WEBVTT - TSMC Beats Expectations, Raises Revenue Outlook 0:00:02.520 --> 0:00:13.600 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.680 --> 0:00:17.479 from coast to coast with Caroline Hide in New York 0:00:17.800 --> 0:00:20.920 and Eva Low in San Francisco. 0:00:22.960 --> 0:00:24.600 This is Bloomberg Tech coming up. 0:00:24.640 --> 0:00:29.000 TSMC reports third quarter results, beating expectations and giving a 0:00:29.040 --> 0:00:31.720 positive outlook, buoyed by strong AI demand. 0:00:31.880 --> 0:00:34.680 Glass's trade tensions re escalate between China and the US. 0:00:34.760 --> 0:00:38.599 Good president. She's rare US hardbules, but a global pushback. 0:00:38.760 --> 0:00:42.680 And yet another exec departure from Apple with its head 0:00:42.800 --> 0:00:47.160 of the chat GPT. Like AI search efforts going to Meta. 0:00:47.400 --> 0:00:49.519 For first ed we dig into the market instead of 0:00:49.600 --> 0:00:54.120 shaking off that trade anxiety and refocusing on the AI trade. 0:00:54.160 --> 0:00:56.760 Of course, you just just TSMC will dig into it. 0:00:56.960 --> 0:00:59.680 NASA up three quarters percent with trading higher for two 0:00:59.680 --> 0:01:03.200 straight days. People focus on that and indeed potential talks 0:01:03.240 --> 0:01:06.400 between President Putin and indeed the United States President. 0:01:06.440 --> 0:01:08.039 But what are we looking at underneath the hood? 0:01:08.760 --> 0:01:12.440 Yeah, TSMC the world's biggest and most important contract manufacturer 0:01:12.440 --> 0:01:16.119 of semiconductors. The news is that it is hypedic sales 0:01:16.160 --> 0:01:18.920 growth outlook for twenty twenty five for the second time 0:01:19.000 --> 0:01:22.560 this year. Then we look at the shart we open 0:01:22.640 --> 0:01:25.400 up two percent. We've given off some of those gains 0:01:25.480 --> 0:01:27.120 if you read on the Bloomberg terminal or some of 0:01:27.160 --> 0:01:29.959 the market stories. The early part of the morning was 0:01:29.959 --> 0:01:33.760 TSMC driving US up positivity. But the trade story is 0:01:33.800 --> 0:01:36.800 overtaking a little bit AI demand intact character. 0:01:36.680 --> 0:01:38.960 It is, let's just talk about that being an impact. 0:01:39.200 --> 0:01:42.039 Bloomos Peter Elstrom, who needs that tech coverage from the US, Europe, 0:01:42.080 --> 0:01:46.360 in Asia, and Peter, look, TSMC did almost what ASML did. 0:01:46.640 --> 0:01:48.640 They said, Look, AI, the. 0:01:48.640 --> 0:01:51.280 Mega trends still there even if China pulls away in 0:01:51.400 --> 0:01:52.120 terms of demand. 0:01:53.480 --> 0:01:54.680 Yeah, it's a little bit more than that. 0:01:54.880 --> 0:01:58.280 CC way, the CEO had this conference call after the 0:01:58.320 --> 0:02:02.280 earnings results and as Ed was talking about, they hike 0:02:02.360 --> 0:02:05.480 their forecast for twenty twenty five for the second time. 0:02:05.560 --> 0:02:07.880 Just three months ago, they hike their forecast. And now 0:02:07.880 --> 0:02:10.000 what CC, what you're saying is that this AI mega 0:02:10.040 --> 0:02:13.160 trend is actually getting stronger. They of course are making 0:02:13.160 --> 0:02:16.200 the chips for Nvidia and for many others too, and 0:02:16.280 --> 0:02:18.520 what they're seeing is that the demand for those chips 0:02:18.720 --> 0:02:21.800 is getting stronger. At this point, they're watching the capital 0:02:21.880 --> 0:02:24.360 spending from some of the big customers out there, including 0:02:24.400 --> 0:02:27.000 Open Ai. They realize that in Video is going to 0:02:27.040 --> 0:02:29.600 have to supply those customers, and the trends are going 0:02:29.680 --> 0:02:31.680 up from here. So we're starting to get a fuller 0:02:31.720 --> 0:02:34.120 picture of what's going on in the chips business. We've 0:02:34.120 --> 0:02:37.040 got preliminary results from Samsung earlier this week, and we 0:02:37.160 --> 0:02:40.919 got ASML, the chip equipment maker after that, and now 0:02:40.919 --> 0:02:44.960 we have TSMC, the biggest contract chip manufacturer, which is 0:02:45.000 --> 0:02:46.760 giving us a very strong forecast too. 0:02:48.000 --> 0:02:50.480 That's kind of the demand side, right, Peter. But on 0:02:50.520 --> 0:02:53.400 the supply side, there was lots of interesting information. The 0:02:53.440 --> 0:02:56.160 two headlines that jump out at me are there massively 0:02:56.160 --> 0:03:00.600 supply constrained. Capacity is tight, but they're moving really quick 0:03:00.639 --> 0:03:04.639 to expand manufacturing capacity here in the United States. 0:03:05.840 --> 0:03:06.280 That's right. 0:03:06.360 --> 0:03:08.960 Yeah, Well, it takes a while to build these chip plants. 0:03:09.520 --> 0:03:13.720 They've begun construction in the US a few years ago, 0:03:13.800 --> 0:03:15.680 and they've now said that they want to build on 0:03:15.720 --> 0:03:17.919 top of that. They want to expand even more than they. 0:03:17.760 --> 0:03:18.440 Have in the past. 0:03:18.680 --> 0:03:20.880 But they're trying to add capacity in the US while 0:03:20.919 --> 0:03:24.400 they also build up their capacity in Taiwan right now. 0:03:24.440 --> 0:03:26.440 So it's taken a while for them to bring those 0:03:27.040 --> 0:03:29.880 fabs online and then meet this very strong demand that 0:03:29.880 --> 0:03:33.200 they're getting from customers like Nvidia, also from Apple, they're 0:03:33.240 --> 0:03:36.360 supplying a number. They also make the chips for AMD too, 0:03:36.360 --> 0:03:39.360 as AMD tries to compete with Nvidia, so they're really 0:03:39.360 --> 0:03:41.720 the big beneficiary. They're kind of the picks and shovels 0:03:41.720 --> 0:03:43.360 that are helping with this AI boom. 0:03:43.560 --> 0:03:46.280 Look, we are looking at the ADRs a little lower, Peter. 0:03:46.360 --> 0:03:49.120 They're at a record high in trading over in Asia. 0:03:49.360 --> 0:03:51.080 Is perhaps just a lot already priced in? 0:03:53.240 --> 0:03:55.680 Yeah, maybe, as Ed was talking about, there are a 0:03:55.680 --> 0:03:57.640 lot of factors going on in the market right now. 0:03:57.680 --> 0:04:01.560 The primary trading forum for TEA SMC shares is in Taiwan, 0:04:01.600 --> 0:04:04.120 so we'll see how they do tomorrow as they open 0:04:04.200 --> 0:04:06.839 up there. But the ADRs are getting buffeted a bit. 0:04:07.200 --> 0:04:09.680 Probably there are some high expectations going into this. I 0:04:09.680 --> 0:04:12.040 think investors did anticipate that there was going to be 0:04:12.040 --> 0:04:14.880 some pretty strong numbers from TSMC, But on top of that, 0:04:14.920 --> 0:04:16.719 there are a lot of trade factors that are playing 0:04:16.760 --> 0:04:20.080 into this. The US China tension certainly kind of overlay 0:04:20.480 --> 0:04:22.200 a lot of what we are seeing in the market 0:04:22.279 --> 0:04:22.719 right now. 0:04:23.640 --> 0:04:26.360 The index Peter Alstrom, Thank you very much. Our next 0:04:26.360 --> 0:04:29.960 story is trade tensions between China and the US. This 0:04:30.120 --> 0:04:33.080 is what Treasury Secretary Scott Besson had to say about 0:04:33.080 --> 0:04:37.160 how negotiations are going, and in particular about one top 0:04:37.279 --> 0:04:38.279 Chinese trade official. 0:04:39.200 --> 0:04:45.160 We've had four rounds of talks Geneva, London, Stockholm, and Madrid, 0:04:45.440 --> 0:04:49.240 and both sides approached them with great respect, and this 0:04:49.279 --> 0:04:53.840 individual did not. He showed up uninvited and said, quote, 0:04:54.600 --> 0:05:00.480 China will cause global chaos if if the poor shipping 0:05:00.520 --> 0:05:05.080 fees go through. So I don't believe that China wants 0:05:05.160 --> 0:05:09.520 to be an agent of chaos. And maybe maybe they 0:05:09.600 --> 0:05:14.000 used to have the wolf warrior diplomats, so maybe he 0:05:14.160 --> 0:05:15.440 thinks he's a wolf warrior. 0:05:15.920 --> 0:05:16.440 We don't know. 0:05:18.120 --> 0:05:18.719 This is happening. 0:05:18.839 --> 0:05:22.360 Is China's decision to unveil export controls and the rare 0:05:22.440 --> 0:05:26.000 earth supply chain is now sparking a global pushback. Bloomberg 0:05:26.080 --> 0:05:28.320 Senior Tech editor Mike Shepherd joins us to break it 0:05:28.360 --> 0:05:31.120 all down. Based on what the Treasury Secretary was talking 0:05:31.160 --> 0:05:35.599 about and recent reporting, China sees its hand with rare 0:05:35.640 --> 0:05:39.159 earths as being leverage in a negotiation. There are two 0:05:39.200 --> 0:05:42.120 sides and question Mike is whether China is or is 0:05:42.160 --> 0:05:43.559 not overplaying that hand. 0:05:44.800 --> 0:05:47.560 Well, that is a big question right now in the market, 0:05:47.600 --> 0:05:51.160 and certainly here in Washington where we're seeing the IMF 0:05:51.200 --> 0:05:54.799 and World Bank meetings being held, in so many global 0:05:54.839 --> 0:06:00.719 officials in town to watch these trade negotiations unfold on 0:06:01.080 --> 0:06:03.479 in real time between the US and China with so 0:06:03.600 --> 0:06:06.599 much at stake, and the question is how much of 0:06:06.640 --> 0:06:09.200 an impact there will be on other economies in the 0:06:09.279 --> 0:06:13.039 US is banking on other nations, other trading partners and 0:06:13.160 --> 0:06:16.680 other allies also feeling that pain and joining the US 0:06:16.680 --> 0:06:19.280 and trying to counter whatever China may try to do 0:06:19.680 --> 0:06:24.600 in restricting the shipment and export of rare earth materials 0:06:24.640 --> 0:06:28.320 from China to buyers outside China, and that is something 0:06:28.320 --> 0:06:31.400 that will affect the European Union and other nations and Japan. 0:06:31.560 --> 0:06:33.919 We have seen a push led by the US to 0:06:33.960 --> 0:06:36.640 try to get the Group of Seven to somehow counter 0:06:36.760 --> 0:06:40.120 and respond to China's intention here and look what we're 0:06:40.160 --> 0:06:42.800 seeing is even as China is trying to exert some leverage, 0:06:42.839 --> 0:06:45.400 the US is also expressing a little bit of skepticism 0:06:45.520 --> 0:06:48.760 about whether this will actually go through. Jamison Greer, the 0:06:48.839 --> 0:06:51.840 US Trade representatives said yesterday he doesn't think China will 0:06:51.920 --> 0:06:56.000 actually take this step, owing to the geopolitical implications and 0:06:56.040 --> 0:06:58.680 the fallout it would have on the global economy. And 0:06:58.720 --> 0:07:00.480 we can see a sign of that step the sism 0:07:00.480 --> 0:07:03.200 in the counteroffer that the US made at the US 0:07:03.279 --> 0:07:07.640 is really only stepping forward with a longer pause and tariffs, 0:07:07.680 --> 0:07:10.080 and that's not nearly enough for what Beijing had been 0:07:10.120 --> 0:07:12.960 hoping for. They have been really angling to get a 0:07:13.000 --> 0:07:16.960 relaxation of years of export controls as a result of 0:07:17.000 --> 0:07:18.520 that leverage. 0:07:18.320 --> 0:07:20.880 That did seem to be real anger coming from Treasury, 0:07:20.920 --> 0:07:22.280 Sectary Scott VESNT. 0:07:21.920 --> 0:07:22.280 Their MinC. 0:07:22.520 --> 0:07:26.320 And I'm interested as to reminding us how important the 0:07:26.360 --> 0:07:28.720 hand is that China has when it comes to technology. 0:07:28.920 --> 0:07:29.720 The fact that they. 0:07:29.680 --> 0:07:31.560 Mine an awful lot of the rare earth, but the 0:07:31.600 --> 0:07:35.240 main point is they also produce and refine most of 0:07:35.280 --> 0:07:35.920 the rare earths. 0:07:37.040 --> 0:07:40.800 Well they do, they own, They really hold more than 0:07:40.880 --> 0:07:43.840 half of the world's reserves, and they dominate the refining 0:07:43.840 --> 0:07:47.280 and production of these elements are critical across the economy 0:07:47.440 --> 0:07:51.760 and consumer electronics and automobiles, and in military equipment. Think 0:07:51.760 --> 0:07:54.720 of night vision goggles. You can't run those without some 0:07:55.120 --> 0:07:58.600 rare earths, and so the importance of this is something 0:07:58.640 --> 0:08:01.880 that hits a nerve with trade officials around the world, 0:08:01.880 --> 0:08:04.920 but especially with the US, because American officials had thought 0:08:05.080 --> 0:08:08.200 the rare earth's issue have been settled during the last 0:08:08.320 --> 0:08:11.160 round of trade talks, and here China goes, in their view, 0:08:11.480 --> 0:08:13.760 reopening it and trying to use it as a last 0:08:13.800 --> 0:08:16.720 minute bit of leverage heading into this all important meeting 0:08:16.760 --> 0:08:20.240 between President Donald Trump and his counterpart Hijiping at the 0:08:20.400 --> 0:08:23.680 end of the month, And rather than seeing a narrowing 0:08:23.760 --> 0:08:27.280 list of trade issues to be resolved heading into that meeting, 0:08:27.400 --> 0:08:29.760 we're actually seeing a growing list. And you heard the 0:08:29.800 --> 0:08:33.719 Treasury Secretary talk about the sensitivity around shipping. And there 0:08:33.760 --> 0:08:36.680 is also the question, Carol, of the US move to 0:08:37.040 --> 0:08:41.280 expand coverage of sanctioned firms to include subsidiaries, and that's 0:08:41.320 --> 0:08:44.439 something that hits some of the Chinese champions like Huawei 0:08:44.480 --> 0:08:47.600 and SMIC, and that is something that Beijing also has 0:08:47.640 --> 0:08:50.160 objected to. And we've seen this all play out just 0:08:50.240 --> 0:08:53.280 in the last few weeks, and it raises questions, Carow, 0:08:53.280 --> 0:08:56.240 about whether the two leaders can actually sort all of 0:08:56.280 --> 0:08:58.640 this at the end of the month, if and when 0:08:58.640 --> 0:08:59.280 they sit down. 0:09:00.080 --> 0:09:03.640 If is a big if right now, Mike Shephard, thank 0:09:03.679 --> 0:09:07.880 you very much. Indeed, from DC, look amid this geopolitical tension, 0:09:08.000 --> 0:09:10.480 you are still seeing the markets relatively calm. I'm looking 0:09:10.480 --> 0:09:11.959 at the tech markets up sevent ten percent on the 0:09:12.040 --> 0:09:14.080 nastat one hundred. We've been whipped a little bit about 0:09:14.120 --> 0:09:17.240 the concerns on resurgence, trade frictions more broadly, but the 0:09:17.240 --> 0:09:21.240 AI real feel factor is still there. Angeloukakafas is with 0:09:21.320 --> 0:09:23.800 us seeing global investment strutres to Edward Jones. 0:09:23.720 --> 0:09:25.719 Today is AI winning out. 0:09:27.360 --> 0:09:29.839 It is a good tech for a good day for technology. 0:09:30.280 --> 0:09:35.160 That the SMC results and guidance provide some confidence in 0:09:35.200 --> 0:09:40.000 the durability of the AI theme. There's no AI related 0:09:40.040 --> 0:09:43.640 slow down, at least not yet, and AI is going 0:09:43.679 --> 0:09:48.400 to remain a kid driver for markets and Joe. 0:09:48.440 --> 0:09:50.440 One of the most read stories today on the Bloomberg 0:09:50.520 --> 0:09:53.400 terminal and on the website is Ken Griffin, the founder 0:09:53.440 --> 0:09:57.520 of hedge fund in Citadel saying that jen AI is 0:09:57.600 --> 0:10:01.720 not helping hedge funds beat them market with astonishing returns. 0:10:01.760 --> 0:10:03.400 We're going to pull up what it is that he said. 0:10:03.720 --> 0:10:07.080 But as somebody that is in the markets as a strategist, 0:10:07.559 --> 0:10:13.439 your reaction to that news story and also what Jeni 0:10:13.760 --> 0:10:17.800 better than you in strategy. 0:10:18.040 --> 0:10:21.960 I don't think we're quite there yet. We are still 0:10:22.000 --> 0:10:25.080 in our view in the early stages of adoption. Of course, 0:10:25.080 --> 0:10:28.000 there's a lot of spending going in now to make 0:10:28.080 --> 0:10:32.560 this technology and incorporated. But thinking about major technology firms 0:10:32.600 --> 0:10:36.040 and really many different businesses, including in finance, they are 0:10:36.080 --> 0:10:40.840 all requiring their operating system to incorporate AI. So it 0:10:40.880 --> 0:10:44.800 will take a little bit while to see productivity gains, 0:10:45.240 --> 0:10:47.800 but we do think that these gains are on the way. 0:10:47.960 --> 0:10:51.240 Of course, from an investment standpoint, we need to be 0:10:51.480 --> 0:10:55.120 ware of complacency or euphoria. At some point that's going 0:10:55.160 --> 0:10:59.120 to be increased competitions and overbuilding over capacity. We are 0:10:59.160 --> 0:11:02.200 not quite there yet, but something to what's out for 0:11:02.280 --> 0:11:05.760 and I think the reaction in the c SMC results 0:11:05.760 --> 0:11:08.960 in the stock today, the meat reaction reflects the high expectations. 0:11:09.640 --> 0:11:12.240 So it's the two very distinct story, right, how market 0:11:12.240 --> 0:11:15.360 participants use AI and then the impact of the ALI 0:11:15.440 --> 0:11:18.600 story on markets. But you went there with TSMC, So 0:11:18.640 --> 0:11:21.559 what did that sort of outlook from them tell you 0:11:22.120 --> 0:11:24.319 about the staying power of this cycle? 0:11:25.640 --> 0:11:28.680 Yeah, I do think it provides confidence that this will continue, 0:11:28.720 --> 0:11:32.840 especially thinking about the next six to twelve months only 0:11:32.920 --> 0:11:36.640 the direction of travel force spending is higher, and there's 0:11:36.640 --> 0:11:39.360 a lot of push for many different businesses and industries 0:11:39.360 --> 0:11:43.720 to incorporate AI. So I think that the mega trend 0:11:43.800 --> 0:11:47.360 of adoption remains alive and well. And yes, we can 0:11:47.440 --> 0:11:52.120 debate all day about valuations, but the results speak for themselves, 0:11:52.240 --> 0:11:55.040 especially as we enter a key earning season. 0:11:55.160 --> 0:11:57.320 We don't have all day, but let's debate where would 0:11:57.360 --> 0:12:00.120 you go? Evaluations are high for some of the big names. 0:12:02.640 --> 0:12:05.920 So we favor a Barbel approach. 0:12:06.400 --> 0:12:11.360 So having continue to participate in this AI long term 0:12:11.600 --> 0:12:13.720 secular theme as I would call it, but at the 0:12:13.760 --> 0:12:18.720 same time, for especially new capital, start to complement portfolios 0:12:18.760 --> 0:12:21.439 with areas of the market that have been left behind, 0:12:21.480 --> 0:12:25.040 and that could include value style investments, small cap stocks 0:12:25.040 --> 0:12:29.079 that may benefit from the Federal Reserve rebooting its rate 0:12:29.160 --> 0:12:33.720 cutting cycle. So having this balanced approach and again avoid 0:12:33.880 --> 0:12:38.200 chasing some of the unprofitable, more speculative parts of the market. 0:12:39.120 --> 0:12:42.200 What is the catalyst for those speculative parts of the 0:12:42.240 --> 0:12:44.520 market to actually be popped? Do you think that we 0:12:44.640 --> 0:12:47.160 can remain irrational for a little bit longer if you 0:12:47.200 --> 0:12:49.559 see it that way, you know. 0:12:49.520 --> 0:12:51.760 As they say, you can only tell a bubble kind 0:12:51.760 --> 0:12:54.320 of with the benefit of hindsight. But at the same time, 0:12:54.400 --> 0:12:58.400 there's some key differences between now and the late nineties. 0:12:58.559 --> 0:13:00.480 A lot of these companies that are doing all these 0:13:00.559 --> 0:13:03.640 heavy spending, they are financing that from their own cast 0:13:03.679 --> 0:13:07.200 from operations, so not that finance. They are very mature, 0:13:07.520 --> 0:13:12.080 profitable businesses, and they have a diversified stream of revenue. 0:13:12.679 --> 0:13:16.559 So we're not quite there yet. Valuations are not at extremes, 0:13:16.760 --> 0:13:18.480 But at the same time, markets are going to be 0:13:18.600 --> 0:13:23.240 sensitive to any news about return on investment from all 0:13:23.280 --> 0:13:25.840 this spending that is taking place, and also paying attention 0:13:26.000 --> 0:13:29.479 to science of euphoria, which we do not see yet. 0:13:31.000 --> 0:13:32.959 In this environment anger. I think we should continue to 0:13:32.960 --> 0:13:36.840 talk about tariffs. The idea when the President took office 0:13:37.200 --> 0:13:42.440 in January was that consumers would take on the burden 0:13:42.480 --> 0:13:45.920 of tariffs, right because companies would raise prices across all 0:13:45.960 --> 0:13:49.880 sorts of domains. That hasn't really materialized. What has been 0:13:49.920 --> 0:13:54.080 impact impacted is the labor market in different ways. Are 0:13:54.080 --> 0:13:56.480 the people of cutting back, how are you reading that 0:13:56.920 --> 0:13:57.839 play out right now? 0:13:59.480 --> 0:14:03.200 Yeh, couple of things here about prices. As we navigated 0:14:03.960 --> 0:14:07.920 the very period of high uncertainty, especially in April and May, 0:14:08.360 --> 0:14:11.520 companies really try to absorb a lot of that and 0:14:11.600 --> 0:14:15.280 not pass these increased costs to the consumer. Now that 0:14:15.320 --> 0:14:17.240 we have a little more clarity, we may see a 0:14:17.240 --> 0:14:22.280 little more even distribution of these increase in costs. We 0:14:22.360 --> 0:14:24.760 have seen goods prices increase, but at the same time 0:14:25.360 --> 0:14:29.840 they increase. The apptic in inflation remains manageable now as 0:14:29.840 --> 0:14:33.040 it relates to the labor market. We remain in a 0:14:33.240 --> 0:14:38.320 low hiring and low firing mode. The labor market remains balanced. 0:14:39.120 --> 0:14:43.560 Corporate Corporate profits remain at record highs, even as we've 0:14:43.600 --> 0:14:47.400 seen a significant slowdown in hiring, which to me applies 0:14:47.680 --> 0:14:52.120 productivity gains, so we do not expect a major uptick 0:14:52.200 --> 0:14:55.000 in unemployment. Companies have been very profitable, so they have 0:14:55.080 --> 0:14:58.680 really no pressure to continue to cut costs to protect 0:14:58.720 --> 0:15:03.000 margins because margins again aurt all time highs. But something 0:15:03.040 --> 0:15:05.680 to monto, there's going to be some disruption from AI, 0:15:06.240 --> 0:15:09.160 But so far it seems like only a small part 0:15:09.200 --> 0:15:12.320 of that slowdown in the laboral market is because of AI, 0:15:12.520 --> 0:15:13.520 or you know, Tarish for. 0:15:13.480 --> 0:15:15.760 That matter, and I take you, I ask you, that 0:15:16.200 --> 0:15:18.640 takes us nicely into earning season that's about to hit 0:15:18.720 --> 0:15:22.120 us hard next week. Angelocal cofas of Edward Jones, thank 0:15:22.160 --> 0:15:26.400 you very very much. Indeed, Okay, coming up, Salesforce looks 0:15:26.400 --> 0:15:29.840 to reinsure investors worried the company could lose out in 0:15:29.880 --> 0:15:33.160 the AI boom. We have more on Salesforce next. This 0:15:33.240 --> 0:15:34.200 is Bloomberg Tech. 0:15:45.880 --> 0:15:46.720 Salesforce shares. 0:15:46.800 --> 0:15:48.600 As you can see, they spite this morning after chief 0:15:48.600 --> 0:15:51.120 financial and operating officer Robin Washington has said the company 0:15:51.160 --> 0:15:54.160 expects to return to double digit revenue growth in the 0:15:54.240 --> 0:15:55.400 coming years. 0:15:55.400 --> 0:15:56.440 More in the company's outlook. 0:15:56.480 --> 0:15:59.440 Let's bring in Bloomberg's Brodie Ford, who covers enterprise software companies. 0:15:59.800 --> 0:16:02.320 It's still down a quarter so far this year in 0:16:02.360 --> 0:16:06.000 terms of its market cap, but some reassuring points that 0:16:06.120 --> 0:16:08.120 to reacceleration of growth exactly. 0:16:08.240 --> 0:16:09.840 I mean, this is a stock that was beat up 0:16:09.880 --> 0:16:12.640 thirty percent year to date yesterday, and so it's up 0:16:12.680 --> 0:16:16.200 seven today and that's pretty cool, but it's still investors 0:16:16.200 --> 0:16:19.239 are a little anxious whether these kind of traditional application 0:16:19.360 --> 0:16:21.480 leaders like Salesforce are going to be the ones to 0:16:21.520 --> 0:16:26.240 successfully sell ai products. We got a decent outlook from 0:16:26.320 --> 0:16:31.280 Salesforce yesterday, but you know, it's not a resounding celebration. 0:16:31.400 --> 0:16:32.000 At this point. 0:16:33.520 --> 0:16:39.320 You've been reporting on the close relationship between open ai 0:16:39.360 --> 0:16:43.800 and Oracle and how maybe the publicly traded and at 0:16:43.800 --> 0:16:46.440 this stage slightly bigger of the two is helping that 0:16:46.520 --> 0:16:49.160 company navigate chip export controls. 0:16:49.200 --> 0:16:51.240 What do we need to know? It's interesting. 0:16:51.240 --> 0:16:53.720 I mean, Oracle is kind of a famous lobbyist, right 0:16:53.880 --> 0:16:56.960 they know Washington, They're pretty tight with the Trump admin 0:16:57.040 --> 0:17:00.200 right now. And yesterday open ai said when we're having 0:17:00.280 --> 0:17:05.000 trouble getting chips into UAE or Argentina, we call up 0:17:05.040 --> 0:17:06.639 Oracle and they are the ones that have kind of 0:17:06.680 --> 0:17:09.399 been able to help us get our chips around the world. 0:17:09.480 --> 0:17:12.240 And we found that pretty interesting because our arcle is 0:17:12.240 --> 0:17:15.199 playing an increasingly large role in open Aiyes in for 0:17:15.200 --> 0:17:15.720 a bill. 0:17:15.600 --> 0:17:19.680 Out Bloomberg's Brady Ford across a lot of stories, thank 0:17:19.680 --> 0:17:23.919 you very much. Another top top story, Apple can't catch 0:17:23.960 --> 0:17:26.880 an AI break. The executive who is in charge of 0:17:26.920 --> 0:17:31.000 developing a chat GPT like search feature within Apple is 0:17:31.359 --> 0:17:34.080 stepping down and heading to Meta. That's according to sources. 0:17:34.480 --> 0:17:37.480 For more, bloombergs Mark gunman who brokes that story joins us. Now, 0:17:37.840 --> 0:17:42.040 who is this executive and how significant is it Mark 0:17:42.320 --> 0:17:43.840 that he's jumping to Meta. 0:17:45.560 --> 0:17:46.479 Yeah, this is keying. 0:17:46.640 --> 0:17:49.280 And to give you an idea of how significant this is, 0:17:49.359 --> 0:17:53.680 we've talked about maybe a dozen Apple AI departures over 0:17:53.720 --> 0:17:56.520 the last few months. This is probably the most significant 0:17:56.600 --> 0:17:59.600 or second most significant of that group. This person was 0:17:59.640 --> 0:18:02.639 a direct purport to John g and Andrea, the senior 0:18:02.720 --> 0:18:06.600 VP who runs all of AI at Apple. This person 0:18:06.680 --> 0:18:08.680 was actually put into their role only a few weeks 0:18:08.720 --> 0:18:14.360 ago when his predecessor, Robbie Walker left Apple. Walker had 0:18:14.359 --> 0:18:17.840 been in charge of Siri, but he was removed from 0:18:17.840 --> 0:18:20.399 being in charge of Siri in March after the major 0:18:20.440 --> 0:18:23.360 delays and the blowback against Apple Intelligence. 0:18:23.880 --> 0:18:24.600 And then he. 0:18:24.480 --> 0:18:28.160 Started a new team called AKI Answers Knowledge and Information, 0:18:28.680 --> 0:18:32.240 and that team is focused on AI powered web search tools, 0:18:32.240 --> 0:18:37.159 so basically adding chat, GPT, perplexity, Gemini like functionality to 0:18:37.359 --> 0:18:40.000 Siri and other parts of the Apple operating system. And 0:18:40.119 --> 0:18:42.679 Yang he became in charge of that program just a 0:18:42.680 --> 0:18:45.359 few weeks ago. Before that, he was running the search 0:18:45.400 --> 0:18:48.280 related functionality, then he was running the whole thing. And 0:18:48.359 --> 0:18:51.679 so now Apple's AI team is going through another major 0:18:51.720 --> 0:18:54.720 reorganization in light of that significant departure. 0:18:54.680 --> 0:18:56.720 And a key line in your story is several of 0:18:56.720 --> 0:18:58.919 the Apple team members think that this is going to 0:18:58.960 --> 0:19:00.960 continue to happen, more departures to come. 0:19:02.480 --> 0:19:03.639 This is going to keep happening. 0:19:03.680 --> 0:19:08.320 I mean the core team developing the models underlying Apple Intelligence. 0:19:08.359 --> 0:19:11.760 It's a team called AFM or Apple Foundation Models. They've 0:19:11.800 --> 0:19:15.159 been breeding bleeding talent since July. The creator of that 0:19:15.240 --> 0:19:17.480 team and the person who ran that team, Roman Paying. 0:19:18.040 --> 0:19:20.560 He left for a two hundred and fifty million dollar 0:19:20.680 --> 0:19:23.720 multi year pay package and is now a senior AI 0:19:23.760 --> 0:19:27.480 executive at Meta. Since his departure, they've lost about a 0:19:27.560 --> 0:19:30.480 dozen people. I'm told there's several other people on that 0:19:30.560 --> 0:19:34.200 team continuing to interview. Other people are going to met 0:19:34.280 --> 0:19:36.400 Us still. Other people are going to start ups Open 0:19:36.400 --> 0:19:39.400 AI and Google. We've been reporting this out as these 0:19:39.440 --> 0:19:42.960 departures have been happening, and these new companies have been 0:19:43.280 --> 0:19:45.640 hiring these folks, and this is going to continue, given 0:19:45.680 --> 0:19:49.399 the pay packages that these competitors are offering, and given 0:19:49.520 --> 0:19:53.399 the embarrassments that Apple's AI AI efforts have become for 0:19:53.480 --> 0:19:55.320 some of these people actually working on them. 0:19:55.920 --> 0:19:58.560 Mark you've come on Bloomberg Tech and you've broken all 0:19:58.600 --> 0:20:02.240 these stories about people to Apple. A reasonable question and 0:20:02.320 --> 0:20:05.000 we just have sixty seconds, is is there actually anyone 0:20:05.080 --> 0:20:07.280 left at Apple of notes working on AI. 0:20:09.240 --> 0:20:09.400 Oh. 0:20:09.440 --> 0:20:13.840 Apple has tons of folks. They're working on acquisitions to 0:20:13.880 --> 0:20:17.480 try to refuel the ranks there. John g and Andrea, 0:20:17.520 --> 0:20:21.920 despite their being rumors and discussions about him stepping down, 0:20:22.600 --> 0:20:24.760 are being pushed out of the company for several months now, 0:20:24.840 --> 0:20:26.439 he remains in charge. 0:20:27.240 --> 0:20:28.760 He may not be. 0:20:28.760 --> 0:20:30.920 There for long, as I'm told that Apple has been 0:20:30.920 --> 0:20:34.880 looking for outside replacements for him, but for now he's there. 0:20:35.359 --> 0:20:38.960 Creig Federighi, who runs all software engineering, has now taken 0:20:39.000 --> 0:20:41.000 an ownership role over all the AI. 0:20:41.240 --> 0:20:42.359 Strategy at Apple. 0:20:42.640 --> 0:20:46.480 Mike Rockwell, who created the Vision pro he's heavily involved 0:20:46.480 --> 0:20:49.399 in the AI strategy there now too. So yeah, they 0:20:49.440 --> 0:20:51.840 have definitely had folks, but it's just about refueling the 0:20:51.920 --> 0:20:54.760 ranks and putting the right people in place. But certainly 0:20:54.760 --> 0:20:58.720 this is another considerable setback to Meta's game potentially. 0:21:00.400 --> 0:21:02.520 As always, we thank you so much for joining us. 0:21:02.800 --> 0:21:06.840 Meanwhile, coming up potentially catastrophic breach of a US based 0:21:06.880 --> 0:21:10.160 cybersecurity firm it's being blamed on Chinese state backed hackers. 0:21:10.160 --> 0:21:11.800 That detail and the fallout. 0:21:11.800 --> 0:21:27.760 Next, this is Bloomberg, Bloomberg Tech, and it's time now 0:21:27.760 --> 0:21:30.800 for talking tech and first up. US cybersecurity provider F 0:21:30.800 --> 0:21:33.439 five disclosed that Nation state hackers from. 0:21:33.359 --> 0:21:35.840 China breached its networks and gained. 0:21:35.720 --> 0:21:39.960 Long term, persistent access to certain systems, including source code now. 0:21:39.960 --> 0:21:41.320 The breach prompted warnings from the. 0:21:41.359 --> 0:21:44.560 US and UK authorities, describing the attack as a significant 0:21:44.640 --> 0:21:46.480 cyber threat that could be used. 0:21:46.280 --> 0:21:47.600 To exploit vulnerabilities. 0:21:47.880 --> 0:21:50.280