Speaker 1: From Mahard where Innovation of Money and Power Collie in
Speaker 1: Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde
Speaker 1: and Ed Ludlove.
Speaker 2: I'm Caroline Hyde at Bloomberg's Weld headquarters in New York
Speaker 2: and am Ed Ludlow in San Francisco.
Speaker 3: This is Bloomberg Technology.
Speaker 2: Coming up. We break down the market action as equities
Speaker 2: trade in the red and inn video drops for the
Speaker 2: first time since it's a blowout earnings report.
Speaker 4: Plus, we'll talk artificial intelligence as the Biden administration weighs
Speaker 4: how aggressively to regulate new artificial intelligence tools like chat, GPT, and.
Speaker 2: A mid recent termoil in the US banking system. One
Speaker 2: fintech startup saw revenue surge. We'll discuss why, plus so
Speaker 2: much more throughout the show, including where public markets are
Speaker 2: currently trading ed. We're seeing a little bit of a
Speaker 2: dismal feel to the NASDAC today. We're dropping about seven
Speaker 2: tenths of a percent nervousness. Nervousness out there that maybe
Speaker 2: some of the economic data in the US is just
Speaker 2: too strong. The Federal Serve is still going to have
Speaker 2: to call this economy the Jolts data. Basically job openings
Speaker 2: looking much better than any single economist out there had anticipated.
Speaker 2: But what's interesting is you weave in therefore perhaps the
Speaker 2: sell off, well, the buying that we see in two
Speaker 2: year years actually just dipping a little bit. That's all
Speaker 2: around where we go in terms of the debt ceiling
Speaker 2: as well, whether we get some sort of agreement finally
Speaker 2: push forward. We're hearing from Kanie Lynes just at the
Speaker 2: end of the previous show on that. But what's notable
Speaker 2: is also the fact that yes, economic data in the
Speaker 2: US perhaps signing too much on the positive side, and
Speaker 2: over in China and Europe that PMI and manufacturing data
Speaker 2: looking weak. So we sell off once again in terms
Speaker 2: of those US listed Chinese stocks. Let's move on and
Speaker 2: see what's happening elsewhere in the world of technology. I'm
Speaker 2: looking at what's happening in the world of crypto, because
Speaker 2: what a dire amount month. We end up the month
Speaker 2: of May down more than eight percent. This is the
Speaker 2: worst since November when FTX collapsed. Of course, so there's
Speaker 2: significant perhaps pullback and some of the games we've seen
Speaker 2: going on in the crypto world. But dig into some
Speaker 2: of the microne names that we're seeing on a move today.
Speaker 4: Yeah, some of that nervousness you're talking about certainly coming
Speaker 4: from earnings. Hewlett Packard Enterprise, the maker of networking or
Speaker 4: office infrastructure tools, down seven percent, pretty big decline. It's
Speaker 4: forecasts of the current period really coming in below expectations.
Speaker 2: HP Inc.
Speaker 4: Not to be confused with the maker of laptops missing
Speaker 4: sales in the court, had just gone the fiscal second
Speaker 4: quarter that giving some concern around demand for PC. But
Speaker 4: Bloomberg Intelligence our colleagues, they're saying, actually there was evidence
Speaker 4: that the market for PC's bottoming out. Based on what
Speaker 4: HP Inc. Had to say, tut the down two percent.
Speaker 4: Elon Musk over in China, giving back some of its
Speaker 4: recent games, coming off a two month high. Elon Musk
Speaker 4: photographed having dinner at a restaurant in China. Heats at
Speaker 4: restaurants just like the rest of us.
Speaker 3: Not sure me. I'm having much waiting on the stock.
Speaker 4: But a lack of news for us mere mortals driving
Speaker 4: Tessa action in the chip space. Actually really interesting, Intel
Speaker 4: making significant gains now up four percent, had been up
Speaker 4: significantly higher after the CFO said revenue in the current
Speaker 4: period will come at the upper half of its previously
Speaker 4: guided projection or range, that giving investors some confidence, and
Speaker 4: then in Vidia down three point seven percent is actually
Speaker 4: it's biggest drop since February. But remember we're coming off
Speaker 4: of record close Tuesday evening, and of course twenty four
Speaker 4: hours after Nvidia touched a one trillion dollar market cap
Speaker 4: for the first time.
Speaker 3: Some profit taking.
Speaker 2: Perhaps, yeah, maybe, just maybe. And we've got to think
Speaker 2: about the profit taking more broadly, because an awful lot
Speaker 2: of the rally that we've seen so far this year
Speaker 2: has been thanks to just a very few names, and
Speaker 2: that's highlighted by the recent report coming from Joanne Feenim
Speaker 2: with Police to welcome her to the show. Ed partner
Speaker 2: and portfolio and manager over at Advisor's Capital Management. And
Speaker 2: I read your note with real interest as we were,
Speaker 2: of course still trying to muddy through the macro what's
Speaker 2: happening in terms of debt ceilings and the like. But
Speaker 2: talk to us are just how important a certain few
Speaker 2: names of ultimately tech stocs have been to the rally
Speaker 2: so far this year.
Speaker 5: Yeah, Caroline, you know, we got a lot of inquiries
Speaker 5: from our clients about how much the market has gone
Speaker 5: up this year and is this a good time to
Speaker 5: get into equities. And when you break down, there are
Speaker 5: really two stock markets. There's the super seven, the biggest
Speaker 5: tech and consumer companies like Amazon, Tesla, Microsoft, Apple, Google,
Speaker 5: obviously in Nvidia that have served on average as of
Speaker 5: Friday's closed, they are up sixty seven percent year to date,
Speaker 5: whereas the rest of the market is only a zero
Speaker 5: point three percent.
Speaker 6: And that really does tie into two narratives.
Speaker 5: One the growth opportunity related to AI on the one hand,
Speaker 5: and then the rest of the market, which is all
Speaker 5: about recession risks, intrast rate risk, inflation risk as we're
Speaker 5: seeing materialized today.
Speaker 2: Let's dig deeper into the AI equation because yes, in
Speaker 2: Nvidia now back below that one trillion, but still basically
Speaker 2: what a surge. Are we putting too many eggs in
Speaker 2: just a very few baskets? Are you on the sort
Speaker 2: of Kafy Woods side of the equation that there are
Speaker 2: other companies that are going to win here and you
Speaker 2: should start looking at better valuations out.
Speaker 5: Yeah, Caroly, it's hard to tell how much we're going
Speaker 5: to get out of AI over the long term, but
Speaker 5: it's pretty clear that the companies that are enabling AI,
Speaker 5: whether it's through the chips like Nvidea provides, or whether
Speaker 5: it's the software and deployment like Amazon Web Services, Google,
Speaker 5: Microsoft are enabling. What I think investors recognize is that
Speaker 5: even though we don't know all the details, we know
Speaker 5: that AI and it's spread across the economy is going
Speaker 5: to provide years of growth for these companies. And that's
Speaker 5: a step change in what we expected these companies to
Speaker 5: be able to do, you know, just some months ago,
Speaker 5: and so I think that's warranted. It isn't to say
Speaker 5: that there aren't opportunities out there, and you know, investors
Speaker 5: can look for those, but we think these are solidly
Speaker 5: in the middle of this and it's a less risky
Speaker 5: way I think to play the AI move over time,
Speaker 5: and then you can look beyond that into companies adopting
Speaker 5: AI in industrials, in healthcare. There are plenty of opportunities
Speaker 5: out there. We'll learn more about them as time goes on.
Speaker 4: Johan Kaffee Wood our programming our colleagues in Asia. Overnight
Speaker 4: she's moved her focus on from Nvidia Tesla to the
Speaker 4: next big bet.
Speaker 3: Have listened to what she had said.
Speaker 7: We are really happy that investors who own benchmarks like
Speaker 7: the Nasdaq and QQQ still own Nvidia.
Speaker 8: They own it in some of our portfolios. But we're
Speaker 8: onto the next thing. Nvidia is a hardware stock, and
Speaker 8: sure it has some software, but the history of hardware
Speaker 8: and software is the bigger beneficiary.
Speaker 7: Over time is going to be software, is.
Speaker 4: Going to be software. I think you note that investors
Speaker 4: are looking to move money into software, which can mean
Speaker 4: a broad range of things, right cloud, SaaS enterprise. What
Speaker 4: are the corners of that sub sector that interests you?
Speaker 6: Oh yeah, there are going to be many. I mean
Speaker 6: the adoption of AI.
Speaker 5: Into software tools across multiple and markets I think is significant.
Speaker 5: You know, we own a company, for example, called Slunk
Speaker 5: in our growth strategy. They are a big data analytics company,
Speaker 5: and AI is going to play an increasingly important role there.
Speaker 5: From Nvidia's perspective, you know, the tying of hardware to
Speaker 5: software is actually pretty critical to what they're enable enabling
Speaker 5: their customers to do. It's also why their gross margins
Speaker 5: are going up, and so you know, we see in
Speaker 5: hardware and software to be more and more tied over time,
Speaker 5: which I.
Speaker 6: Think is why you know, in Vidia is such an
Speaker 6: interesting opportunity here.
Speaker 5: Not to say one should potentially take a little bit
Speaker 5: of profits at this time, which we did for clients
Speaker 5: actually after they recorded. But going forward, yeah, there are
Speaker 5: going to be plenty of opportunities in software as well.
Speaker 3: Yeah, Karry.
Speaker 4: The point that I make as well is like this
Speaker 4: obsession with a small group of US domicile names, right
Speaker 4: the megacap tech, But if you look at the commentary
Speaker 4: of the broader market, particularly the bomb market, when we
Speaker 4: think about this economy and global inflation, everyone's got an
Speaker 4: eye on China.
Speaker 2: And well, Elon Musk is there at the moment, isn't
Speaker 2: he as well that we were just highlighting a bit earlier?
Speaker 2: I mean, joan to that point, how much when you're
Speaker 2: looking at the macro, when you're looking at what's happening
Speaker 2: here in the US and everyone seeing the seven winners
Speaker 2: the rest leaving behind. When we think about where inflation's at,
Speaker 2: how much are you looking for your investor base at oh, China,
Speaker 2: Europe being opportunities or being just there as you need
Speaker 2: to stay well away from at the moment.
Speaker 5: You know, there's always a role for international exposure in portfolios.
Speaker 5: We have actually separate international strategies in addition to some
Speaker 5: strategies owning some international names.
Speaker 6: China clearly has become more of a concern.
Speaker 5: I think investors were overly optimistic about how much the
Speaker 5: reopening we'll be able to drive demand in the near term,
Speaker 5: Which isn't to say that China is not going to
Speaker 5: be a very important source of conservat demand. They have
Speaker 5: massively moved a big chunk of their population into the
Speaker 5: middle class and that's going to be a foundation for
Speaker 5: buying over many, many years.
Speaker 6: So you know, overall, there are some attractive valuations.
Speaker 5: Our approach is to look for companies in countries as
Speaker 5: opposed to investing in countries as a whole, and that
Speaker 5: way we can hand select, as we do in all
Speaker 5: of our strategies. You know, back to the hardware side,
Speaker 5: the advantage we're seeing that Ed mentioned the focus on
Speaker 5: US I think comes from the deep modes right that
Speaker 5: our companies have created around this technology. Now as a
Speaker 5: semiconductor analyst for ten years, and one of the key
Speaker 5: things there was digging into the technology advantage that companies
Speaker 5: like Nvidia and Google teaming up with Broadcom to develop
Speaker 5: an alternative big chip to be able to do these
Speaker 5: AI training computations shows that mode is very deep.
Speaker 6: It supports their margins. So I think it's not wrong
Speaker 6: for investors.
Speaker 5: To recognize that the source, right of a lot of
Speaker 5: the gains are going to be in these US companies.
Speaker 4: You know, we learn that one morning a market does
Speaker 4: not make But it is interesting that there's more emphasis
Speaker 4: right now on current risks rates recession. How much is
Speaker 4: that going to impact the technology sector going forward? Do
Speaker 4: you think from this moment right now?
Speaker 9: Yeah?
Speaker 5: Great, great thought there. As I said, we have two
Speaker 5: stock markets right now. We have the investor focus on
Speaker 5: which companies out there can actually provide years of growth
Speaker 5: with or without a recession. Right, that's secular growth and
Speaker 5: now it's been revealed in AI that that's going to
Speaker 5: be significant. And then you have the rest of the
Speaker 5: market ed and I think that's the market where they're
Speaker 5: going to be really focused on those recession risks, and
Speaker 5: rightly so. Right the jolt state of this morning suggests
Speaker 5: that the Fed's going to have to raise rates again
Speaker 5: instead of pausing, and it really throws into doubt the
Speaker 5: FED being able to cut rates towards the end of
Speaker 5: the year, and that makes investors worry that those higher
Speaker 5: rates are going to constrain lending that's actually going to
Speaker 5: trigger a recession.
Speaker 6: The FED obviously would like to avoid that.
Speaker 5: So there's just a massive amount of uncertainty right now,
Speaker 5: and we're seeing it in the prices of stocks in
Speaker 5: the rest of the market, where secular growth isn't as
Speaker 5: big a driver, where the sickle could concerns are far
Speaker 5: more important.
Speaker 6: But the patient investors should really look beyond this.
Speaker 5: Equities do a terrific job over the long term of
Speaker 5: delivering the ability to build wealth. So it's an opportunity
Speaker 5: to get some of those companies in the rest of
Speaker 5: the in the rest of the market and build those
Speaker 5: positions now while.
Speaker 6: Risks are high, and if you're a long term investor, you.
Speaker 5: Can look beyond that and build really solid, diversified portfolios.
Speaker 2: And take profit in the seven names that have driven
Speaker 2: us thus far.
Speaker 6: We've done some of that absolutely.
Speaker 5: You know, we're actually slightly now underweight and video we've
Speaker 5: been overweight for the last year. And I think it's
Speaker 5: appropriate to make sure that the risk exposure you have
Speaker 5: in a portfolio is balanced against you know, how the
Speaker 5: potential return from here is now confronting the level of
Speaker 5: risk that we see, you know, across the global economy.
Speaker 4: Jo Am Feenie Partner, Profolio Manager Advisor's Capital Management one morning.
Speaker 4: A market does not make, but it's good to get
Speaker 4: a snapshot of view.
Speaker 3: Thank you very much. Credit Card starts up.
Speaker 4: Brex has seen a surge and usage of its products
Speaker 4: following this year's regional banking term or the think tech
Speaker 4: company on track to reach roughly five hundred million in
Speaker 4: recurring revenue over the next twelve months of it's if
Speaker 4: its current pace of growth continues. Joining us now to
Speaker 4: discuss is Brex co founder Enriq dubigraph in Rik what's
Speaker 4: driving this. That's a pretty big build up in forward
Speaker 4: looking revenue.
Speaker 10: Right, Yeah, the first thank you so much for having
Speaker 10: me here. So we're actually announcing that there's two products
Speaker 10: that crossed.
Speaker 11: Over one hundred million in revenue.
Speaker 10: Which is our empower product, which is replacing concur for
Speaker 10: travel and expense for most businesses. And also our business
Speaker 10: Accounts right which can do operational payments, deposit checks, all
Speaker 10: the kind of like traditional banking activities for our business
Speaker 10: in one place.
Speaker 11: And both of them crossed over one hundred million.
Speaker 10: So now we have three products that crossed one hundred
Speaker 10: million revenue.
Speaker 11: That's something that we're like really really excited about.
Speaker 4: So the one hundred million in annual recurring revenue for
Speaker 4: the business account, it's unit and Enpower Bloomberg sources saying
Speaker 4: that company wide and you're recurring revenue on track for
Speaker 4: about five hundred million.
Speaker 3: What is it that makes bres so.
Speaker 4: Attractive to startups that you've done business with since the
Speaker 4: fallout of SVB.
Speaker 11: So, I think there are two kind of main growth drivers.
Speaker 10: The first one is actually our enterprise segment of the business.
Speaker 10: So Empower, which is our spend management solution, has been
Speaker 10: serving customers such as door Dash, Coinbase, indeed that has
Speaker 10: glassed or Elimonade, et cetera truck and I think both startups,
Speaker 10: mid sized companies and a large enterprises have been attracted
Speaker 10: for a product because it's super easy to use for employees.
Speaker 10: You know, you can just slip your car and your
Speaker 10: expenses are done. It's extremely global that works all over
Speaker 10: the world for all your subsidiaries all over the world,
Speaker 10: and that's been like growing a lot as remote work
Speaker 10: grows and people are hiring internet a lot of focus
Speaker 10: on experience. The second one is our banking product, and
Speaker 10: I would say that, yes, the regional banking crisis definitely
Speaker 10: had We didn't know if it was going to be
Speaker 10: a net negative for Brax.
Speaker 11: We got that question a lot. Now we know it
Speaker 11: wasn't a positive.
Speaker 10: Customers did come and stay with Brax and that also
Speaker 10: drove a lot of growth for the company.
Speaker 4: You know, Caroline, I think you and I will never
Speaker 4: forget that Friday where the SVB story unfolded.
Speaker 3: We did that special program.
Speaker 4: But we learned so much about how startups manage their finances,
Speaker 4: the type of funding that they seek beyond just raising
Speaker 4: capital from vcs.
Speaker 2: And what was interesting was Silicon Valley Bank was so
Speaker 2: intertwined with the startup sector because not only was it
Speaker 2: offering lending, but offering menu ways, venture, debt and enriquey.
Speaker 2: That's an area that you've been working in as well.
Speaker 2: How much are you seeing startups getting into cash burn
Speaker 2: needing to get further money to deploy but don't want
Speaker 2: to raise equity? Is venture that's still a big They're
Speaker 2: part of your business.
Speaker 10: I would say that vengjur Donna is a very small
Speaker 10: part of you know, it's definitely an experiment that we
Speaker 10: try it and continue to do it in small amounts,
Speaker 10: but it's not mainly why customers come to us. The
Speaker 10: main way our business account customers come to us is
Speaker 10: because of their operational banking, so running payroll wires, they
Speaker 10: ch checks, making their kind of day to day banking.
Speaker 11: It's a lot of startups.
Speaker 10: They keep up a lot of their funds in some
Speaker 10: of the big banks, but they keep you know, one, two, three,
Speaker 10: four months of money with us to be their day
Speaker 10: to day partner that really understands them.
Speaker 2: And where are these companies coming from. You're obviously focused
Speaker 2: on allowing these companies to be global, to travel, to grow,
Speaker 2: but are they largely US based companies? Are you seeing
Speaker 2: this becoming much more of an international play?
Speaker 11: These are a lot of them are global companies.
Speaker 10: So over fifty percent of the companies that we serve
Speaker 10: have global employees.
Speaker 11: All of them have US employees.
Speaker 10: We only serve you if you have some sort of
Speaker 10: US operation for a bunch of regulatory reasons. But a
Speaker 10: lot of them are global companies and we serve as
Speaker 10: I said, from startups just were born to you know,
Speaker 10: customers that were from SEB also to kind of like
Speaker 10: larger enterprise is like indeed, door adacting point base.
Speaker 2: I have a sninky suspicion as a few more AI
Speaker 2: players looking to bank or being born at the moment
Speaker 2: and Ed I mean every day with discussing the exuberance
Speaker 2: around that.
Speaker 4: Yeah, it reflects the conversation we had twenty four hours ago, right,
Speaker 4: Rex Salisbury. It's about what AI can do for existing
Speaker 4: fintech players And I guess, Enrica, that's my question for you.
Speaker 4: How is AI going to boost your offering? Where are
Speaker 4: you investing to jump on the bandwagon, so to speak.
Speaker 10: I think AI is going to completely transform our industry.
Speaker 10: And I would say there's a couple different places.
Speaker 11: Right.
Speaker 10: You can think about it something the employee experience. How
Speaker 10: can you make it even easier for employee to do
Speaker 10: their expenses or not have to do them at all,
Speaker 10: you know, make all of that automated. We also announced
Speaker 10: earlier this year kind of like you know, a CFO
Speaker 10: for everyone where if anyone has any questions, you know,
Speaker 10: you can just ask this chatbot and they will respond
Speaker 10: to you, so you don't have to waste the finance
Speaker 10: team time of questions. They already know the answer to
Speaker 10: all the way to like accounting and operations. I think
Speaker 10: it's going to completely revolutionize and transform our industry.
Speaker 11: And we're investing very, very heavily into the.
Speaker 10: Development of new capabilities, and you know, I think we're
Speaker 10: over the next few months you'll see a lot of
Speaker 10: very innovative things coming out.
Speaker 12: Of Rex Henrique. When does Brex go public? We don't
Speaker 12: have a timeline yet. We're not against being a public company,
Speaker 12: you know, in any shape or form.
Speaker 10: That being said, I would love to be a low
Speaker 10: volatility public company. We're not yet profitable, so we'll probably
Speaker 10: wait for that to happen before we go public. Other
Speaker 10: things to remember is we're a six year old company.
Speaker 10: We were started in twenty seventeen, so I would say,
Speaker 10: you know, don't we don't have any pressure to go public. Yes,
Speaker 10: we're still quite young for a startup.
Speaker 2: And we understand you don't have any pressure to raise
Speaker 2: new bench capital yourself. I'm interested though, where you are
Speaker 2: in terms of the focus on being profitable, being CAPEX
Speaker 2: positive and all this sort of good stuff. You still
Speaker 2: trying to hire because you seem to be talk about
Speaker 2: developing leaning into AI. How are you managing those costs?
Speaker 10: Yeah, I would say that, you know, we're still investing
Speaker 10: a lot in one our go to market organization because
Speaker 10: the product is having so much traction that you know,
Speaker 10: I think it is higher or y for us to
Speaker 10: invest in sales and marketing to acquire you know, more
Speaker 10: customers faster. So we are investing there and our investors
Speaker 10: are really excited about it. And then in the second area,
Speaker 10: as are. I do believe this is going to be
Speaker 10: transformation on a step function change. So I think if
Speaker 10: you know, if you're a company and you're not willing
Speaker 10: to invest in AI, you know, you're probably missing the.
Speaker 11: Next big shift.
Speaker 10: That being said, we do have a good business of
Speaker 10: a good business model. I think we can we have
Speaker 10: a plan to being you know, cashul positive without raising
Speaker 10: any more money.
Speaker 2: Ry kay, great test in time with you again, Thank you.
Speaker 2: Enrique Ubrogress is the bex Coach CEO. Meanwhile, coming up,
Speaker 2: we're going to talk about a guest the email master
Speaker 2: tests the CEO's been making the rounds Beijing. More on
Speaker 2: who he met with and any projects that he's mulling.
Speaker 2: That's next. Meanwhile, we've got to remember we've still got
Speaker 2: earnings coming dripping through the system salesforce. Investor is going
Speaker 2: to be watching that one closely today after the Bell
Speaker 2: Company gonna update us on its own cost cutting campaign. Look,
Speaker 2: how is it going to provide us with the long
Speaker 2: run revenue goals that it's set itself. This is Bloomberg.
Speaker 2: It's time now for talking tech. First up iPhone maker
Speaker 2: fox Con Technology says it expects to more than double
Speaker 2: its revenue in the second half of the year thanks
Speaker 2: in large part two sales and guess what, artificial intelligence
Speaker 2: and the servers thereof. It's part of a move to
Speaker 2: generate revenue from other fields such as electric cars and
Speaker 2: AI on high that's the listed vehicle for fox Con
Speaker 2: Technology also working with Nvidia on autonomous driving applications, and
Speaker 2: Baidu is looking to beef up China's AIC and the
Speaker 2: internet company has set aside roughly one hundred and forty
Speaker 2: million dollars to fund Chinese startups. Has specialized in generative
Speaker 2: AI by Doo and its VC partners will accept pitches
Speaker 2: from prospective founders who will use its ernie bot to
Speaker 2: build their own large language model before Baydu determines well
Speaker 2: who gets the seed funding. Plus day two of Youla
Speaker 2: Musks visits China and he's already met with more government officials.
Speaker 2: That's as he looks to bolster opportunities in the country.
Speaker 2: Musk met earlier with China's Minister for Industry and Information
Speaker 2: Technology and Scott by the Ministry of Commerce. He also
Speaker 2: met with the head of the Battery Giant's ATL, sparking
Speaker 2: rumors of potential collaboration, and Musk arrived in Beijing Tuesday,
Speaker 2: where he met with Foreign Minister Quinn Gang. And I mean, overall,
Speaker 2: this is a focus another CEO. We've heard from Mercedes,
Speaker 2: We've heard from GM, We've heard from well Jamie Diamond,
Speaker 2: really having to talk up that. Look, these are still
Speaker 2: focused on Chinese despite some of the trade tensions, the
Speaker 2: tech tensions.
Speaker 4: Yeah, and in the statement issued by the Chinese government,
Speaker 4: Elon Musk is quoted as saying that he is against
Speaker 4: the decoupling from China. They'll continue to invest in China.
Speaker 4: It's a really interesting two way situation. Fifty percent of
Speaker 4: Tesla's output was in out of Shanghai globally last year.
Speaker 4: And you know, the Chinese government have given Tesla the
Speaker 4: freedom to operate there as an independent US company, which
Speaker 4: is rare.
Speaker 3: But again it's a chorus of names. As you point out, and.
Speaker 2: Interesting that potential rumoring around the big battery maker, because
Speaker 2: that's of course a big part of trying to have
Speaker 2: supply chain in the US rather than depending on the
Speaker 2: Chinese made goods.
Speaker 4: Right well, when Ford announced that it was going to
Speaker 4: make batteries in Michigan licensing Coatl Technology, there was a
Speaker 4: big fallout, particularly from the Republican Party. That relationship really
Speaker 4: closely watched. Welcome back to Bloomberg Technology. I med love
Speaker 4: Vo in San Francisco.
Speaker 2: I'm Caroline hid in New York. Let's check in on
Speaker 2: these markets. Halfway through the show, halfway through the training
Speaker 2: day therein and we're looking at slightly from lower and
Speaker 2: now's that one hundred At the moment, we're off by
Speaker 2: eight ten seven percent. Bit of a concern profit taking
Speaker 2: call it after the massive run up that we've seen
Speaker 2: in this particular benchmark, but also the warriors that basically
Speaker 2: we're running too hot in the US. The Federal Reserve's
Speaker 2: still going to have to tame the growth. The jolt
Speaker 2: stata showing that people are still really hiring. We see
Speaker 2: a little bit of movement in the two year yield
Speaker 2: on the back of that data that came roaring through
Speaker 2: but remember tepid growth coming from China in terms of
Speaker 2: PMIS and manufacturing data there. Europe to interestingly taking the
Speaker 2: window of the sales of bitcoin once again. We're actually
Speaker 2: off by more than eight percent over the course of
Speaker 2: this month, the worst month since when FTX collapsed. Let's
Speaker 2: moving on and have a little look at what's happening
Speaker 2: in terms of individual movers, because we do still have
Speaker 2: earnings we used to have real news, but we also
Speaker 2: have perhaps the first fall in Nvidia since it's waring
Speaker 2: earnings that we saw last week. We're off by about
Speaker 2: five percent, called it profit taking after it hit that
Speaker 2: one trillion dollar mark. We also, though, see Intel on
Speaker 2: the back seeing an uptick a more point three point
Speaker 2: eight percent higher as we see the CFO speaking at
Speaker 2: a td count event really discussing how maybe they're going
Speaker 2: to manage to be at the top end of the
Speaker 2: range when it comes to their forward looking guidance Packet enterprises,
Speaker 2: though that disappoints on the back of its numbers ed
Speaker 2: down by some seven percent. Are we worried about compute
Speaker 2: spending at the moment. We are still in a very
Speaker 2: difficult macroeconomic environment. We're going to remember that.
Speaker 3: But AI is still a big factor in those markets.
Speaker 11: Now.
Speaker 4: The US and EU are meeting up this week at
Speaker 4: the USU Trade and Technology Council gathering in Sweden, where
Speaker 4: the EU is discussing plans to subject generative AI to
Speaker 4: additional rules.
Speaker 13: This is bigger than Europe. US is important, but it
Speaker 13: is bigger than the US. But if the two of
Speaker 13: us take the leads with close friends, I think we
Speaker 13: can push something that will make us all much more
Speaker 13: comfortable with the fact that generality of AI is now
Speaker 13: in the world and is developing at amazing speed.
Speaker 4: Meanwhile, Biden administration officials have been divided over how aggressively
Speaker 4: new AI tools should be regulated, a dissonance that has
Speaker 4: left the US without a coherent response to the EUS
Speaker 4: proposals that it's bringing Bloombergs and eguiton to break it down.
Speaker 4: And I thought we were in a place where the
Speaker 4: US and EU were on the same page. You regulate
Speaker 4: the use case the tool rather than the underlying technology itself.
Speaker 3: Where have we gone wrong?
Speaker 1: Well, we were kind of on the same page, you know.
Speaker 14: The last TTC meeting came out with this joint roadmap
Speaker 14: that kind of agreed to pursue this risk based approach,
Speaker 14: like you said, focusing on the use of the technology
Speaker 14: rather than the development of the technology. So AI used
Speaker 14: for things like critical infrastructure would be subject to higher
Speaker 14: levels of compliance. Now Chat GPT changed everything, and that
Speaker 14: really showed us how a general purpose AI product, you know,
Speaker 14: something that's not inherently high risk, can become very risky
Speaker 14: on a societal level when it's used by one hundreds
Speaker 14: of millions people every month for everything from you know,
Speaker 14: helping with homework to know more nefarious purposes. So that's
Speaker 14: what policymakers are grappling right with right now, is how
Speaker 14: to treat these generative AI products and how to class
Speaker 14: sify the risk of those.
Speaker 2: At the moment, though, Anna doesn't even really matter if
Speaker 2: the US, for examples, and parts of the administration are divided,
Speaker 2: because to me, it feels like the EU is going
Speaker 2: to be the first mover here with the AI Act.
Speaker 14: Well, and that's why the the EU's AI Act is
Speaker 14: most important, is because US companies are going.
Speaker 9: To have to comply with this if they want to
Speaker 9: operate in Europe.
Speaker 14: So much like the GDPR did for privacy, the AI
Speaker 14: Act is going to set a defacto floor for compliance.
Speaker 14: So that's what US companies are worried about is as
Speaker 14: they develop these foundation models that underpin this generative AI technology,
Speaker 14: if they want to operate in Europe, they're going to
Speaker 14: have to comply with those rules, whether or not the
Speaker 14: US has passed its own policy. And these companies are
Speaker 14: really looking for a champion in the Biden administration to
Speaker 14: go to the EU and say, listen, we don't think
Speaker 14: this policy is going to work the way it's imagined
Speaker 14: when it's implemented eventually. So the reason why it matters
Speaker 14: if the Biden administration is divided is that these companies
Speaker 14: don't have that champion. They don't have anyone going to
Speaker 14: these multi latteral discussions and really expressing their point of view.
Speaker 4: There was a time where we thought that Vice President
Speaker 4: Kamala Harris was the champion, right she hosted that meeting
Speaker 4: with Sam Altman's statues at Nadella. The administration has made
Speaker 4: noises about they want to do something. But I'll go
Speaker 4: back to one point you made policy. We haven't really
Speaker 4: heard any arguments for I side of where to focus regulation,
Speaker 4: particularly from this White House.
Speaker 14: That's right, Well, I will give the administration credit for
Speaker 14: putting forward some very well received frameworks. We have the
Speaker 14: Risk Management Framework from the National Institute of Standards and
Speaker 14: Technology that had a lot of input from industry, from
Speaker 14: civil society as a very well thought out document. You
Speaker 14: had the White House putting forth their Bill of Rights
Speaker 14: for people who use AI products. But we don't have
Speaker 14: binding policy in the United States, and that's because the
Speaker 14: US Congress is just now starting to hold their initial
Speaker 14: hearing to educate while makers and what AI even is.
Speaker 14: So while the Biden administration has done a lot of
Speaker 14: work to kind of set non binding guidelines, actually binding
Speaker 14: regulation is going to come from Europe.
Speaker 15: Once again, Anna Juton, I mean thank you giving us
Speaker 15: well the global perception of AI risks, let's dive into
Speaker 15: some of the perceptions here in the United States, because
Speaker 15: there's been another open letter signed by a group of
Speaker 15: industry leaders.
Speaker 2: Warning of this time the risks of extinction due to
Speaker 2: artificial intelligence. So it was published by the Center for
Speaker 2: AI Safety.
Speaker 16: Which has mission to reduce societal scale risks from artificial intelligence,
Speaker 16: joining us now to deeper dive on all of this
Speaker 16: and explain the center zone thinking.
Speaker 2: This is Executive director Dan Hendrix it's great to have you.
Speaker 2: Thank you, Dan. I'm just interested in how this first started,
Speaker 2: this whole mission statement that you put out there about
Speaker 2: summer mitigating the risks in line with potentially a nuclear
Speaker 2: war or indeed a global pandemic. How did you have
Speaker 2: first off conversations with Sam Altman and demis of deep Mind.
Speaker 2: Do they come to you, you go to them.
Speaker 17: So we created the letter largely because I knew that
Speaker 17: many people had concerns that AI could lead to extinction
Speaker 17: and that we should not just be treating it like
Speaker 17: every other tech issue, but instead as a global priority.
Speaker 17: So we created this letter to succinctly convey the shared concern,
Speaker 17: and then we disseminated it among.
Speaker 9: Some profits and from there it spread organically.
Speaker 17: And so there are some surprises in that open Ai
Speaker 17: signed it, Google, deep Mind signed it, Microsoft signed it,
Speaker 17: as well as many of the scientists that built the
Speaker 17: current wave of artificial intelligence.
Speaker 2: What's interesting is I'm trying to understand also how you
Speaker 2: were born as a center for AI safety, you funded
Speaker 2: by any of these businesses. What is the ultimate way
Speaker 2: in which you continued to deliver and do your research.
Speaker 17: So we started, we started a while ago and We're
Speaker 17: largely funded by a philansphy. We're not funded by Elon
Speaker 17: Musk or things like that. So we're just trying to
Speaker 17: reduce the risks from AI. I've been when I was
Speaker 17: as a graduate student at Berkeley, I'd been researching safety
Speaker 17: for a very long time, So this has been a
Speaker 17: concern that I've had for many years. And now finally
Speaker 17: the AI technologies are getting to the point where it's
Speaker 17: becoming a lot more obvious to the scientific community that
Speaker 17: this is a large concern. A letter like this probably
Speaker 17: could not have existed six months ago, but given the
Speaker 17: rapid developments, a lot of people are changing their minds,
Speaker 17: a lot of experts are changing their minds of just
Speaker 17: about how severe the risks can be done.
Speaker 4: I actually want to go back to Caroline's previous question quickly.
Speaker 4: Have you taken money from any AI executives that were
Speaker 4: signatories to that letter? The previous letter basically key names
Speaker 4: in the field of AI.
Speaker 17: There, I'd have to check if we're having any funding
Speaker 17: from any employees that are also concerned about safety.
Speaker 9: The AI community is particularly large.
Speaker 17: Ninety plus percent of our funding is from Open Philanthropy,
Speaker 17: which is an independent.
Speaker 4: Philanthropy One question that arose quite quickly when you put
Speaker 4: out the statement twenty four hours ago, is the rationale
Speaker 4: or motivations behind the signatories?
Speaker 3: Why are they doing this?
Speaker 4: I get it there's a long term, broad concern about
Speaker 4: the risks from AI. But why do you think these
Speaker 4: leading names who want the field to advance signed the
Speaker 4: letter that you organized.
Speaker 17: Well, so many of them were on the voter. We
Speaker 17: get out a move as quickly as possible. Developing I
Speaker 17: will be a generally good thing, But a lot of
Speaker 17: the scientists who signed this have recently changed their tune.
Speaker 17: Jeff Hinton, of course helped create artificial intelligence modern artificial intelligence,
Speaker 17: so did Yashchu A Benjio. But in recent months now
Speaker 17: they're substantially more concerned about there being rogue behavior, that
Speaker 17: these AIS could potentially lead to human extinction as they.
Speaker 9: Get more advanced.
Speaker 17: So for that reason, I think that it's just because
Speaker 17: people are starting to see that this is moving extremely quickly.
Speaker 17: We don't understand how these technologies work. It's difficult to
Speaker 17: steer them, and so that could potentially.
Speaker 9: They could be misused.
Speaker 17: Those things could potentially lead to catastrophic risks or potentially,
Speaker 17: in the longer term extinction.
Speaker 3: Very quickly.
Speaker 4: In response to your letter, there were those that know
Speaker 4: present and much more near term basic risks have listened
Speaker 4: to SASHALUCCIONI of hugging face you joined us yesterday.
Speaker 18: I personally see it a bit as a magic trick,
Speaker 18: as misdirection right. I care very very strongly about, for example,
Speaker 18: data consent, for example, disclosing data sources, disclosing transparency and
Speaker 18: model documentation. And instead of focusing on that we're being
Speaker 18: directed towards these unsolvable risks.
Speaker 4: Are we paying enough attention to more near term and
Speaker 4: immediate risks from AI.
Speaker 17: I should certainly hope that the risk of extinction is
Speaker 17: not unsolvable, or else we're in big trouble. So I
Speaker 17: think it's important as a society to manage multiple different risks.
Speaker 9: I think we can certainly do it.
Speaker 17: I also think that many of the risks from that
Speaker 17: currently affect us can take on more extreme forms later on.
Speaker 17: For instance, if the people developing these AI technologies have
Speaker 17: decisive control over them, that gives them extremely high power
Speaker 17: and power inequality with respect AI is a concern that
Speaker 17: could potentially get out of control where a few people
Speaker 17: are calling the shots in society. So I think that
Speaker 17: it's important any competent form of risk management will address
Speaker 17: current ongoing arms as well.
Speaker 9: As tail risks. So I think we need to have
Speaker 9: a complementary approach.
Speaker 2: Yeah, and Hendricks, the outcome from this, You've certainly stirred
Speaker 2: a lot of interest people, perhaps either aligning them to
Speaker 2: thinking that this is too much or indeed that we
Speaker 2: need to shine a light on this. How do you
Speaker 2: think we ultimately take on these risks? You're very good
Speaker 2: at highlighting what the risks are. Is it regulation, is
Speaker 2: it self regulation? What do you think the outcome will be?
Speaker 17: Well, I think that self regulation would be a useful start,
Speaker 17: But we wouldn't trust something like a pandemic or nuclear
Speaker 17: technology just to the scientists. We wouldn't say solve the
Speaker 17: AI or the nuclear arms race scientists.
Speaker 9: It's not necessarily completely their purview.
Speaker 17: There are technical aspects to this problem, but there are
Speaker 17: also social aspects to this problem. So we wanted to
Speaker 17: just make sure that the public is aware that many
Speaker 17: of the AI scientists, we have AI scientists from all
Speaker 17: the top universities, and many of the people who created it.
Speaker 9: Are concerned that it could even lead to extinction.
Speaker 17: So then policy tends to be more of a negotiation process,
Speaker 17: and so hopefully we can get those conversations started recognizing
Speaker 17: that there are severe effects on the horizon, such as
Speaker 17: potentially extinction. So I think we need to treat as
Speaker 17: a global priority, and we need to work toward cold
Speaker 17: operating domestically but also internationally so that we're not caught
Speaker 17: in an AI arms.
Speaker 9: Race between different countries.
Speaker 17: The nuclear arms rate brought us to the brink of catastrophe,
Speaker 17: and we don't want another arms race where we build
Speaker 17: extremely powerful technologies that could potentially.
Speaker 9: Destroy us all and we just keep stockpiling them.
Speaker 17: That was not a good outcome for humanity that could
Speaker 17: have gone substantially worse. I don't want the same to
Speaker 17: happen with AI. So hopefully we can cooperate starting today.
Speaker 2: Have you seen decent self regulation thus far on some
Speaker 2: of the more near term, immediate societal damage we're seeing,
Speaker 2: as many have referenced the bias already baked into some
Speaker 2: of the data that it's being built upon, the worries
Speaker 2: that the wrong people are being potentially stoped by police,
Speaker 2: the worries that the wrong misinformation is already circulating. Have
Speaker 2: you seen that tackle before we even get onto the
Speaker 2: much larger and more significant concern that you have about extinction.
Speaker 9: Yes, so I think we ought to be.
Speaker 17: If we can't address many of those current risks, then
Speaker 17: I don't have much help us addressing some of these
Speaker 17: larger risks as well.
Speaker 9: I should say.
Speaker 17: That there's a bit of a mix in whether companies
Speaker 17: have been successful at making their EI technologies safe. There's
Speaker 17: some notable failures, like with Being's initial rollout where it
Speaker 17: was threatening users, but some other technologies have been useful
Speaker 17: in being relatively reliable and mitigating their amount of bias.
Speaker 17: So there are fortunate signs that there's some progress being made.
Speaker 17: I'm concerned though, that since the AI companies are competing
Speaker 17: with each other and are locked in an arms race
Speaker 17: with each other, that there won't be enough time for safety,
Speaker 17: that they're going to prioritize development over safety, because if
Speaker 17: they don't prioritize development and making it as powerful as
Speaker 17: quickly as possible, then we won't be able to make
Speaker 17: it safe and bring the risks down to a negligible level.
Speaker 2: Is it a risk that by regulating, self regulating or
Speaker 2: otherwise we start to stifle out the new competitors, the
Speaker 2: smaller players, the academics that you're talking to within labs,
Speaker 2: rather than the large players such as a being or
Speaker 2: a bard or an open AI.
Speaker 17: I think that, well, if we're concerned about academics, I
Speaker 17: think that that would largely be the government to be
Speaker 17: taken care of that. I think that we can definitely
Speaker 17: target some of these catastrophic risks for models that are
Speaker 17: at a certain level of capability. That seems like a
Speaker 17: possible proposal. So we'll basically have to see with these negotiations.
Speaker 17: I'm largely just pushing for us and initiating this process
Speaker 17: and trying to have broader societal cooperation, including international cooperation
Speaker 17: on these issues.
Speaker 4: Dan, how does the public reconcile that the signatories to
Speaker 4: your petition, your initiative were the leaders in the field
Speaker 4: of AI, the AI evangelists for want of a better expression,
Speaker 4: who are now apparently the AI doomers. How have we
Speaker 4: moved so quickly from leadership to cann in that field.
Speaker 17: I think that this is a natural part in any
Speaker 17: industry where initially it's move fast and break things, be
Speaker 17: risk seeking, tinker, throw stuff at the wall, see what sticks.
Speaker 17: But then we start shifting over to a more risk
Speaker 17: averse regime when the technology starts affecting society on a
Speaker 17: larger scale. Now people are actually using these AI technologies,
Speaker 17: and so we ought to be substantially more cautious with
Speaker 17: their potential outcomes as well. It's getting a lot closer
Speaker 17: to human level intelligence. So earlier two years ago, they
Speaker 17: really weren't intelligent at all. But it's quite conceivable that
Speaker 17: in the next few years that in many cognitive domains
Speaker 17: we have AIS that are as good as us or better.
Speaker 9: So I think that's one.
Speaker 17: Of the main things shifting this underlying change in tone,
Speaker 17: Because this air arms race is making it move so quickly,
Speaker 17: people are starting to think we need to rethink our priorities.
Speaker 4: Center for AI Safety Executive and research director Dan Hendrix,
Speaker 4: thank you for your time now. Elizabeth Holmes turned herself
Speaker 4: in at a minimum security prison in Texas, yes today
Speaker 4: to begin her eleven year, three month sentence. The disgraced
Speaker 4: tech founder had been convicted of defrauding investors at her
Speaker 4: failed blood testing startup Pharrhos, and she and her former
Speaker 4: business partner Ramesh Bahwani must together pay four hundred and
Speaker 4: fifty two million dollars in restitution to investors.
Speaker 2: Cara, Well, let's get back to it, ed, because we've
Speaker 2: got more to discuss on artificial intelligence, if you can
Speaker 2: believe it. But we're going to talk about it on
Speaker 2: Wall Street. How hedge funds are actually dipping their toes
Speaker 2: into the pool of AI tools to handle all the
Speaker 2: boring stuff the grant work or on that next there's
Speaker 2: a Bloomberg Wall Street. It's already filled with quants with
Speaker 2: computer wizards. But because not stopping hedge funds from utilizing
Speaker 2: the powers of CHATCHBT for the basics, be better to
Speaker 2: discuss all of this reg news Will Street repolitician atibaseconds.
Speaker 2: So what is it, junior hedge funds analysts?
Speaker 9: Really?
Speaker 2: Allelujah? You don't have to do the basics the grumble
Speaker 2: work here.
Speaker 19: Yeah, there's a reason that it only really works for
Speaker 19: the basics. I don't normally like to use personal examples,
Speaker 19: but I had gotten my degree in quant finance and
Speaker 19: down over at NYU for the NBA program. What they
Speaker 19: do is they take all the students, they have them
Speaker 19: run through all this data. They put it through code
Speaker 19: under different market scenarios, and what they show you is
Speaker 19: that the code the models don't always work.
Speaker 1: The point here being is two things.
Speaker 19: Once, sometimes the data doesn't work, sometimes it's just wrong,
Speaker 19: and the other times the market is just unpredictable. It's
Speaker 19: why there's limitations to how chat GBT.
Speaker 1: Could be used. But Caroline, there are things about.
Speaker 19: Chat GBT that make this kind of rendition of quantitative
Speaker 19: finance different than before, and that is natural language processing
Speaker 19: generated AI that I'll make it easier to read company.
Speaker 1: Reports, research reports.
Speaker 19: News filings, and even company transcripts to hopefully make it
Speaker 19: easier to purse through investing signs down to a third
Speaker 19: minutes to get signals on how devish or hark is
Speaker 19: something is.
Speaker 2: So it feels for now it's about productivity and workflow
Speaker 2: rather than perhaps getting an edge when actually comes to
Speaker 2: your investing. Shenani bassa short sweep but always to the point.
Speaker 2: We love it. And what is going viral? It's the
Speaker 2: finale z ed of Succession and Ted Lasso Warner Brothers Discovery,
Speaker 2: which calls owns HBO. It's so close to three million
Speaker 2: people watch the Succession finale on TV and it's streaming
Speaker 2: app HBO Max. In the US sixty eight percent improvement
Speaker 2: over the last episode of season three, according to the company,
Speaker 2: And meanwhile, it's the top trending topic on Google Trends.
Speaker 2: Ted Lasso's own finale Tealasa has been born a boon,
Speaker 2: of course, to Apple TV, breaking into the Nielsen weekly
Speaker 2: streaming ranking in sixth place during the last week at
Speaker 2: April with this third and last season. Meanwhile, though our
Speaker 2: Brits aren't watching it much.
Speaker 3: Right, it's unbelievable.
Speaker 4: I mean, Apple doesn't disclose numbers, but it's all everyone's
Speaker 4: talking about on social succession is on fin Twitch. Three
Speaker 4: million doesn't seem like a lot in a country of
Speaker 4: three thirty three hundred and thirty million people, but as
Speaker 4: you know, we're both big fans. That does it for
Speaker 4: this edition. Kara of Bloomberg Technology, don't forget so much
Speaker 4: to recap and what's been a short week packed with
Speaker 4: news on our podcast, Apple, Spotify, iHeart, wherever you get
Speaker 4: your podcast from New York and San Francisco.
Speaker 3: This is Bloomberg