaker 3: eth we're off by one and a half percent, down
Speaker 3: below that two thousand mark. Let's talk a little bit
Speaker 3: more about crypto, not so much the price moves on
Speaker 3: the day, but the future of regulation. I need to
Speaker 3: say emmel Na Cole joins us for what is some
Speaker 3: movement at last when it comes to regulation. But over
Speaker 3: in Europe, can you talk us through what's being decided
Speaker 3: at the moment in terms of the first EU sort
Speaker 3: of package that seems to be coming towards tech and
Speaker 3: crypto startups over there.
Speaker 11: Yeah.
Speaker 2: So, the EU has been working on its crypto legislative
Speaker 2: package for the last three years and it's finally here.
Speaker 2: The European Parliament formally approved the final text of the
Speaker 2: Markets in Crypto Assets Regulation also known as MEKA MICA
Speaker 2: depending on your pronunciation earlier today, and what that includes
Speaker 2: is basically a bill of rules that means that now
Speaker 2: crypto company is seeking to operate from the EU will
Speaker 2: need to register in one of the member states and
Speaker 2: that then allows them the right to passport those approvals
Speaker 2: across the entire block. It also seeks to put in
Speaker 2: place some risk management and corporate governance structures so that
Speaker 2: companies are able to kind of operate within the EU
Speaker 2: under the purview of supervisory authorities and in a bid
Speaker 2: to avoid another FTX style collapse.
Speaker 3: Yeah, it felt like the talk was pretty tough coming
Speaker 3: from the shadow representative of micro or micro or how
Speaker 3: have you set saying, you know, to provide a safe
Speaker 3: haven no longer to forsters and criminal organizations. But really
Speaker 3: a unified way of regulating crypto has got to be
Speaker 3: joy to many founder's ears in some way.
Speaker 2: The crypto industry as a whole is generally very happy
Speaker 2: about MECA because in their eyes it's any rules at
Speaker 2: all are good rules. And when we say that, we mean,
Speaker 2: you know, bespoke cause to crypto. In the eyes of
Speaker 2: the industry it's something that doesn't really fit into existing
Speaker 2: financial services.
Speaker 10: But not every regulator agrees those proposed.
Speaker 2: In the UK, for example, the rules that were set
Speaker 2: up by the government earlier this year, those would seek
Speaker 2: to fit crypto under existing financial services rules. And we'd
Speaker 2: heard Gary Genza in the US earlier this week saying
Speaker 2: that crypto should fit under the existing financial services rules
Speaker 2: in the US. But the companies when they come into
Speaker 2: the SEC and talk to them about it, just don't
Speaker 2: really like what they're hear it.
Speaker 3: Yeah, and no wonder Therefore, Europe's been taking bit of
Speaker 3: market share in terms of crypto venture funding. Emily Nicole,
Speaker 3: we thank you so much, and really for crypto the
Speaker 3: real cloud has been regulatarly uncertainty here in the US.
Speaker 3: But sticking on crypto, we've had a lot about the
Speaker 3: cryptosphere choosing Miami if you are building in the US
Speaker 3: to be one of its key hubs. In fact, Bitcoin
Speaker 3: Miami is around the corner. It's not just crypto has
Speaker 3: emerged as one of several rising hubs and take at large.
Speaker 3: It's born about by the pandemic shifting work trends, of course.
Speaker 3: So today we want to focus in on Miami a
Speaker 3: little bit. The Emerge America's conference is kicking off in
Speaker 3: Miami right now. Bring vcs, tech entrepreneurs together for two days.
Speaker 3: Let's bring in the Emerge America CEO Flucio Garrado, wonderful
Speaker 3: tab some time with you. You've also been nominated as
Speaker 3: the US representative on the board of the World Bank
Speaker 3: Group by President Joe Biden. So some big tasks at hand.
Speaker 3: Fluccio Filicia, talk to us a little bit about what's
Speaker 3: happening about the signature event. You launched it back in
Speaker 3: twenty fourteen. How many people are you expecting?
Speaker 12: Yeah, well, thank you first Caroline for having me on.
Speaker 12: Emerge America's was founded in twenty fourteen with a singular
Speaker 12: focus to transform Miami into me a global tech hub.
Speaker 12: And we do that by convening all stakeholders that make
Speaker 12: up any thriving tech ecosystem, from government to higher startups
Speaker 12: to investors, and we connect the dots between the entrepreneurs,
Speaker 12: the capital, and the talent, and we tell the stories
Speaker 12: of how South Florida.
Speaker 11: And the rehole is transforming.
Speaker 12: We're doing this specifically to capitalize on this very moment,
Speaker 12: and so today we have more than twenty thousand attendees
Speaker 12: from all around the world that are convenient here to
Speaker 12: showcase their new startups, their investments, and to make those
Speaker 12: connections to help take their businesses to the next level.
Speaker 12: I would say, you know, talking a little bit about
Speaker 12: or dovetailing from your previous speaker. If last year was
Speaker 12: all about blockchain, this year is all out AI. We've
Speaker 12: got literally the guy who wrote the Bible on AI,
Speaker 12: the former CEO and chairman of Google SMID, who will
Speaker 12: be keynoting tomorrow. And I just got on stage with
Speaker 12: the seventh time football champion, real entrepreneur and best selling
Speaker 12: author Tom Brady, who was our opening keynote this morning.
Speaker 3: Okay, but interestingly, Felicia of course I would associate Tom
Speaker 3: Brady more with crypto with blockchain, so is he pivoting
Speaker 3: to AI as well? I mean, how are you seeing
Speaker 3: what has been real build up in VC money being
Speaker 3: allocated to Miami perhaps taking a hit from twenty twenty
Speaker 3: two like the rest of the tech world because of
Speaker 3: the pullback in crypto VC money.
Speaker 12: Well that's a great question, but it's actually more of
Speaker 12: a myth. The reality is the data.
Speaker 11: Speaks for itself.
Speaker 12: Miami has led the nation in terms of venture growth,
Speaker 12: being number one in the nation for venture activity since
Speaker 12: the start of the pandemic. While the rest of the
Speaker 12: world to be contracting, Miami actually only continues to expand.
Speaker 12: We've grown about two hundred and forty eight percents since
Speaker 12: the start of the pandemic. And while investments as continue
Speaker 12: to focus on fintech, we also have been one of
Speaker 12: the leading health tech hubs, and I would say and
Speaker 12: argue also for climate tech, with this being also incredibly
Speaker 12: important to our community and to the region as a whole.
Speaker 3: But surely money must be pulling back and in a way,
Speaker 3: I mean, has the money that in terms of sponsorship
Speaker 3: coming for your event pulled back any compared to twenty
Speaker 3: twenty two.
Speaker 12: That's actually a great question, and the reality is no,
Speaker 12: we are actually pacing ahead of where we were in
Speaker 12: twenty twenty two. We've have more enterprise tech companies like Microsoft,
Speaker 12: Google and delf for startups who've taken up more space
Speaker 12: on our expo floor, who also partner with us year round.
Speaker 12: We're not just an event, we're a platform, and so
Speaker 12: we organize start a pitch competitions, innovation challenges, investor summits
Speaker 12: year round.
Speaker 11: And these tech leaders are.
Speaker 12: Not just planting a flag here in South Florida, they're
Speaker 12: looking to also expand their footprint.
Speaker 3: Apparently resilient to the macro trends. We thank you so much.
Speaker 3: Emerging America CEO Felicio Garado there. Meanwhile, coming up, we'll
Speaker 3: take a further look at the Miami VC scene. Actually,
Speaker 3: Sapphire Adventures, one of the partners, Casba Wang's over there
Speaker 3: at the event. We're going to talk about or whether
Speaker 3: they're putting boots on the ground in Miami. Plus particularly
Speaker 3: look at one particular Latin company, Marcardo Libra. The shares
Speaker 3: well of a quarter of a percent, but some interesting
Speaker 3: moves in terms of how much they're building up. It's
Speaker 3: the largest e commerce company over there in Latin America
Speaker 3: and it's fucking tech layoffs, adding thirteen thousand workers this year.
Speaker 3: This is a bloomberg time now for our VC roundup. Starting
Speaker 3: with Tiger Global top point seven billion dollar benure fund
Speaker 3: that has is recording a twenty percent paper loss as
Speaker 3: of December twenty twenty two. That's all according to the information.
Speaker 3: It's taking a hit of course from the FTX fancracy,
Speaker 3: so as the NFTs in the company's portfolio. On the
Speaker 3: positive side, JP Morgan is closing its inaugural Growth Equity
Speaker 3: Fund with over one billion dollars in aggregate capital commitments
Speaker 3: eighty percent which is available to deploy in new investment
Speaker 3: opportunities and to help its portfolio companies scale. And let's
Speaker 3: stick with the VC scene a little bit more and funding.
Speaker 3: Let's get back to Emerge America's comfort Over in Miami,
Speaker 3: Crypto tech workers moving there, so did VC deals. Therefore,
Speaker 3: so Miami is not at the level of the biggest
Speaker 3: hubs like here in New York or over in the
Speaker 3: Bay Area. I'm bringing only a fraction of the deals
Speaker 3: compared to these major hubs. According to pitchbook will bring
Speaker 3: in more. That's our someone on underground, Kasba Wang's their
Speaker 3: partner at Safire Adventures. We want you to read about
Speaker 3: what the opportunities are in Miami because Safi Adventures doesn't
Speaker 3: have an office there, right, but are you making investments there?
Speaker 11: Thanks first, well, thanks for having me on Caroline.
Speaker 13: You know, we don't have offers in Miami, but we
Speaker 13: constantly look for opportunities that are outside of the Bay
Speaker 13: Area and New York and some of the core tech markets.
Speaker 13: I would say the invasion here at Emerge as well
Speaker 13: as the broader Miami city has been amazing, and I've
Speaker 13: got the opportunity to title a lot of founders INBC,
Speaker 13: specifically in certain areas like crypto, AI and developer tools
Speaker 13: and all that.
Speaker 3: Of course, you're largely sort of focusing on bigger, later
Speaker 3: stage company is what are the opportunities for that in AI?
Speaker 3: We were just hearing from the CEO of Emerged saying
Speaker 3: this year it's pivoted from all things crypto into all
Speaker 3: things artificial intelligence. What sort of companies attract you?
Speaker 13: Yeah, one hundred andtent So, you know, we think AI
Speaker 13: is a super trend for the decade, next decade to come.
Speaker 13: In the short term though, however, you know, the processes
Speaker 13: that are being disrupted by AI in the short term
Speaker 13: from a value creation perspective, are actually better captured by
Speaker 13: incumbents to some extent. Right, So let's say, you know,
Speaker 13: if you're trying to build the next generation salesforce, salesforce
Speaker 13: by adding AI on top.
Speaker 11: Coul potentially do better than a company.
Speaker 13: So I look for companies and founders that are a
Speaker 13: unique take on AI and how to apply AI to
Speaker 13: certain business processes.
Speaker 11: And the way I think.
Speaker 13: About this is, you know, compared to let's say the Internet, right,
Speaker 13: we don't have new speed as a way of consuming
Speaker 13: content from the Internet all the way onto your Facebook
Speaker 13: came up the content news feed, So we're still waiting
Speaker 13: for that big more for long term value creation. I
Speaker 13: can already see multiple pockets where AI could really come
Speaker 13: in and create real value and disrupt existing business prophecies.
Speaker 3: Casmer, lend us your expertise as to how you're sorting
Speaker 3: week from chaff, because there's an awful lot of people
Speaker 3: who is suddenly an AI company or an AI startup
Speaker 3: that weren't a few months ago. So how you ensuring
Speaker 3: that what they're building is really changing the way in
Speaker 3: which productivity could be.
Speaker 13: Yeah, Caroline, this is a great question. This space is emerging,
Speaker 13: sol fask. Frankly, it's very hard at track, even from
Speaker 13: an investment perspective, right we at Saftware Adventures, we've started,
Speaker 13: We've been investing in AI for last decade almost, So
Speaker 13: this is not a brand new thing. It's just the
Speaker 13: GENERVD models themselves have been a new way to interact
Speaker 13: with human beings and add certain chat functions that are familiar,
Speaker 13: familiar to the users themselves. So for me, I really
Speaker 13: look for one again, a founder that has a unique
Speaker 13: take on a specific problem, So not necessarily just starting
Speaker 13: from technology, but starting from the business problem itself. That's
Speaker 13: that's probably number one, and the number two from a
Speaker 13: pure technological standpoint, I'd like to understand how they differentiate
Speaker 13: from the incombent solutions. Right, Better it's a distribution advantage. Better,
Speaker 13: it's you know, pure technological advantage. Do they have a
Speaker 13: new take on distribution Because at the end of the day,
Speaker 13: again going back to my point earlier, AI, you know,
Speaker 13: just applying to existing business process doesn't solve the distribution
Speaker 13: problem and in Combent's own distribution, So that's a big thing.
Speaker 13: I keep seeing companies and then I keep trying to
Speaker 13: challenge founders on what's their unique take on this Ksber.
Speaker 3: What's interesting is what seems to have the crypto world
Speaker 3: really concern right now is regulatory lack of clarity. And
Speaker 3: we still have a lot of concerns. Let's say, in
Speaker 3: the way in which AI is currently being built, the
Speaker 3: ethical nature in which it can be scaled. Do you
Speaker 3: worry about regulation? How do you see the CEOs, the
Speaker 3: founders you're talking to navigate that one.
Speaker 11: Yeah, that's a that's a great question.
Speaker 13: Again, I think, you know, first of all, I think
Speaker 13: AI statey should be top of mind for both.
Speaker 11: Regulators and builders at the same time.
Speaker 13: I think in the value there's the sense of, you know,
Speaker 13: you try to build first and ask for forgiveness later
Speaker 13: sort of thing. And I think that philosophy and mentality
Speaker 13: doesn't necessarily apply to AI. Now we are, you know,
Speaker 13: despite the fact that in some sense we're kind of
Speaker 13: closed to AGI, you know, we're not that closed yet,
Speaker 13: So we are we do have some time to.
Speaker 11: Figure this out from a framework perspective.
Speaker 13: Well, we do want to see some real clarity around.
Speaker 13: You know, regulars come in and draw the lane for
Speaker 13: companies and founders to play within that lane. And you
Speaker 13: know that just takes time and takes practice, and given
Speaker 13: how fast is spaced is evolving, I'm assuming the regulations
Speaker 13: probably will come not this year, but that year.
Speaker 3: You specialize partnering the B to be SaaS companies as well.
Speaker 3: That isn't just all things AI. There's things like cybersecurity.
Speaker 3: You go to old, good old kind of almost economic
Speaker 3: resilient building of cyber companies. Where else is attracting you?
Speaker 3: Because it can't just be checks being written to AI,
Speaker 3: or can.
Speaker 11: It one hundred percent?
Speaker 13: Look, I would say, going back to my point on AI,
Speaker 13: you know I don't think about AI specific companies. I
Speaker 13: think about how people apply AI into cyber marketing, sales
Speaker 13: and all the other pockets and B to B SaaS. Right,
Speaker 13: it's today you don't you don't find a company and
Speaker 13: say we're mobile, right just like tomorrow, I don't think
Speaker 13: we'll see companies who say their AI only and cyber
Speaker 13: to me is an incredible, you know, incredibly exciting space, right.
Speaker 13: I think you know number one, cyber has been the
Speaker 13: top priority for enterprise spending, but everybody is looking to
Speaker 13: get less get more out of last.
Speaker 11: Right.
Speaker 13: It's the analogy I uses like our iPhone. You know,
Speaker 13: when we first got our iPhone, we've got you know,
Speaker 13: ten apps on this we can keep down on the
Speaker 13: new apps. Now we've had a thousand apps on iPhone,
Speaker 13: we're not going to download new apps. And similar thing
Speaker 13: is happening in cyber too, where the ce cells, the
Speaker 13: key buyers, they're looking for consolidation in real time. And secondly,
Speaker 13: I think what's incredibly interesting exciting is you know, the
Speaker 13: talent shortage in cybers unfortunately not going away and you
Speaker 13: know anytime soon.
Speaker 11: So there's going to be opportunities.
Speaker 13: For companies to come in and provide not only just
Speaker 13: you know, alerts and and and insights, for the companies
Speaker 13: to provide a laugh nat solutions for those companies and
Speaker 13: buyers who want to tackle cybersecurity challenges.
Speaker 11: How so, I thought those are incredibly.
Speaker 3: Exciting, all very exciting, but how much these founders are
Speaker 3: having to get to grips with where valuations are now at,
Speaker 3: even for something as exciting and exuberant as AI or cyber.
Speaker 13: Yeah, look, Caroline, I think it's a great question. I
Speaker 13: don't have a crystal of all. I would say, though,
Speaker 13: I think valuation is coming down real time. You know,
Speaker 13: it's bridging the public market and the product market is
Speaker 13: bridging real time. Now, at what point, you know, do
Speaker 13: we get to an equiliby room where we started seeing
Speaker 13: a lot more deals happening. My personal gas is probably
Speaker 13: we're still a couple of quarters away.
Speaker 11: From that point.
Speaker 13: But I would say, you know, efficient growth has been
Speaker 13: a big, big carendy word this year in the value
Speaker 13: for good reasons. And one of the key reasons and
Speaker 13: one of the key online statement behind efficient growth is
Speaker 13: not our growth is created equal.
Speaker 11: Right, We're going to have high.
Speaker 13: Growing eye probid companies that are flying today that might
Speaker 13: not be a big public IPO, companies that could go,
Speaker 13: you know, grow efficiently. And what happened now is investors
Speaker 13: are looking for proof points for each efficient growth earlier
Speaker 13: on in company cycle. So instead of just looking at
Speaker 13: growth early on series A, series B, they're asking for
Speaker 13: efficient growth stoner than later, which is not a phenomenon
Speaker 13: that's impacting the funding market.
Speaker 3: And how how much are you being impacted by the
Speaker 3: fact that the exit market is pretty close? There's consolidation
Speaker 3: as you said, but maybe not so much from a
Speaker 3: regulatory perspective, from the big American companies being able to
Speaker 3: buy up smaller ones as we've previously seen, and the
Speaker 3: IPO market is still pretty short.
Speaker 11: Yeah, yeah, totally.
Speaker 13: Unfortunately, most of our propolic companies have you know, years
Speaker 13: of cash on their on their balance sheet. We believe
Speaker 13: most of our companies are building resilient, long term, sustainable
Speaker 13: B to B businesses that they will always have a
Speaker 13: demand right. The way I think about this is, you know,
Speaker 13: economy is a function of productivity growth and B to
Speaker 13: B SaaS is a big driver behind that increasing productivity growth,
Speaker 13: and a.
Speaker 11: Lot of our companies are index to that.
Speaker 13: So you know, the way I think about is there's
Speaker 13: n demand market, it's just how we get from point
Speaker 13: A to point B while surviving this downturn.
Speaker 3: Kasper, great to spend some time with you go have
Speaker 3: you so Fana over at the conference. Caswa Wang, partner
Speaker 3: at Saffar Adventures. We continue our coverage of the Emergent
Speaker 3: America conference, where a look at the labor market gender economists.
Speaker 3: Categor Roy joins us from Miami. She's a CEO and
Speaker 3: founder of Pipeline Equity uses artificial intelligence to help companies
Speaker 3: address and take action against gender biases in the workplace.
Speaker 3: In Kostka, when we look at these more headlines that
Speaker 3: BuzzFeed is going to be laying off people, we know
Speaker 3: metas started to execute on this way. Are they thinking
Speaker 3: about how they lay off people and how it affects
Speaker 3: some of their overall gender equity and other areas of equity.
Speaker 14: You know, what we've seen so far is that that
Speaker 14: actually isn't true unfortunately. So for instance, the tech labor
Speaker 14: for US is about twenty six percent women, and yet
Speaker 14: so far they've been about sixty five percent of those
Speaker 14: laid off, which is really unfortunate because we're actually taking
Speaker 14: a step backward in terms of gender equity in tech
Speaker 14: at a time when we actually need to be moving forward.
Speaker 14: Given all the advancements in artificial intelligence.
Speaker 3: And everyone's so excited about artificial intelligence, How does your
Speaker 3: overall data work? What do you use the power of
Speaker 3: AI to do?
Speaker 6: Well?
Speaker 14: What we actually do is ensure that every people decision
Speaker 14: that companies make, so pay performance potential for instance, are
Speaker 14: actually equitable before they're made. So companies for instance, to
Speaker 14: pay gap analyzes and what we do is actually ensure
Speaker 14: the pay gap is closed and keep it closed.
Speaker 3: And how does AI take that a step forward? How
Speaker 3: are you starting to see other companies develop on this?
Speaker 14: Yeah, so what we're actually seeing is that, for instance,
Speaker 14: if you look at performance reviews, what we do is
Speaker 14: actually look at and we use natural language processing, and
Speaker 14: we find about a third of all performance reviews can
Speaker 14: came biased, so we can actually correct that before that
Speaker 14: performance review becomes part of someone's permanent employment record, and
Speaker 14: that actually catalyzes companies toward equity. We've seen, for instance,
Speaker 14: on average that our customers increase equity by sixty seven
Speaker 14: percent and the first three months on our platform.
Speaker 3: We love how hearing how AI is actually practically being
Speaker 3: used in here and now Kasika ROI enjoying Miami, which
Speaker 3: is a pipeline equity. That is it for this edition
Speaker 3: of blu Meg Technology. Do you not forget to check
Speaker 3: out our podcast's on Apple Spotify and I heeart this
Speaker 3: a Blitu Meg didn't they ta