WEBVTT - China Urges Companies Not to Use Nvidia’s H20 Chips 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:18.560 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.920 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:23.120 us live on YouTube. 0:00:24.000 --> 0:00:25.599 All Right, I have to be honest with you. I'm 0:00:25.720 --> 0:00:27.720 having a hard time keeping up with this whole China 0:00:28.320 --> 0:00:33.160 in video AMDB, the fifteen percent tariffs? Can the chips? 0:00:33.280 --> 0:00:35.159 Are they welcome in China? Are they not? Can they 0:00:35.159 --> 0:00:37.720 sell them in China? Let's go to Ed Lolo. He's 0:00:37.760 --> 0:00:39.960 on top of this stuff. Ed loves the Bloomberg Technology 0:00:40.000 --> 0:00:43.800 co host. He's over in London right now. Hey, Ed, 0:00:43.800 --> 0:00:45.040 what's the latest here in China? 0:00:45.240 --> 0:00:45.360 Is? 0:00:45.760 --> 0:00:48.440 I guess they're urging firms not to use in video's 0:00:48.560 --> 0:00:51.080 H twenty chip. I thought things were kind of thawing 0:00:51.080 --> 0:00:51.560 out there. 0:00:51.920 --> 0:00:54.400 Yeah, this is fast moving. This is, you know, the 0:00:54.440 --> 0:00:57.240 only appropriate time of the phrase market whip saw that 0:00:57.280 --> 0:01:00.240 I've been able to use to date in this contact. 0:01:00.400 --> 0:01:05.760 The Information has reported that China's Internet regulator has ordered 0:01:06.200 --> 0:01:11.399 firm ordered specific technology companies Ali Barber, Tencent among them, 0:01:11.520 --> 0:01:15.640 to stop placing orders of in Nvidia's H twenty. The 0:01:15.800 --> 0:01:18.760 H twenty is the China specific chip that had had 0:01:18.840 --> 0:01:22.680 performance engineered out of it that was subject to export control. 0:01:22.959 --> 0:01:27.040 What we knew, by the way as of Monday morning 0:01:27.560 --> 0:01:30.840 was that Nvidia had not in any recent months shipped 0:01:30.880 --> 0:01:34.520 any H twenties to China anyway. But the problem with 0:01:34.560 --> 0:01:36.720 this latest report, which has been in the last hour 0:01:36.840 --> 0:01:40.600 or so, is that it's a much more extreme move 0:01:40.720 --> 0:01:43.760 by China than what Bloomberg had reported overnight, which was 0:01:43.800 --> 0:01:49.320 basically an advisory. Chinese authorities had strongly recommended to various 0:01:49.680 --> 0:01:53.600 Chinese technology companies not to use the H twenty in particular, 0:01:53.800 --> 0:01:57.320 as well as one chip from AMD. The market's reacting, 0:01:57.400 --> 0:01:58.520 that's all that matters. 0:01:58.280 --> 0:02:01.920 Right, So you're seeing shores of Nvidia down a touch, 0:02:01.960 --> 0:02:04.760 about eight tens of a percent here. Can you just 0:02:04.800 --> 0:02:07.480 speak a bit more about what are the implications here 0:02:07.560 --> 0:02:09.080 for in Nvidia in particular. 0:02:10.160 --> 0:02:13.040 Yeah, so the state of play is really important to understand. 0:02:13.320 --> 0:02:16.959 In Vidia's H twenty chip is not the best chip 0:02:17.040 --> 0:02:20.960 that a Chinese technology company can buy. Huawei, which is 0:02:21.280 --> 0:02:26.000 essentially China's domestic champion, has actually several generations of chip 0:02:26.320 --> 0:02:29.480 that have better performance and power not just more than 0:02:29.480 --> 0:02:32.480 the Age twenty, but of in Nvidia's H two hundred chip, 0:02:32.639 --> 0:02:35.760 which until very recently was the sort of cutting ed 0:02:36.160 --> 0:02:39.839 generation accelerator that many American companies used. They've since moved 0:02:39.880 --> 0:02:42.399 on to a later generation called Blackwell that's not available 0:02:42.400 --> 0:02:47.160 in China. The President, as you know, confirmed yesterday about 0:02:47.160 --> 0:02:49.960 twenty four hours ago, that he had cut a deal 0:02:50.000 --> 0:02:53.680 and ad hoc arrangement, a quid pro quo with both 0:02:53.800 --> 0:02:57.520 Nvidia and AMD where he would allow them to export 0:02:57.639 --> 0:03:01.880 these China specific chips with lower power performance in exchange 0:03:01.919 --> 0:03:05.240 for fifteen percent of the revenues gained from that market 0:03:05.400 --> 0:03:09.560 for Chinese AI accelerators. The problem is, like, what are 0:03:09.560 --> 0:03:12.639 we interpreting this as. Is China responding in this way 0:03:12.720 --> 0:03:16.480 because it's a tactic in the broader negotiations between the 0:03:16.560 --> 0:03:19.200 United States and China of trade overall, that is what 0:03:19.200 --> 0:03:22.480 the analyst community thinks. Or is China protecting its own 0:03:22.520 --> 0:03:26.519 domestic industry for AI accelerators making sure that Chinese tech 0:03:26.520 --> 0:03:29.680 companies buy a Chinese AI chip. Both are possible. The 0:03:29.760 --> 0:03:32.880 main conclusion of cross both is that now Wall Street 0:03:32.919 --> 0:03:35.640 has to reassess how likely it is that in Video 0:03:35.680 --> 0:03:38.440 and AMD do business in that market, at least in 0:03:38.480 --> 0:03:39.520 the near term. 0:03:40.280 --> 0:03:42.600 Ed I guess if I were an analy certain investor, 0:03:42.600 --> 0:03:45.000 I'd be saying, I think I have to factor into 0:03:45.000 --> 0:03:47.360 my model that the intro would be know that I 0:03:47.400 --> 0:03:50.280 can't imagine. Yeah, some of the advanced chips being allowed 0:03:50.320 --> 0:03:52.960 into China just doesn't feel like the political winds are 0:03:52.960 --> 0:03:54.000 blowing that way at this point. 0:03:55.000 --> 0:03:58.560 You know, there are certain sections of Wall Street the 0:03:58.600 --> 0:04:02.400 most bullish analysts in Video's next quarter coming up is 0:04:02.400 --> 0:04:05.320 the fiscal second quarter. Some people saw them doing seven 0:04:05.320 --> 0:04:08.760 billion dollars of sales in China on the basis that, Okay, 0:04:08.840 --> 0:04:11.240 President said, it's cool even if you have to pay 0:04:11.280 --> 0:04:13.720 a fifteen percent so called export tax, and there are 0:04:13.800 --> 0:04:17.800 questions about how constitutional that that rule would be, which 0:04:17.800 --> 0:04:20.159 we can get into shore. It's still better to have 0:04:20.240 --> 0:04:22.840 eighty five percent access to a market than zero. So 0:04:22.880 --> 0:04:25.200 everyone was like, they can do this quickly, like just 0:04:25.240 --> 0:04:27.880 turn the tap back on. I would wager I think 0:04:27.920 --> 0:04:30.040 I said this yesterday anyway, But twenty four hours on, 0:04:30.120 --> 0:04:33.839 given the newsflow, they're probably reassessing their model down and 0:04:33.880 --> 0:04:35.719 down and down closer towards zero. 0:04:36.920 --> 0:04:39.400 And we of course know that China is a major 0:04:39.400 --> 0:04:41.160 player here when we think about in video. But and 0:04:41.279 --> 0:04:43.920 Vida also holds a significant market share in the AI 0:04:44.000 --> 0:04:47.200 chip sector about ninety five percent. So tell us Abit 0:04:47.400 --> 0:04:50.080 how big of a deal this most recent news is 0:04:50.120 --> 0:04:52.679 and how does it kind of change how you look 0:04:52.760 --> 0:04:54.960 ahead of these earnings that we're going to be getting 0:04:55.000 --> 0:04:55.440 coming soon. 0:04:55.960 --> 0:04:58.040 Well, the thing is, and the reason why, you know, 0:04:58.520 --> 0:05:01.039 Paor and I back and forth over over the sellside 0:05:01.040 --> 0:05:03.200 over the last couple of days. As important is there's 0:05:03.240 --> 0:05:06.320 been zero business for nvideo in China, at least since 0:05:06.360 --> 0:05:08.960 the turn of the year. You know, they wrote down 0:05:09.040 --> 0:05:12.000 five billion dollars worth of chips that were specifically made 0:05:12.000 --> 0:05:14.600 for that market, and they haven't sent any of them there. 0:05:14.920 --> 0:05:17.200 Let's say they're just sitting in a warehouse somewhere. They 0:05:17.200 --> 0:05:21.640 probably are. However, when you think about the context of 0:05:21.680 --> 0:05:25.320 AI development, the number of researchers and companies working on models, 0:05:25.360 --> 0:05:28.119 about half of the world's activity is happening in China. 0:05:28.440 --> 0:05:31.680 It was an important end market. Will we return. 0:05:31.839 --> 0:05:34.960 Stay with us More from Bloomberg Intelligence coming up after this. 0:05:37.160 --> 0:05:40.840 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:05:40.920 --> 0:05:44.280 weekdays at ten am Eastern on Applecarclay and Android Otto 0:05:44.440 --> 0:05:47.479 with the Bloomberg Business app. Listen on demand wherever you 0:05:47.520 --> 0:05:50.680 get your podcasts, or watch us live on YouTube. 0:05:51.480 --> 0:05:54.240 Looking at the cannabis company, Kilray Brands, it's a name 0:05:54.279 --> 0:05:56.480 we've been talking about a little bit this morning. Stacks 0:05:56.560 --> 0:06:00.160 up about nine ten percent here. That's a good news. 0:06:00.200 --> 0:06:01.880 The band news it is down about twenty five percent 0:06:02.000 --> 0:06:04.039 year to date, and I think it's up on part. 0:06:04.320 --> 0:06:07.440 Looking at some of the Bloomberg reporting here, President Trump 0:06:07.480 --> 0:06:11.000 made some comments that maybe he'd be open to reclassifying cannabis, 0:06:11.000 --> 0:06:15.279 maybe as a less restrictive drug their substance. So I 0:06:15.320 --> 0:06:17.359 went to bring in Ken Shay, he covers all this 0:06:17.480 --> 0:06:21.240 stuff for Bloomberg Intelligence. Senior consumer products analysts for Bloomberg Intelligence. 0:06:21.520 --> 0:06:23.440 Ken talk to us about the comments that President Trump 0:06:23.520 --> 0:06:26.720 made as it relates to the cannabis industry and how 0:06:26.760 --> 0:06:28.039 impacko could that be? 0:06:29.000 --> 0:06:32.240 Yeah, Hi, Paul, sure. So what I understand is President 0:06:32.240 --> 0:06:35.680 Trump over the weekend made some comments with regard to 0:06:36.160 --> 0:06:38.880 a marijuana rescheduling in the US, a topic that's been 0:06:39.040 --> 0:06:42.920 very top of mine among this industry for a while, 0:06:44.000 --> 0:06:47.320 and apparently he said that the administration was going to 0:06:47.320 --> 0:06:51.280 be looking into it now, that's really a long way 0:06:51.279 --> 0:06:55.200 between that and actual rescheduling. But nevertheless, this beaten down 0:06:55.240 --> 0:06:58.719 industry and the close observers too, it took that as 0:06:58.760 --> 0:07:01.919 a dose of old or you know, overdo good news. 0:07:01.920 --> 0:07:04.159 I mean, these stocks have have you alluded to before, 0:07:04.279 --> 0:07:06.359 are down, you know, over fifty percent or so of 0:07:06.400 --> 0:07:09.000 many of the big ones. So this hint of good 0:07:09.040 --> 0:07:12.880 news has led to a rally yesterday and today. But 0:07:13.000 --> 0:07:17.160 you know, I would advise observers to you know, temper 0:07:17.200 --> 0:07:20.960 their enthusiasm because, as I mentioned, it's a long process 0:07:21.120 --> 0:07:26.240 between looking into it and actual rescheduling it, and it's 0:07:26.280 --> 0:07:29.600 even further to legalize it, which would really bestow the 0:07:29.800 --> 0:07:32.080 greatest benefits of all. 0:07:32.200 --> 0:07:34.320 So you mentioned how we've seen a lot of these 0:07:34.360 --> 0:07:36.600 stocks really taking a beating this year. Can you just 0:07:36.680 --> 0:07:40.280 kind of contextualize here for our listeners what has created 0:07:41.040 --> 0:07:42.200 this this lag? 0:07:43.560 --> 0:07:48.480 Yeah? Sure, so the market really had turned negative for 0:07:48.480 --> 0:07:51.480 the last couple of years actually with a lack of 0:07:51.720 --> 0:07:55.560 progress made on federal reform of this industry. You know, 0:07:55.600 --> 0:07:58.920 many states have taken it upon themselves to legalize either 0:07:59.200 --> 0:08:02.640 at the medical or adult use level. I mean some 0:08:02.720 --> 0:08:05.560 forty states now talking to a vast majority of states 0:08:05.560 --> 0:08:09.440 have now legal cannabis in some form, so they a 0:08:09.520 --> 0:08:12.000 lot of the industry players and the market thought it's 0:08:12.040 --> 0:08:14.360 just a matter of time that the federal government would 0:08:14.760 --> 0:08:20.040 retire these really old you know, the treaties that require 0:08:20.440 --> 0:08:23.760 cannabis to be a Schedule one drug and then really 0:08:23.800 --> 0:08:26.760 puts the handcuffs on this industry to do a lot 0:08:26.800 --> 0:08:29.640 of good things in terms of business. You know, consumer 0:08:29.680 --> 0:08:32.599 product companies in general have the benefits of the economies 0:08:32.640 --> 0:08:36.319 of scale because they have interstate commerce, they can advertise, 0:08:36.840 --> 0:08:41.079 they're not hurt by onerous taxes which these companies are 0:08:41.120 --> 0:08:44.120 subject to. So a lot of a lot of barriers 0:08:44.200 --> 0:08:48.200 facing this industry still given the current status, and so 0:08:49.280 --> 0:08:52.440 it's really over the prior to these comments over the weekend, 0:08:52.520 --> 0:08:54.360 I think there's really been a sense of throwing the 0:08:54.400 --> 0:08:58.480 towel in among investors with this group, and so that 0:08:58.640 --> 0:09:01.760 that's why you're seeing this at the magnification of response 0:09:01.800 --> 0:09:03.120 to this news today. 0:09:03.760 --> 0:09:08.640 So can if the majority of states have legalized cannabis, 0:09:08.960 --> 0:09:11.920 what's the what's the problem with the federal government coming 0:09:11.920 --> 0:09:12.840 around and doing the same. 0:09:14.000 --> 0:09:17.240 Well, the biggest thing, Paul, is because This is a 0:09:17.280 --> 0:09:19.719 treaty that was signed back in the seventies and the 0:09:19.800 --> 0:09:24.240 Nixon administration that again it's part of the anti drug 0:09:24.280 --> 0:09:26.960 wars back then, they set this in a stone basically, 0:09:27.000 --> 0:09:30.319 and only an Act of Congress can change that treaty 0:09:30.679 --> 0:09:34.560 to no longer include marijuana cannabis, uh, you know, as 0:09:34.600 --> 0:09:38.720 a Schedule one drug. So so I guess you know, 0:09:38.760 --> 0:09:41.000 Congress doesn't seem to be willing to act. I mean, 0:09:41.040 --> 0:09:43.880 that's the biggest thing that the biggest blockade to legalization, 0:09:44.559 --> 0:09:48.920 kind of the shortcut reclassification under the Controlled Substances Act. 0:09:49.600 --> 0:09:52.080 A lot of the industry is saying, look, you're you're 0:09:52.120 --> 0:09:54.360 putting us at Schedule one, which is the same level 0:09:54.400 --> 0:09:57.760 as you know, ecstasy and only these horrible harmful things. 0:09:57.840 --> 0:10:00.280 And the definition for a Schedule one is there's no 0:10:00.760 --> 0:10:04.120 proven medical value. Well, that kind of contradicts the own 0:10:04.280 --> 0:10:10.199 FDA's decision a few years ago when it approved a 0:10:10.200 --> 0:10:13.480 a cannabis drug called epidialects, which is used to treat 0:10:13.480 --> 0:10:18.760 seizures in rare cases for epilepsy. So clearly the medical 0:10:18.840 --> 0:10:20.719 use and it doesn't belong to the Schedule one if 0:10:20.720 --> 0:10:22.800 it was your scheduled if it was rescheduled to three, 0:10:23.000 --> 0:10:25.520 it would still remain illegal unless that treaties are changed. 0:10:26.000 --> 0:10:29.920 It could at least alleviate something called two ade and 0:10:29.960 --> 0:10:32.839 a tax code which basically says, look, if you're in 0:10:32.840 --> 0:10:35.520 the drug business, maybe a bad thing, but we still 0:10:35.520 --> 0:10:38.880 want your taxes. And so they don't allow these companies, 0:10:39.600 --> 0:10:44.520 these cannabis companies to deduct ordinary business expenses like rent, salary, marketing, 0:10:45.040 --> 0:10:47.720 and so as you can imagine, the taxation hit to 0:10:47.760 --> 0:10:51.880 these companies is just dramatic, and that's really their biggest problem. 0:10:52.880 --> 0:10:55.240 So there was a time back in the early nineteen 0:10:55.280 --> 0:10:58.480 twenties when cigarettes were illegal and then of course we 0:10:58.559 --> 0:11:00.400 know now when we look at the industry, the tobacco 0:11:00.440 --> 0:11:03.920 industry globally, it's a multi billion dollar industry. So if 0:11:03.960 --> 0:11:06.079 we think about cannabis stocks and a lot of these 0:11:06.120 --> 0:11:08.920 companies here, what's the bowl case. 0:11:10.840 --> 0:11:13.560 Well, the ball case is that at some point either 0:11:13.600 --> 0:11:18.120 gets rescheduled or legalized, and that's a long, long term 0:11:18.160 --> 0:11:20.560 Can I remember the market as a discounting mechanism is 0:11:20.559 --> 0:11:23.000 looking you know, well into the future. Now, if you're 0:11:23.200 --> 0:11:26.080 a real bull, you look well into the future. You know, 0:11:26.120 --> 0:11:28.920 these companies at the gross margin line are very profitably. 0:11:28.920 --> 0:11:32.480 It's about forty to fifty sixty percent gross margins. That's 0:11:32.520 --> 0:11:36.000 a pretty good business. But it's when you get below 0:11:36.080 --> 0:11:39.080 that they really get hurt, particularly the taxation line. So 0:11:39.080 --> 0:11:40.920 if you're a ball on this industry, you say, you 0:11:40.960 --> 0:11:42.560 know what, these are pretty good companies. You need a 0:11:42.600 --> 0:11:47.160 license to compete, so there's natural barriers to entry. We 0:11:47.240 --> 0:11:50.080 know there's a demand for this product. It's been around 0:11:50.120 --> 0:11:53.000 for a long time, so you know, I think we 0:11:53.200 --> 0:11:55.720 just get the regulation right, this could be a pretty 0:11:55.760 --> 0:11:56.319 good business. 0:11:57.600 --> 0:12:01.120 Ken you also cover the big tobacco companies. How are they, 0:12:01.320 --> 0:12:03.959 how have they been impacted or may they be impacted 0:12:04.280 --> 0:12:07.800 with the various tariff discussions that are out there. 0:12:09.440 --> 0:12:12.720 Well, the US tobacco industry is really a domestic business. 0:12:12.800 --> 0:12:16.560 You know the big guys, you know Aultria, Uh, they 0:12:16.840 --> 0:12:21.200 source virtue all the tobacco domestically for domestic use, so 0:12:21.280 --> 0:12:25.040 they were only exposure to the tariffs is really very small. 0:12:25.120 --> 0:12:28.760 Some of the materials they use, like they're smokeless tobacco cans, 0:12:29.200 --> 0:12:32.199 ten metals, things like that. Then they you know, get 0:12:32.200 --> 0:12:35.800 from suppliers offshore and that could be indirect problems. I mean, 0:12:35.840 --> 0:12:40.880 you know, other suppliers could raise prices in a small 0:12:40.920 --> 0:12:43.720 way for products for other inputs, but by and large, 0:12:43.760 --> 0:12:47.080 they they've been skirt they've been they can skirt this problem, 0:12:47.200 --> 0:12:49.960 and it's not really an issue for the US tobacco industry. 0:12:50.559 --> 0:12:53.040 Quickly hopping off of that question, I'm going to ask 0:12:53.080 --> 0:12:56.400 the same of cannabis. Is that more a domestic industry here? 0:12:56.720 --> 0:12:58.160 Any tariff concerns. 0:12:59.080 --> 0:13:01.920 No tariffs concerned. Matter of fact, it's illegal to import 0:13:01.960 --> 0:13:06.360 cannabis into the US, so it would only be to 0:13:06.400 --> 0:13:09.840 the extent where the vaporizers and the electronic goods and 0:13:09.880 --> 0:13:12.600 the you know, the ancillary products that are used with 0:13:12.720 --> 0:13:17.959 cannabis are subject to those import terrorists. But the planet itself, 0:13:18.280 --> 0:13:19.680 there's no tiriff issue. 0:13:20.080 --> 0:13:23.240 Say with us. More from Bloomberg Intelligence coming up after this. 0:13:25.360 --> 0:13:29.079 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:29.160 --> 0:13:32.520 weekdays at ten am Eastern on Applecarplay and Android Auto 0:13:32.640 --> 0:13:35.720 with the Bloomberg Business App. Listen on demand wherever you 0:13:35.760 --> 0:13:38.720 get your podcasts, or watch us live on YouTube. 0:13:39.640 --> 0:13:41.600 Looking at this market, we still got some greena on 0:13:41.640 --> 0:13:43.040 at this reen here today I want to check in 0:13:43.040 --> 0:13:45.600 with on rog run on a Bloomberg intelligence technology analysts 0:13:45.840 --> 0:13:49.079 honorack I Steem remember something in the zeitgeist, as Tom 0:13:49.160 --> 0:13:52.720 Keen would say, Elon Musk not real happy with Apple 0:13:52.960 --> 0:13:55.120 and maybe even vice versa. I'm not sure what's going 0:13:55.160 --> 0:13:55.520 on there. 0:13:56.800 --> 0:13:58.680 Yeah, if you go back a few years ago, you know, 0:13:58.720 --> 0:14:01.679 Elon made a big deal of about the fee that 0:14:02.240 --> 0:14:04.559 they have to pay on for you know, X subscriber 0:14:04.600 --> 0:14:06.559 to the thirty percent or so. I mean there was 0:14:06.600 --> 0:14:09.440 a visible argument. But you know, in a few days 0:14:09.480 --> 0:14:11.960 he was seen, you know, walking around with him cocaine 0:14:12.400 --> 0:14:14.720 in the campus, and you know, the whole thing. I mean, 0:14:14.760 --> 0:14:17.680 today's complain was a bit odd because apps on the 0:14:17.720 --> 0:14:20.520 App Store don't go up just because Apple wants to 0:14:20.560 --> 0:14:22.720 do it that way. I mean, they go up because 0:14:23.040 --> 0:14:25.640 users are downloading one app over the other. In fact, 0:14:26.240 --> 0:14:29.000 the other day, I remember the perplexity CEO was saying 0:14:29.040 --> 0:14:32.480 that in India App Store, you know, his app is 0:14:32.520 --> 0:14:35.040 above Chat, GPT and so forth. So I mean he's 0:14:35.080 --> 0:14:37.960 basically complaining that, you know, Xai is not getting the 0:14:37.960 --> 0:14:40.840 same love as Chad GPT is, which to me is 0:14:40.920 --> 0:14:43.960 understandable given you know where the presence of that is 0:14:44.000 --> 0:14:46.240 in terms of the ecosystem and the users. So I 0:14:46.280 --> 0:14:49.160 think that's really, you know, some argument going there, but 0:14:49.400 --> 0:14:52.320 I think it's it's just news. Frankly, it's it's there's 0:14:52.360 --> 0:14:53.000 not much to it. 0:14:53.480 --> 0:14:55.320 I mean, so you mentioned not much to it. So 0:14:55.400 --> 0:14:57.640 where do you go from here? I mean, how what 0:14:57.720 --> 0:15:00.280 steps forward would he need to make to see any 0:15:00.320 --> 0:15:00.920 changes here? 0:15:02.320 --> 0:15:04.280 He has to go prove the world that his grock 0:15:04.400 --> 0:15:08.240 model is better than Chad GPT and their models. They 0:15:08.440 --> 0:15:10.920 just launched a brand new model and they have to 0:15:10.920 --> 0:15:13.640 go figure out whether it's better than that, And he 0:15:13.680 --> 0:15:17.240 has to go and sell that to either enterprises or 0:15:17.320 --> 0:15:20.320 the consumer application and become you know, have the same 0:15:20.400 --> 0:15:22.240 number of users. I mean, you just can't say that, 0:15:22.440 --> 0:15:24.520 you know, my product is not doing better because somebody 0:15:24.560 --> 0:15:27.840 else is you know, not giving it the same amount 0:15:27.880 --> 0:15:30.920 of love. Even Google's model Gemini is doesn't have that 0:15:31.040 --> 0:15:33.640 level of user based right now. I mean, the first 0:15:33.640 --> 0:15:36.920 movement advantage is open AI and Chad GPT, and the 0:15:37.000 --> 0:15:40.560 user growth has just been phenomenal, you know, on that end, 0:15:40.600 --> 0:15:42.520 and there isn't I you know, I don't think I 0:15:42.560 --> 0:15:45.200 know anybody at this time who's not using Chad GPT 0:15:45.320 --> 0:15:47.640 on their phone or any other device that they. 0:15:47.560 --> 0:15:50.040 Have you can look at me, I don't use it. 0:15:51.000 --> 0:15:53.400 Let's talk about Apple. I see the stock having this 0:15:53.520 --> 0:15:56.680 nice move here, you know, during the month of August. 0:15:56.720 --> 0:16:00.400 Here is this a sense that maybe they'll do something 0:16:00.480 --> 0:16:02.560 to maybe get a little bit more in the game 0:16:02.600 --> 0:16:03.520 as it relates to AI. 0:16:04.960 --> 0:16:07.040 I think we to discuss this a few months ago, 0:16:07.120 --> 0:16:10.520 when you know, the President came out and criticized them 0:16:10.720 --> 0:16:12.640 for building phones in India, and you know, the stock 0:16:12.720 --> 0:16:15.080 really took a hte at that point. But I think 0:16:15.120 --> 0:16:18.080 them could do the right thing. He announced the big plan, 0:16:18.240 --> 0:16:21.120 He went to the White House, he you know, essentially 0:16:21.280 --> 0:16:25.560 gave President Trump an assurance that he is working very 0:16:25.560 --> 0:16:28.480 hard to bring whatever he can in the US. You know, 0:16:28.520 --> 0:16:31.000 this was just glass at one point, but I think 0:16:31.000 --> 0:16:34.160 that really made a huge pivot. The President was extremely 0:16:34.200 --> 0:16:36.880 complimentary of the stuff that he's doing. So I mean, 0:16:36.920 --> 0:16:38.840 since then, you can see stocks pin at a tier. 0:16:39.000 --> 0:16:42.640 So there was danger that you know, it could they 0:16:42.680 --> 0:16:45.720 could be additional surcharge on Apple or anything out there. 0:16:45.960 --> 0:16:48.360 So you don't want to be against the president at 0:16:48.360 --> 0:16:50.840 this point. So I think Apple's done a good job 0:16:50.880 --> 0:16:53.680 of managing that. Now the question is whether iPhone seventeen 0:16:53.680 --> 0:16:56.440 will deliver. We've heard it's got a really cool new 0:16:56.440 --> 0:16:59.080 phone coming out, so I think things are looking good 0:16:59.120 --> 0:17:01.720 for Apple from that, but I'm still waiting for one 0:17:01.760 --> 0:17:04.840 particular element, that is the Google case and whether Apple 0:17:04.880 --> 0:17:08.320 gets to keep the powers partially or somewhat of the 0:17:08.320 --> 0:17:09.760 payment that it gets from Google. 0:17:10.080 --> 0:17:13.159 Stay with us more from Bloomberg Intelligence coming up after this. 0:17:15.359 --> 0:17:19.080 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:19.160 --> 0:17:22.199 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:22.240 --> 0:17:25.560 Auto with the Bloomberg Business App. Listen on demand wherever 0:17:25.600 --> 0:17:29.160 you get your podcasts, or watch us live on YouTube. 0:17:29.960 --> 0:17:33.720 Next guest had a fascinating story out Bloomberg Business Week 0:17:33.760 --> 0:17:38.520 cover story Treasury Secretary Scott Bessant. The US Treasury sector 0:17:38.560 --> 0:17:42.480 has the ear of an impulsive president and nervous investors worldwide. 0:17:42.520 --> 0:17:45.600 Hope it stays that way. And Eric Schatsker has an 0:17:45.600 --> 0:17:49.680 exclusive interviewed Eric Schatsker, Bloomberg New Economy Editorial director, Should 0:17:49.680 --> 0:17:51.040 we just live here in on our Bloomberg and Active 0:17:51.040 --> 0:17:54.200 Broker studio. Eric your setan Scott beston for an extended 0:17:54.200 --> 0:17:56.080 period of time. What were some of your takeaways there? 0:17:56.480 --> 0:17:59.560 Gosh, Well, first of all, the man is unbelievably busy. 0:18:00.240 --> 0:18:03.560 Spent a day at the Treasury Department with ALCOHOLICU Dan Flatley, 0:18:04.280 --> 0:18:07.840 and to observe how much he gets done in the 0:18:07.840 --> 0:18:10.439 course of a day, including spending an extended amount of 0:18:10.440 --> 0:18:13.000 time with US, gives you a window into the life 0:18:13.000 --> 0:18:15.880 of the Treasury Secretary in the Trump administration. And it's 0:18:15.880 --> 0:18:19.080 important to emphasize in the Trump administration because this particular 0:18:19.119 --> 0:18:22.920 Treasury Secretary has been given a whole host of responsibilities 0:18:22.920 --> 0:18:26.520 that go beyond that of the typical Treasury secretary. We 0:18:26.600 --> 0:18:29.399 know that the Treasury Secretary in any administration is involved 0:18:29.400 --> 0:18:32.200 in tax policy, is involved in economic sanctions, is involved 0:18:32.200 --> 0:18:35.600 in financial regulation, and the like. But President Trump has 0:18:35.640 --> 0:18:40.240 tasked Scott Bessen with trade negotiations with striking and not 0:18:40.400 --> 0:18:43.960 just any old trade negotiations. China perhaps the most difficult 0:18:43.960 --> 0:18:47.720 trade negotiation of all, Japan, which was successful, South Korea, 0:18:47.760 --> 0:18:52.040 which was successful, Indonesia. The list goes on. He's also 0:18:52.080 --> 0:18:56.280 the acting IRS Commissioner. He also crafted the deal that 0:18:56.480 --> 0:18:59.520 the very novel and original deal that the United States 0:18:59.560 --> 0:19:03.199 struck with Ukraine for a share of that country's mineral 0:19:03.280 --> 0:19:06.960 resource wealth back in April. These are not and furthermore, 0:19:06.960 --> 0:19:09.800 I have to add he was instrumental in getting the 0:19:09.800 --> 0:19:14.760 One Big Beautiful Bill through opposition in both among Republicans 0:19:14.760 --> 0:19:16.840 in both the House and the Senate in order to 0:19:16.880 --> 0:19:20.359 meet the president's self imposed July fourth deadline. So Scott 0:19:20.359 --> 0:19:24.080 Besson has taken on way more than your traditional Treasury 0:19:24.160 --> 0:19:27.720 secretary does, and much of that is because the President 0:19:27.800 --> 0:19:29.679 himself has asked him to do so. 0:19:30.640 --> 0:19:32.520 And it seems as though a lot of people see 0:19:32.680 --> 0:19:35.239 Besson as really having the president's ear here. And this 0:19:35.280 --> 0:19:38.800 is a really fantastic story. Okay, what was the most 0:19:38.840 --> 0:19:40.960 surprising element through your conversation with him? 0:19:41.000 --> 0:19:41.080 Oh? 0:19:41.119 --> 0:19:44.480 Well, there are so many surprises. I would say that 0:19:44.600 --> 0:19:48.240 the thing I didn't fully appreciate and which he spelled 0:19:48.240 --> 0:19:51.120 out for us, and which others spelled out for us, 0:19:51.359 --> 0:19:55.200 is the degree to which this is something he sought 0:19:55.280 --> 0:19:59.119 after going back many years. Besson told us that he 0:19:59.200 --> 0:20:02.720 thought about joining the Trump campaign as early as twenty sixteen, 0:20:03.160 --> 0:20:05.160 but at that time he just started a new hedge fund, 0:20:05.240 --> 0:20:07.560 Key Square Group, and he didn't feel like he could 0:20:07.720 --> 0:20:11.520 abandon his employees or abandon his clients. But what he 0:20:11.640 --> 0:20:14.080 did do was start to get to know the people 0:20:14.200 --> 0:20:18.399 close to Trump almost immediately thereafter, starting with Steve Bannon 0:20:19.480 --> 0:20:24.160 and subsequently Peter Navarro, Stephen Moore, Kevin Hassett. For example, 0:20:24.200 --> 0:20:27.639 Trump's close economic advisor's Art Lafer. He went down to 0:20:27.720 --> 0:20:31.159 see Art Lafer in the South, made a pilgrimage of 0:20:31.200 --> 0:20:37.199 starts to get Art Lafer's blessing for his ambitions to 0:20:37.200 --> 0:20:41.520 become Treasury secretary, and these he didn't make known to 0:20:41.600 --> 0:20:45.679 Trump until October of twenty twenty three. Excuse me, November 0:20:45.720 --> 0:20:47.439 of twenty twenty three throws, So it was almost a 0:20:47.480 --> 0:20:51.040 six year period in which he was maneuvering to position 0:20:51.160 --> 0:20:54.560 himself for a shot at Treasury secretary. And when he 0:20:54.640 --> 0:20:58.280 saw Trump in that November twenty twenty three meeting at 0:20:58.320 --> 0:21:01.280 mar Alago, Trump asked him if he wanted the job, 0:21:01.320 --> 0:21:04.240 if he was interested in being fed chair, and Besson said, no, 0:21:04.280 --> 0:21:05.400 I have another job in mind. 0:21:06.160 --> 0:21:11.760 Very good. The Street Eric gives Scott Besson a fair 0:21:11.800 --> 0:21:15.200 amount of credit for walking to President back and maybe 0:21:15.240 --> 0:21:18.560 some of the more difficult tariffs that were initially announced. 0:21:19.240 --> 0:21:22.720 Is that a valid point that Scott Beson play a 0:21:22.720 --> 0:21:25.120 big role in walking the president back a little bit, 0:21:25.119 --> 0:21:26.439