Speaker 1: From Mahard where Innovation, money and power Collie in Silicon
Speaker 1: Vallet NBN. This is Bloomberg Technology with Caroline Hyde and
Speaker 1: Ed Ludlow.
Speaker 2: I'm Caroline Hide at Bloomberg's Welth headquarters in New York
Speaker 2: and I met Ludlow in San Francisco.
Speaker 3: This is Bloomberg Technology.
Speaker 2: Coming up, we'll talk the state of fintech and of
Speaker 2: course earnings with the CEO of SOFI as a company
Speaker 2: beats and raises its revenue forecast for the year plus.
Speaker 4: President Biden plans to issue a sweeping executive order on
Speaker 4: artificial intelligence. Today will break down the details and its impact.
Speaker 2: And we push ahead to the all important Apple event
Speaker 2: of the year. It's the last one they have and
Speaker 2: it's set to veil two new macs and processes later
Speaker 2: tonight at a scary fest.
Speaker 5: But first let's check in.
Speaker 2: On these markets, because look, there's a tug of war
Speaker 2: going on, whether it's geopolitics on the one side, whether
Speaker 2: or not it's well questions of whether direction of travel
Speaker 2: we saw off too far too fast when it comes
Speaker 2: to tech. We're actually seeing money move into stock markets today,
Speaker 2: particularly in the nasdac COAB a percentage point are the
Speaker 2: benchmarks well rallying off of what have been over sold territory,
Speaker 2: particularly as geopolitics still does swell and we're seeing some
Speaker 2: concerns about the conflict in the Middle East, but maybe
Speaker 2: not escalating the way that many had imagined. So we
Speaker 2: actually see perhaps a move out of some of the
Speaker 2: haven's of choice yields Actually pushing up on the ten
Speaker 2: year yield is notable though also we've got the all
Speaker 2: important fair and we've also got, of course what we
Speaker 2: see from the Treasury in terms of bondishments coming up
Speaker 2: for the last quarter.
Speaker 5: In the next year, we're looking at crude just.
Speaker 2: Off by three and a half percent, that really playing
Speaker 2: into perhaps some of the anxiety just pulling back, ever
Speaker 2: so slightly cautiously when it comes to of course Israel
Speaker 2: and Hamas. Let's move on and have a little look
Speaker 2: at oh, the riscacid a choice. When it comes to
Speaker 2: the blue Blag technology, we're looking at crypto look, actually
Speaker 2: not much volatility on a day. We're actually we've seen
Speaker 2: such buying in the previous week. There is still thin
Speaker 2: liquidity here ed but we're seeing thirty four thousand, a
Speaker 2: level that's being so stayed for now. That's as the
Speaker 2: dollar is on the downside.
Speaker 3: Yep. Three single names I'm watching.
Speaker 4: The first is Apple, Yeah, the scary fast event this evening,
Speaker 4: the expectation a new iMac and an updated higher end
Speaker 4: MacBook Pro, but also an emphasis on chips. We think
Speaker 4: they'll unveil the M three latest generation processor. The stock
Speaker 4: being supported up one percent. Then we get earnings on Thursday.
Speaker 4: Big week for Apple Meta actually some news.
Speaker 3: Out of Europe.
Speaker 4: Out of Europe, the stock up two and a half percent.
Speaker 4: We will have an ad free subscription based version of
Speaker 4: the Facebook app and Instagram that supported the stock in
Speaker 4: the session. One interesting name that we're watching is kind
Speaker 4: of the main one of the show is so Fi.
Speaker 4: This is an earning story. Were down one point seven percent.
Speaker 4: Following the open we were almost fifteen percent. That is
Speaker 4: a big swing now to the downside, down one and
Speaker 4: a half percent. Upgrading revenue guidance for the year, beating
Speaker 4: expectations on that front, deposits tripling from a year ago
Speaker 4: and coming in ahead of expectations. But this is a
Speaker 4: really interesting stock reaction, strange one.
Speaker 5: And funny enough.
Speaker 2: I'm pretty sure our next guest doesn't always want to
Speaker 2: talk about stock reaction. But we'll want to talk a
Speaker 2: bit more about the numbers. Let's bring in Sofi see
Speaker 2: Anthony Noto And I'm sure you're going to say, oh,
Speaker 2: we don't go by the day by day fluctuations. What
Speaker 2: do you make though of the optimism of release originally
Speaker 2: seen around the numbers? And what more do you want
Speaker 2: to say to an investor base that maybe just or
Speaker 2: maybe we'll take some profit on the day.
Speaker 6: Well, first, thank you for having me.
Speaker 7: What I'd say is we're really excited about the results
Speaker 7: that we delivered today. I think they're extraordinary in a
Speaker 7: number of different ways, and equally as positive on the outlook.
Speaker 7: There's very few companies that are driving durable growth the
Speaker 7: way we are. Plus twenty five percent revenue growth, really
Speaker 7: strong member growth at forty seven percent accelerated. We had
Speaker 7: a record number of new members added as well as products,
Speaker 7: which is a testament to the value proposition that we're delivering.
Speaker 6: Our profitability continues to improve.
Speaker 7: We now have all three of our business segments that
Speaker 7: are profitable, that being the lending products as well as
Speaker 7: tech plot form and now financial services. Sixty seven percent
Speaker 7: growth in are absolute dollars on a year year basis
Speaker 7: from non lending and that will continue to be the
Speaker 7: driver and growth of the company. And we meaningfully grew
Speaker 7: tangible book value over they're trailing twelve months of about
Speaker 7: one hundred and seventy million dollars. So I feel like
Speaker 7: we're executing across the board on both growth and profitability
Speaker 7: and shareolder value, and it's just a matter of time
Speaker 7: before that's reflected in the stock.
Speaker 6: We just have to keep delivering the way we have been.
Speaker 4: Anthony, it was this interesting to listen to you on
Speaker 4: the call. You kind of really talked up the non
Speaker 4: lending parts of the business, particularly going into twenty twenty four.
Speaker 4: Are those going to continue to be more of growth
Speaker 4: driver for you than the lending business?
Speaker 6: That's correct.
Speaker 7: They've reached the size in terms of their absolute scale
Speaker 7: where their absolute growth in dollars is meaningful at two
Speaker 7: thirds of the overall growth in dollars, and they're profitable,
Speaker 7: which means we can now start investing even more in
Speaker 7: them and have them grow faster.
Speaker 6: Than their lending businesses.
Speaker 7: And so the way we talked about the call is
Speaker 7: that I would expect tech platform and financial services to
Speaker 7: be the driver of growth and lending to be additive
Speaker 7: to growth, which is the opposite of what happened so
Speaker 7: far this year.
Speaker 4: The interest rate environment is really interesting because some of
Speaker 4: your sort of technology focused payers Lending Club being an example,
Speaker 4: is struggling. They've gone through a round of job cuts.
Speaker 4: For example, I look at deposits tripling from a year ago.
Speaker 4: What is the principal driver of that traction you're getting?
Speaker 4: Why are you able to perform when similar business models
Speaker 4: are not.
Speaker 7: The thing that we're benefiting from is that we have
Speaker 7: a great diversification because of our strategy. So our goal
Speaker 7: is to help our members on all the most important
Speaker 7: days in their lives and all the days in between.
Speaker 7: From a financial perspective, that results in us having nine
Speaker 7: different businesses. Some do really well on a high rate environment,
Speaker 7: some will do better in a low rate environment.
Speaker 6: Right now, the.
Speaker 7: Strength that we're seeing is behind our flagship products so far, Money,
Speaker 7: which is the best of checking and savings in one account.
Speaker 7: We give you all the great functionality that a digital
Speaker 7: operator can provide, in addition to additional benefits like two
Speaker 7: day early paycheck and then most significantly, a very unique
Speaker 7: interest rate at four point six percent apy no fees,
Speaker 7: and the ability to get a free certified financial planner
Speaker 7: end up to two million dollars of FDIC insurance.
Speaker 6: So it's a very unique product.
Speaker 7: It's helped us grow at the top of our funnel,
Speaker 7: and then we see great cross buying from that product
Speaker 7: as well as others. So the diversification we have is
Speaker 7: definitely helping. Having both lending businesses and depository businesses are
Speaker 7: also very unique. And then of course our investing business
Speaker 7: is a great cross buy product. On top of that,
Speaker 7: one thing a lot of investors don't know in the
Speaker 7: retail sector about SOFI is we have a third business,
Speaker 7: our technology platform business, which is leveraging the technology that
Speaker 7: we use to build SOFI for other partners.
Speaker 6: There's about one hundred and thirty.
Speaker 7: Five million accounts that sit on top of that technology platform.
Speaker 7: We often talk about it as the fintech of the
Speaker 7: awso fintech because we enable eight billion transactions a year
Speaker 7: across that platform.
Speaker 2: Let's talk about in that offering connector the natural Language
Speaker 2: AI driven I think it's like an intelligent digital assistant. Basically,
Speaker 2: how much has AI been a driver of getting clients
Speaker 2: excited of for your technology offering.
Speaker 6: It's a small piece.
Speaker 7: As you mentioned, we have a whole portfolio of products
Speaker 7: in our tech platform, one of which is a chatbot
Speaker 7: for customer service. It helps reduce the time to resolution
Speaker 7: and reduce the context per customer. It does leverage AI,
Speaker 7: natural language AI and answering the questions that our members
Speaker 7: have they really like the product and improve satisfaction.
Speaker 6: It's a product we're offering to financial institutions.
Speaker 7: We're also increasingly offering it to people that are not
Speaker 7: currently using some of our other products, so it's a
Speaker 7: standalone product that's in the cloud.
Speaker 2: What you're also offering in the retail side of your
Speaker 2: business in particular is IPOs. Of course, this has been
Speaker 2: an interesting thing that we've heard, particularly AI related store
Speaker 2: around on which I know that you were helping sell
Speaker 2: down to some retail investors, but also you're on the
Speaker 2: Instacart deal and oddity tech. How much will the IPO
Speaker 2: pipeline benefit you?
Speaker 6: Do you think the IPO pipeline has two benefits.
Speaker 7: The first is it's a direct revenue stream, which isn't
Speaker 7: that meaningful, But what is more meaningful is that this
Speaker 7: is a unique product that mainstream, main mainstream investors retail
Speaker 7: investors typically do not have access to, so we're giving
Speaker 7: them access to IPOs at ipo prices and that helps
Speaker 7: drive more desire to become a SOFI member as well
Speaker 7: as it increases aum in our invest business, so it
Speaker 7: indirectly drives the business in a unique way. We want
Speaker 7: to give our members an opportunity to invest over the
Speaker 7: long term, and giving them more selection like an IPO
Speaker 7: at IPO prices is one way to do that. We're
Speaker 7: working on alternative asset classes as well. We pioneered fractional shares.
Speaker 7: We also offer ETFs and robo accounts, so we're trying
Speaker 7: to be a one stop shop, not just overall as
Speaker 7: a company, but within verticals like investing.
Speaker 4: Anthony last week he sold one hundred million dollars of
Speaker 4: personal loans.
Speaker 3: He talked about it on the call. Who was the buyer.
Speaker 7: We don't disclose the individual buyers were very pleased with
Speaker 7: the demand we're seeing for our assets, especially with the
Speaker 7: fact that rates are starting to hit a ceiling and
Speaker 7: would likely come down. We've been able to pass on
Speaker 7: the higher benchmark rates and higher rates for our loans
Speaker 7: and that's providing really attractive yields, especially given the fact
Speaker 7: that we have prime customers with an average FYCO score
Speaker 7: in our loans in the seven to fifty range and
Speaker 7: really high yield. So we've had a number of counter
Speaker 7: parties that were now making partners, and one of them,
Speaker 7: as was mentioned in the call, was from one hundred
Speaker 7: million dollar deal that will evolve into a two billion
Speaker 7: dollar forward flow. In addition to that, we filed a
Speaker 7: securitization with Blackrock for three hundred and seventy five million dollars,
Speaker 7: So a lot more to come on the loan asset
Speaker 7: side of the equation, but coming out of rates that
Speaker 7: are pre attractive to our roles into our balance sheet.
Speaker 4: All right, So FI CEO, Anthony Noeso, good to catch up.
Speaker 4: Thanks for joining us on this busy earnings morning. Okay,
Speaker 4: Later today President Joe Biden will sign an executive Order
Speaker 4: on Artificial Intelligence regulation, his most significant action yet to
Speaker 4: rein in the emerging technology. For more on the details,
Speaker 4: let's bring in Bloomberg's a Kayla Gardener.
Speaker 3: So what's in this, CEO?
Speaker 8: Yeah, this EO, as you mentioned, is a lot more
Speaker 8: sweeping than we were expecting. We initially thought it was
Speaker 8: just going to govern how the government uses AI. This
Speaker 8: is going to have wide reaching impacts on the private sector,
Speaker 8: on civil society. And the biggest takeaway here is the
Speaker 8: White House is using a law called the Defense Production
Speaker 8: Act to basically force major developments to submit to safety
Speaker 8: test so they will have to submit those tests to
Speaker 8: the government before they can be used for public release.
Speaker 5: Now this is not everyone.
Speaker 8: This is only powerful systems that are above a certain
Speaker 8: threshold and that could potentially pose risk to national security,
Speaker 8: pose economic risk, and that's going to have a big
Speaker 8: impact on companies like Amazon, Google. And another major takeaway
Speaker 8: that will be very familiar to people at home is
Speaker 8: they're also instructing the Commerce Department to start developing technology
Speaker 8: for water marking. So when you see those deep fakes
Speaker 8: video audio even they want there to be some sort
Speaker 8: of signal to American people that this is authentic, that
Speaker 8: this is a piece of AI, and they should know
Speaker 8: that they this is not disinformation or misinformation. So those
Speaker 8: are the biggest major takeaways, certainly sweeping, but will certainly
Speaker 8: depend on these agencies to enforce some of these targets.
Speaker 2: It's interesting you mentioned the world signaling signaling to well.
Speaker 2: At the moment, the voter is the people, but there's
Speaker 2: signaling to companies here, there's signaling indeed that the little
Speaker 2: of the heavy lifting does fold upon the agencies. Once again,
Speaker 2: that's about what fifteen companies going to be there at
Speaker 2: the signing.
Speaker 5: What have the reaction really been there?
Speaker 8: Yeah, something that's interesting about this EO is it largely
Speaker 8: builds off of voluntary commitments that fifteen major companies made
Speaker 8: this summer. That's Amazon, Facebook, Google, all of these major
Speaker 8: technology companies signed on to basically commit to some of
Speaker 8: the things that are already in this EO. And we're
Speaker 8: going to see all of these companies standing alongside the
Speaker 8: President today as he signed this EO, really signaling that
Speaker 8: they want to be a part of this process and
Speaker 8: ultimately they could be preventing themselves more harm down the
Speaker 8: line if they show now that they are willing to cooperate,
Speaker 8: that they're willing to put safeguards on this type of technology.
Speaker 8: And I think that's exactly what we're going to see today.
Speaker 2: We thank you, Okaynat God who's going to be getting
Speaker 2: back to that EO all important signing and really, well
Speaker 2: this means for Corporate America global viewpoints on AI and
Speaker 2: the gudrails that are being put into place. Let's talk
Speaker 2: about it more with Rama Anu, a senior director of
Speaker 2: Society and Intellectual Property the Special Competitive Studies. Previously, you
Speaker 2: served as director of Research Analysis and the National Security
Speaker 2: Commission on Artificial Intelligence. Therefore, I'm a perfect voice from
Speaker 2: the perspective that this is America trying to say that
Speaker 2: they are taking the biggest steps thus far by the
Speaker 2: world in terms of putting guardrails on the future development
Speaker 2: of AI.
Speaker 5: Do you think that this really is showing that.
Speaker 9: This is a historic moment for our country. America is
Speaker 9: leading and cutting edge frontier AI models and now we're
Speaker 9: leading an AI governance. So it's a signal domestically and
Speaker 9: globally that we are committed to AI governance and not
Speaker 9: stifling this innovation.
Speaker 2: Some of the directives aren't enforceable, as we're hearing. I mean,
Speaker 2: a lot of the overall legwork, heavy lifting is going
Speaker 2: to be done by some of these agencies, and indeed.
Speaker 5: Perhaps yet further legislation.
Speaker 2: Is really needed to come from Congress, particularly when it
Speaker 2: comes for privacy. From your perspective, does this have real
Speaker 2: teeth or is this more about signal?
Speaker 3: I think it's both.
Speaker 5: This is definitely a great start.
Speaker 9: The EO will have time lines on when departments and
Speaker 9: agencies need to work and implement these directives, and so
Speaker 9: I think that is where the hard work is going
Speaker 9: to start, is when we are implementing and enforcing this directive.
Speaker 3: Rama.
Speaker 4: The principal mechanism that the Executive Order outlines is that
Speaker 4: any company building a next generation large language model as
Speaker 4: opposed to one that's currently in existence, has to submit
Speaker 4: it to the government for safety review before it's put
Speaker 4: into the public domain. Is that an effective tool to
Speaker 4: your mind to meet the goals of this administration in
Speaker 4: the field of AI.
Speaker 9: Absolutely, But first we need standards and metrics to audit
Speaker 9: those AI systems.
Speaker 10: So that I expect that the Executive Order will put
Speaker 10: out a directive to the National Unis to come up
Speaker 10: with those standards metrics for auditing AI systems before they're
Speaker 10: adopted across.
Speaker 6: Departments and agencies.
Speaker 11: So I do think it will.
Speaker 9: Be effective, but we still have a lot to work
Speaker 9: to do.
Speaker 4: What's the intellectual property story here? If you're getting government
Speaker 4: oversight and your directing agencies to put water marks on
Speaker 4: content made by a private entity.
Speaker 11: So AI is going to have a.
Speaker 9: Lot of implications on our existing systems like our patent
Speaker 9: regime and our copyright regimes, and as you said, for
Speaker 9: standards for province and authenticity.
Speaker 6: So, for example, I think that the AI.
Speaker 9: Implications on the pattern regime means that we have to
Speaker 9: see what implications this has for our existing pattern regime
Speaker 9: and our existing laws to see what we may need
Speaker 9: to change, and the same for the copyright regime. And
Speaker 9: also there are harms when we don't know whether information
Speaker 9: in the digital domain is real, or if it's been
Speaker 9: generated AI, or if it's authentic.
Speaker 11: So we do need safety.
Speaker 9: Mechanimisms to make sure that when AI, when information is
Speaker 9: generated by AI, or when AI has been used, that
Speaker 9: we know that that's what's happening.
Speaker 2: Rom your own project, the Special Competitive Studies project is
Speaker 2: a fascinating one and in many ways led by Eric Schmidt,
Speaker 2: and the whole idea is sort of ways in which
Speaker 2: you can strengthen America's own competitiveness within technological developments, particularly
Speaker 2: in the world of AI.
Speaker 5: When it comes to competitiveness, how.
Speaker 2: Much do you think it will be fostered or stifled
Speaker 2: by the fact that it's not just America, but we
Speaker 2: also need guardrails put in place globally. We've got the
Speaker 2: UK about to have its AI summit, for example. Is
Speaker 2: there going to have to be some competitiveness given up
Speaker 2: for safety?
Speaker 9: Well, I think we need we definitely need our partners
Speaker 9: and allies in this tech competition.
Speaker 11: We can't do it alone.
Speaker 9: So there needs to be alignment with our existing safeguards
Speaker 9: on trustworthiness, on safety and security, making sure that these
Speaker 9: technologies are fair and responsible. So I think that our nations,
Speaker 9: our partners and allies do need to work together to
Speaker 9: make sure that our governance mechanisms do align so that
Speaker 9: we do have mechanisms for data flows, so that we
Speaker 9: have mechanisms to reach each other's markets.
Speaker 6: And in that sense there's healthy.
Speaker 5: No, so please finish your thought.
Speaker 11: Thank you.
Speaker 9: In that sense there is healthy competition, right, so we
Speaker 9: want everyone to operate according to the rules of the road.
Speaker 11: That's only when that's when we.
Speaker 9: Can get healthy competition, competition and make sure that we're
Speaker 9: innovating the way that we want to be innovating.
Speaker 2: Well, hey, come those rules of the road we see
Speaker 2: rama alu, thank you so much for some time. Special
Speaker 2: Competitive Studies project. We think of adjoining, I mean, while
Speaker 2: coming up we look at the California Governor Gavin Newsom
Speaker 2: wraps up hey China trip with a tour of Testas factory.
Speaker 5: We'll have more on that next and look you're watching the.
Speaker 4: Shes Yeah tested down more than four percent, on track
Speaker 4: for its biggest drop in a couple of weeks, lowest
Speaker 4: levels since May. Two pieces of news Panasonic kind of
Speaker 4: indicating through their first loss in three quarters that there's
Speaker 4: pretty lackluster demand for Models and Model X, translating through
Speaker 4: to their cell demand, but also byd big competitor of
Speaker 4: Tesla's in the China market having strong financial results. This Monday,
Speaker 4: both those things weighing on Tesla's shares down four percent,
Speaker 4: their lowest.
Speaker 12: Level since May. This is Bloomberg Technology.
Speaker 3: It's time for talking tech.
Speaker 4: First up, California Governor Gavin Uson wrapped up his China
Speaker 4: tour with a visit to Tesla's Shanghai factory. Newsom was
Speaker 4: accompanied by his delegation and China based Tesla executives. The
Speaker 4: Shanghai plant accounts for more than half of Tesla's global production,
Speaker 4: plus Panasonic's automotive batteries operations fell to their first law
Speaker 4: in three quarters on lackluster demand four Tesla's models and
Speaker 4: Model X cars. Demand shifted to Tesla models priced below
Speaker 4: the eighty thousand dollars threshold eligible for tax incentives, hurting
Speaker 4: the Japanese supplies profitability.
Speaker 3: In the September quarter.
Speaker 4: Plus, Meta will offer users in Europe add free access
Speaker 4: to Facebook and Instagram for a subscription fee, after courts
Speaker 4: in the region began cracking down on the way social
Speaker 4: media companies treat data. The subscription will cost nine ninety
Speaker 4: nine euros a month on the web or twelve euros
Speaker 4: ninety nine cents a month on iOS and on Android Caroline, And.
Speaker 2: In many ways that's responding to well European views on
Speaker 2: control and indeed some strength in the market that certainly
Speaker 2: Meta has, and that's an ongoing narrative here in the
Speaker 2: US as well ed because today Google CEO so No
Speaker 2: Pishai is testifying today in the company's antitrust trial. We
Speaker 2: just want to get you up to see what's happening,
Speaker 2: because the star witness is giving testimony.
Speaker 5: Bloomberg's Todd Shields is here with.
Speaker 2: More and really this is about so No Pishi is
Speaker 2: push to try and convince basically amid the trial that
Speaker 2: they were doing this not to just monopolize the market,
Speaker 2: that we're really worried about a competitive threat here.
Speaker 13: Yes, throughout the trial and we're in day thirty now,
Speaker 13: so this is not a short proceeding. But the Google
Speaker 13: side of the case, if you will, is just commencing.
Speaker 13: We're about midway through and throughout. Heavy duty payments to
Speaker 13: Apple and others for default position have been one of
Speaker 13: the main issues the government, which says that Google illegally
Speaker 13: monopolizes search maintains its monopoly through illegal means. The government
Speaker 13: says those expensive default payments amounting as much as twenty
Speaker 13: six billion a year basically foreclosed competition. Everybody uses the defaults, nobody,
Speaker 13: no other search engines can breathe. If you will, Google
Speaker 13: says we're in a very intensely competitive world and we
Speaker 13: need to do what we can or else we're going
Speaker 13: to be yesterday's roadkill. So the CEO today will be
Speaker 13: leaning on the latter side of that equation.
Speaker 4: We've known for a long long time that Google dominates seuch.
Speaker 4: But I think at the core of what pitch I
Speaker 4: is trying to argue, right, is that how consumers consumed
Speaker 4: technology is changing, the world around them is changing and
Speaker 4: therefore they are at threats in that market position.
Speaker 13: Todd right, So there are threats from Google's point of view,
Speaker 13: from places like the search within Amazon, search within TikTok,
Speaker 13: you go to Expedia for travel search. You know, who
Speaker 13: knows what other search services are going to pop up
Speaker 13: and potentially undermine Google. And you know, we know from
Speaker 13: the history of tech there's roadkill. The look really big
Speaker 13: a long time ago. I heard something about my Space
Speaker 13: on radio the other day and I thought, wow, there's
Speaker 13: a blast from the past. But that was big back
Speaker 13: in the earlier eons and disappeared rapidly, so you never know,
Speaker 13: I think is Google's main point. And they say everything
Speaker 13: we're doing is legal so far, and it's legal, you know,
Speaker 13: it's justified.
Speaker 4: That is a blast from the past. Wilienberg's Todd shows,
Speaker 4: Thank you very much.
Speaker 5: Welcome back to Bloomberg Technology.
Speaker 4: I'm Carolin Hide in New York and I'm Ed Ludlow
Speaker 4: in San Francisco. European markets have just closed, and for
Speaker 4: one week and one week early we will be bringing
Speaker 4: European market closed daily here on Bloomberg Technology.
Speaker 3: The sock six hundred Europe, which.
Speaker 4: Is a benchmark of equities across seventeen European countries, starting
Speaker 4: the week with a modest four tenths of a percent
Speaker 4: gain after two straight weekly declines. If there is any
Speaker 4: one big piece of movement in European trading, it's Brent,
Speaker 4: the sort of more global benchmark for oil, which is
Speaker 4: moving to the downside, off almost three percent because of
Speaker 4: what we've seen in the Israel Hamas war and the
Speaker 4: escalation of military activity over the weekend. The other thing
Speaker 4: is the eco component. We got GDP data and inflation
Speaker 4: data out of Germany better than expected. We saw bond
Speaker 4: yields pair declines as a result, and also the euro
Speaker 4: strengthen against the dollar. It had been a little bit
Speaker 4: lower before that Echo data came out, Carolina. But that's
Speaker 4: the European piction, as I said, for one week only.
Speaker 4: We'll bring it to you daily.
Speaker 5: Ah, and what joy it's going to be for this week.
Speaker 2: Meanwhile, let's check in on these markets here and across
Speaker 2: the Atlantic, and currently the United States is well seeing
Speaker 2: a little bit of desire to be getting back into
Speaker 2: some of the old soul nature of the Nasdaq and
Speaker 2: the S and P five hundred currently up about six
Speaker 2: tens percent, we're coming off the highs when you're looking
Speaker 2: overall where we had been in some of these benchmarks.
Speaker 2: A lot of this is surrounding, of course, worries about geopolitics,
Speaker 2: a play a conflict in the Middle East, whether or
Speaker 2: not that will be contained or indeed escalate. But notably,
Speaker 2: of course, we're also seeing a federal reserve this week
Speaker 2: from a macro economic perspective, and indeed whether the US
Speaker 2: Treasury how much they're gonna be selling bonds. So NASA
Speaker 2: currently up sixtens per percent. If you're looking at the
Speaker 2: last like one hundred the big tech players, I'm looking
Speaker 2: at Tessel though, weighing that down on.
Speaker 5: One particular side.
Speaker 2: In fact, it's the worst performer in terms of points
Speaker 2: movement on some of these benchmarks, not by four point
Speaker 2: two percent, you outline y ed. And a lot of
Speaker 2: this is to do with the signals we're getting from Panasonic,
Speaker 2: the battery part of this equation there of course saying
Speaker 2: at the moment that they're seeing a lackluster demand for
Speaker 2: the Model S, the Model X, and indeed that's been
Speaker 2: crimping their own sales. But we've also been seeing the
Speaker 2: competition from bid Over in China, really interesting that of course,
Speaker 2: because of some of that narrative around the chip makers,
Speaker 2: we are seeing over.
Speaker 5: All the socks down.
Speaker 2: In fact, only four players in the green on the
Speaker 2: semiconductor chip indext today, and we're going to dig into.
Speaker 5: Wine a little bit.
Speaker 2: One key player we've got coming up as I'm just
Speaker 2: shining light that it's up by two percent almost on
Speaker 2: the day.
Speaker 4: Yeah, you're talking about shares a semi conductor manufacturer. On Semi,
Speaker 4: they're down now more than nineteen percent. That puts it
Speaker 4: on track for its biggest drop since March of twenty twenty.
Speaker 4: The stock trading in its lowest level since January of
Speaker 4: this year. We're going to bring in on Semi CEO
Speaker 4: Hassan El Kouri, And Hassan, this is really about the
Speaker 4: outlook you gave for the fourth quarter coming in below expectations.
Speaker 4: I guess what is the fourth quarter outlook dictated by
Speaker 4: what are you seeing in your end markets?
Speaker 14: Yeah, all of it is as a demand environment, if
Speaker 14: you think about it. From we've always known the softness
Speaker 14: in industrial.
Speaker 11: We've outlined that in the fire quarters.
Speaker 14: We added to that, you know, the softness that we're
Speaker 14: seeing or pockets of sauagine that we are seeing from
Speaker 14: customers as they digest through the inventory, and the inventory
Speaker 14: is really related to the end demand softening in automotive.
Speaker 14: So you couple these two with demand being impacted by
Speaker 14: interest rates, and you give the guide that we've outlined,
Speaker 14: which is a softer guide that we've seen with a
Speaker 14: single outlier of a customer which is also demand that
Speaker 14: is the biggest impact, which is an automotive OEM in
Speaker 14: North America.
Speaker 4: Hassan, is there a tangible impact from what we've seen
Speaker 4: in the strikes here in North America.
Speaker 14: You're referring to the U A W strikes. We don't
Speaker 14: see a direct impact. It's not really a big ten.
Speaker 14: There's no tangible impact that we can pinpoint too. But
Speaker 14: again it's it's the impact is not going to happen
Speaker 14: in a quarter. If there's impact in the outer quarter,
Speaker 14: but given the macro oncertainty that we've had, that's not
Speaker 14: going to be really an outlier that we have to consider.
Speaker 2: Hasani, you've therefore outlined that there's one key player.
Speaker 5: In particular that's impacted your numbers. Can you say who?
Speaker 14: No, I'd rather not get into customer specifics.
Speaker 5: When we do get specifics.
Speaker 2: Can I ask specifically about your relationship with some of
Speaker 2: the Chinese manufacturers, because you do have relationships there and
Speaker 2: geopolitics has been tough in that arena to say the
Speaker 2: very least. How do you see your ongoing relationship with
Speaker 2: China more broadly.
Speaker 14: I think our relationship with Chinese or EM specifically on
Speaker 14: the EV side is very positive. You know, in my
Speaker 14: prepared in March this morning, I talked about the fact
Speaker 14: we are engaged with long term agreements with four of
Speaker 14: the top five China OEMs that are the leading ev
Speaker 14: or ems. We also renewed our engagement with Neil that
Speaker 14: extends towards the end of that KID to twenty thirty one,
Speaker 14: their new generation. So the relationship is very very positive.
Speaker 14: It is incremental for US. So I know there's a
Speaker 14: lot of backdrops by demand in China, but the MAN
Speaker 14: is going up in China, the MEN is going up
Speaker 14: in the evs worldwide. I know there's a lot of
Speaker 14: stories about softening demand, but that doesn't mean demand is
Speaker 14: going down.
Speaker 11: The men's actually increasing.
Speaker 14: It's also increasing in the fourth quarter for US and
Speaker 14: through twenty twenty four, and that also relates to some
Speaker 14: of the China business that we have, which has been
Speaker 14: positive because.
Speaker 11: We were a share gainer over there.
Speaker 14: We came from a very small revenue penetration and that's
Speaker 14: going to be increasing. So any additional EVS in China
Speaker 14: is actually incremental revenue for US.
Speaker 4: Hassan, I always think about the on semi story or
Speaker 4: the mainstay of it being silicon carbide going into either
Speaker 4: battery or power management kit in autos or industrial, and
Speaker 4: you know, you've painted this kind of broad weakness. But
Speaker 4: within the university serve, where's this strength? Are there specific
Speaker 4: industries who are just gobbling up silicon carbide chips as
Speaker 4: fast as they can right now?
Speaker 14: Yeah, So I would start with the biggest industry taking
Speaker 14: in silicon carby chips is the automotive industry or the
Speaker 14: immobility ev specifically tangential to that which is driven by it,
Speaker 14: and also a consequence of it is energy infrastructure, whether
Speaker 14: it's the charging stations or more importantly the energy storage
Speaker 14: systems to.
Speaker 11: Complement the grid.
Speaker 14: That's actually been a very positive and very strong demand
Speaker 14: environment for US in the industrial. Although industrial in general
Speaker 14: has been weak, specifically the energy infrastructure has been a
Speaker 14: very positive, very strong going over fifty percent growth for
Speaker 14: US and will continue to do so for the remainder
Speaker 14: of twenty three into twenty twenty four. So those two
Speaker 14: big macro or mega trends that have been fueling the
Speaker 14: silicon carbide adoption still here and still driving adoption.
Speaker 2: And you've been trying to paint a picture of your
Speaker 2: supply chain as well being able to feed that sort
Speaker 2: of demand, and talking about South Korea as well, the
Speaker 2: ramp there. We're looking at some charts as you speak, Hassan,
Speaker 2: and they're pretty brutal, to be perfectly honest, for off
Speaker 2: by twenty percent on the day. It's a complete leg
Speaker 2: down over the last couple of days. How do you
Speaker 2: respond to those sorts of selling pressures from an investor base?
Speaker 5: How do you manage your own talent pool of this time.
Speaker 14: I look at the reaction as I would say, a momentary,
Speaker 14: short term reaction. It is not a reaction that reflects
Speaker 14: our long term view of the business.
Speaker 11: We'll get through it. I think it's a.
Speaker 14: Buying opportunity for a lot of the log shareholders that
Speaker 14: we have. Employees see in the same way from us Internally,
Speaker 14: our employees are pumped up.
Speaker 11: They've been over executing and really delivering beyond our goals.
Speaker 14: Specifically for example, you know we talked about silicon carbide.
Speaker 14: We've been very bullish about the outlook or multi year
Speaker 14: outlook of electric vehicles. We maintain that strategic view and
Speaker 14: that positive view. Our employees see it. The talent that
Speaker 14: we are recruiting, see the leadership being built, and that's
Speaker 14: why we're really basing our energy on whatever happens today.
Speaker 14: Is again it's a temporary whether it's a day, a week,
Speaker 14: a quarter, it doesn't really matter.
Speaker 11: We don't manage the company on our quarter to quarter
Speaker 11: or a week on week.
Speaker 14: We manage it really on a long term and that's
Speaker 14: where our investments have been going.
Speaker 2: Well, thank you for spelling that out for us. Hasan
Speaker 2: al Kuri is the on Semi CEO. Great to have
Speaker 2: some time with you. Meanwhile, well let's stick on the
Speaker 2: theme of chips, Broadcom and the software maker VMware. Well
Speaker 2: they're saying they're sixty one billion dollar merger is on
Speaker 2: track to close before November deadline. This is despite still
Speaker 2: not receiving approval thus far from the Chinese regulators. Now,
Speaker 2: the companies did not disclose how close they actually may
Speaker 2: be for an approval from China, but they've stated that
Speaker 2: there is quote no legal impediment in closing under US regulations.
Speaker 2: The greement between the companies ex fires November twenty sixth the.
Speaker 3: Right Coming up here.
Speaker 4: On Bloomberg Technology, we're going to talk all about AI
Speaker 4: regulation being in the spotlight. We're going to speak with
Speaker 4: James Green, general partner at CRV next, and then doctor
Speaker 4: Faife Lee s a choir professor in the Computer science
Speaker 4: department at Stanford University in a big name in the
Speaker 4: world of AI. That's coming up next. This is Bloomberg Technology.
Speaker 15: It would be preferable to have a global framework. I mean,
Speaker 15: what we have done around the whole question on climate
Speaker 15: we could actually also apply to Heaven International Energy Association
Speaker 15: also for II. That's given the context in which we
Speaker 15: are in, it would be very difficult to assume that
Speaker 15: it is going to happen.
Speaker 10: Now.
Speaker 4: That was Access CEO Thomas Berbel discussing concerns around artificial
Speaker 4: intelligence how to regulate it.
Speaker 3: It's time now for our VC.
Speaker 4: Spotlight where we talk about how you play the investment
Speaker 4: field given those concerns joining us now James Green, General.
Speaker 3: Partner at CRV.
Speaker 4: We kind of had this big picture look today right
Speaker 4: the Biden Executive Order on regulating AI, the UK will
Speaker 4: consider that tomorrow, and yet at the early stage, so
Speaker 4: much work is going on to develop the technology.
Speaker 3: So where do you start all it's so interesting right now.
Speaker 16: I think the reality is that with where we've been
Speaker 16: investing for fifty three years, you always have to start
Speaker 16: with the people, and so CLV has taken the approach
Speaker 16: that we are investing at the earliest stages with people
Speaker 16: and in broad markets. It's very unclear where the market's
Speaker 16: going to go. I think even if you just look
Speaker 16: today with the Biden administration and their Executive Order as
Speaker 16: well as the EU Act, which remains to be seen,
Speaker 16: where it comes down. We're kind of finding different areas
Speaker 16: to start with security, with dev tools, with applications. There's
Speaker 16: multiple different areas we're spending time.
Speaker 4: The main mechanism outlined in the EO is that a
Speaker 4: maker of large language models future generations of large language
Speaker 4: models must run them by the government and let them
Speaker 4: review them for safety before opening up to the public.
Speaker 4: Does that impact on how attractive a startup that is
Speaker 4: building its own foundation model may be as an investment.
Speaker 16: Yeah, I think it's interesting with the firms that are
Speaker 16: making their own foundational models, so they open AI in
Speaker 16: the US, or DeepMind or Mistrol in the EU.
Speaker 3: I still believe there's.
Speaker 16: Going to be huge outlier companies in that category. I
Speaker 16: believe that open ai as well as the open source
Speaker 16: software companies will still be very interesting. You know, there
Speaker 16: will be regulation, but much like CCPA and GDPR, there'll
Speaker 16: be companies that come around.
Speaker 2: Out of those somewhere to allocate in this environment, James,
Speaker 2: if it's not the big makers the foundational layers, where
Speaker 2: is the applications so nuanced, so necessary that it will
Speaker 2: be walled off that there will be enough barricades for
Speaker 2: a company to really survive in.
Speaker 16: That Yeah, I think at the application layer there'll be
Speaker 16: lots of different areas that people can survive coming from.
Speaker 16: We recently invested in a company called Zero which is
Speaker 16: using AI for field sales, and that like many others,
Speaker 16: whether it's developer tools with GitHub and co pilot, there's
Speaker 16: going be lots of ways that people can be very
Speaker 16: successful and build large companies. Some of these companies are
Speaker 16: growing faster than almost ever before. If you just look
Speaker 16: at the speed that open Eye is growing in terms
Speaker 16: of their revenue growth that is being paralleled with many
Speaker 16: many other companies at the early stage.
Speaker 2: Can you, I mean, as a brit now in America
Speaker 2: from Birmingham, we're looking at the UK trying to sort
Speaker 2: of show off its prowess in the era of AI.
Speaker 2: You're now based allocating money. All the companies you're interested
Speaker 2: in in the West Coast? Are they international? Are they
Speaker 2: us primarily? Where are you looking for it?
Speaker 3: James, that's a great question.
Speaker 16: CMB has been investing all over the world for most
Speaker 16: of its fifty three year period. We've been investing in
Speaker 16: the West Coast. We started in the East Coast. We
Speaker 16: invest in Europe, Israel, Latam, so that will continue to
Speaker 16: be the case. Our AI portfolio, unsurprisingly is very West
Speaker 16: Coast heavy today. However, with teams coming out of deep
Speaker 16: Mind in London which Google acquired, as well as teams
Speaker 16: coming out of Israel, we're seeing global technical talent building
Speaker 16: in and around AI applications and infrastructure. So yes, it's
Speaker 16: currently very heavy on the West Coast, but we'll continue.
Speaker 3: To invest globally.
Speaker 5: James Green, general partner at CRV.
Speaker 2: We thank him for his expertise and that was about
Speaker 2: sort of some of the private talent. What about the
Speaker 2: talent coming from public schools, particularly from universities joining us
Speaker 2: now doctor fair Fairley in the Computer SCIZCE department over
Speaker 2: at Stanford University, also the author of the World's I
Speaker 2: See Curiosity, Exploration and discovery at the dawn of AI
Speaker 2: and this world that you currently see, doctor, are you
Speaker 2: seeing enough of that talent coming out of the university
Speaker 2: with which you sit. Are you worrying, I think in
Speaker 2: particular about the money that's necessary to foster that sort
Speaker 2: of talent.
Speaker 1: Thank you Caroly and Ed for inviting me here. We
Speaker 1: are looking at extremely a high level of excitement of
Speaker 1: students majoring computer science and AI. So as fast as
Speaker 1: we can train our students, yes, there's a huge amount
Speaker 1: of excitement and the talent's going to you know, going
Speaker 1: into the space. But where I said this public sector
Speaker 1: is academia, is higher education. I do think that we
Speaker 1: need a much more investment and resourcing to make sure
Speaker 1: the public sector development and research of AI stays healthy.
Speaker 1: Is part of the ecosystem and frankly part of the
Speaker 1: innovation engine of America.
Speaker 3: Doctor Lee.
Speaker 4: You met with President Biden and spoke with him in June.
Speaker 3: He's due to signing.
Speaker 4: To law his Executive Order for AI Standards this afternoon.
Speaker 4: Based on the fact sheet that's been released in Bloomberg's reporting,
Speaker 4: which I know you shared on social media, did any
Speaker 4: of the proposals or recommendations that you made to President
Speaker 4: Biden end up being in the executive Order?
Speaker 1: Yeah, and I'm definitely very excited to see all the
Speaker 1: details of the executive Order later this afternoon, But from
Speaker 1: the fact sheet that I briefly read, I am excited
Speaker 1: to see the level of comprehensiveness and multifaceted broad a
Speaker 1: coverage of this EO, especially about the National AI Research Resource,
Speaker 1: which is called neyor pilot program. We at Stanford Hi
Speaker 1: Human Center AI Institute spearheaded this effort back in March
Speaker 1: twenty twenty when we wrote an open letter to many
Speaker 1: many university leaders across the country and made this into
Speaker 1: a first bill under the Trumpe administration, and after working
Speaker 1: with Bidon, White House and an SF National Science Foundation
Speaker 1: for twenty or so months, we actually submitted a plan
Speaker 1: for National AI Research Resource there to Congress earlier this year.
Speaker 1: So seeing there being part of the on the facts
Speaker 1: being part of a pilot program coming out of THEEO
Speaker 1: is really exciting, and frankly, I think it's really we're
Speaker 1: in dire need when I say we its public sector.
Speaker 1: Of course, there is a lot more details to be
Speaker 1: to be seen, and I really look forward to Congress
Speaker 1: taking action following this EO.
Speaker 4: Doctor Lee, you want to see more support for public
Speaker 4: sector compute resources and to rebalance the amount of AI
Speaker 4: development being done in the public sector visa v industry
Speaker 4: and government. Why do you want to see that rebalancing?
Speaker 1: And I think this is really important for America's leadership.
Speaker 1: AI is such a critical technology. It's a horizontal technology
Speaker 1: that is propelling the entirety of our global our human
Speaker 1: civization into the next chapter. And we definitely need a
Speaker 1: responsible development and America's global leadership and it's funding democratic
Speaker 1: values are critical to help us share in this responsible technology.
Speaker 1: So this is why we need the public sector to
Speaker 1: be part of the innovation as we have always done,
Speaker 1: whether it's biotech or space technology or you know, computers, Internet.
Speaker 1: We have done that as a country and we need
Speaker 1: that for AI as well.
Speaker 2: You are, of course the godmother of AI, as many
Speaker 2: call you, and this isn't just a ai US field.
Speaker 2: It's a globals field from tomorrow, with the ai discussions
Speaker 2: happening November first in the UK as well. Are you
Speaker 2: hopeful that there will be global guardrails agreed here?
Speaker 1: Carolyn, So, I'm going to remain cautiously hopeful. I really
Speaker 1: want to see actions. We have been working with global
Speaker 1: partners governments, you know, as a neutral public sector institute,
Speaker 1: and we see a lot of engagement. From that point
Speaker 1: of view, I'm really I am hopeful. And what makes
Speaker 1: me most hopeful is the young generation now taking so
Speaker 1: much interest in this technology, not only from tech point
Speaker 1: of view, but also from policy and society point of view.
Speaker 1: But I really want to see actual meat on the bone.
Speaker 1: I want to see action, and we also want to
Speaker 1: be part of this movement in ushering in a multilateral
Speaker 1: partnership way this technology.
Speaker 4: Doctor Faith Ailey of Stanford University, thank you for your time.
Speaker 4: This is Bloomberg Technology.
Speaker 2: It apples the final event of the year tonight. It's
Speaker 2: capitalizing on a computer market resurgence. When the company unveils
Speaker 2: two new max and processes, we understand Mark German is
Speaker 2: here for more from what we expect from the event
Speaker 2: called scary fast, So I'm thinking speed here.
Speaker 17: Speed indeed, mix up a bit of Halloween. This is
Speaker 17: the first time that I can remember that Apple is
Speaker 17: hosting an event at five pm Pacific time eight pm
Speaker 17: Eastern time, and it's all about the Mac. You'll see
Speaker 17: a new twenty core and Drymac. You'll see new MacBook
Speaker 17: pros at the high end in three new chips, the
Speaker 17: M three, the M three Pro and the Mgreen Macs.
Speaker 17: These are going to be their fastest NAC chips to date,
Speaker 17: some of the fastest chips built on this ARM architecture
Speaker 17: that you've seen from any computer manufacturer.
Speaker 11: So for those in the market for a.
Speaker 17: New Mac where those who love the speeds and feeds,
Speaker 17: this event tonight is probably for you.
Speaker 2: Calm wait to see what the Halloween vibes are to
Speaker 2: Mark Gumman, always there to tell us what's coming up
Speaker 2: before the company actually tells us.
Speaker 5: We appreciate it meanwhile, that does it. From this edition
Speaker 5: of BLUEBG Technology.
Speaker 4: ED Yeah big thanks to everyone out there in the
Speaker 4: audience has been tuning into the podcast. You can find
Speaker 4: the podcast on all the Bloomberg platforms, but also on Apple, Spotify,
Speaker 4: and iHeart. We always published the show, and we know
Speaker 4: that a lot of you have been tuning in, so
Speaker 4: thank you very much for that. From New York City
Speaker 4: and here in San Francisco, a really big week ahead.
Speaker 4: This is Bloomberg Technology