Speaker 1: Bloomberg Audio Studios, Podcasts, radio news from Mahart where innovation,
Speaker 1: money and power.
Speaker 2: Collie in Silicon Vallet Nbon.
Speaker 3: This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
Speaker 4: Live from New York. This is Blouebag Technology. Coming up.
Speaker 5: China opens a probe into Nvidia regarding anti monopoly laws.
Speaker 4: That's the global tech.
Speaker 5: War escalates this adding to broader geopolitical risk.
Speaker 4: Weighing on US tech stocks.
Speaker 5: We get the market impact and Alphabet reveals new details
Speaker 5: on the progress it's made in quantum computing.
Speaker 4: But first we check in on Invidio. Top story for
Speaker 4: the day.
Speaker 5: We're currently shaving off a cool one hundred billion dollars
Speaker 5: in terms of market capitalization for what is the most
Speaker 5: valuable company out there and listed in the United States,
Speaker 5: down three percent.
Speaker 4: Why Moores about.
Speaker 5: An investigation, a probe being opened up by China about
Speaker 5: a deal and acquisition.
Speaker 4: It made back in twenty twenty.
Speaker 5: But this really fits into a context of global tit
Speaker 5: for tap between China and the US. Peter Elstrom joins us.
Speaker 5: Now just go into the intricacies of this particular investigation
Speaker 5: regarding a deal made years ago.
Speaker 6: Yeah, this was a bit of a surprise. We got
Speaker 6: this news last night from state television in China, where
Speaker 6: CCTV disclosed that the Agency SAMR has opened this probe
Speaker 6: into Nvidia and what it calls potentially anti monopolistic behavior.
Speaker 6: It's a little curious because, as you say, they're focused
Speaker 6: in or They mentioned specifically a deal that they did
Speaker 6: four years ago to buy a company called Melanox. It's
Speaker 6: a company in Israel that makes networking equipment. China had
Speaker 6: to approve that deal when Nvidia decided to do it,
Speaker 6: and they did approve it, as you mentioned in twenty twenty,
Speaker 6: but they did with seven different conditions about invidious behavior
Speaker 6: going forward. That included giving the customers in China access
Speaker 6: to product information from Melanox and product access for Invidia's
Speaker 6: own chips. Now it's not exactly clear what they're going
Speaker 6: to dig into in this case, but as you noted,
Speaker 6: in Vidia has been this company at the heart of
Speaker 6: the US China conflicts over technology. Washington has cut off
Speaker 6: in Vidia's ability to sell its most advanced chips into China,
Speaker 6: so they're really at the heart of this conflict between
Speaker 6: the two biggest economies.
Speaker 7: In the world.
Speaker 5: Now it's worth noting that the US Justice Department itself
Speaker 5: is looking for information to in video and potentially violating
Speaker 5: anti trust laws. It's not the only country investigating in video,
Speaker 5: but set the context of what other companies are being
Speaker 5: focused in on on this tip for tap, because Micron,
Speaker 5: for example, is having difficulty with its relationship with China.
Speaker 5: This just does seem to be around the context of
Speaker 5: China trying to be one up on what respond to
Speaker 5: the US limitations of technology into its country.
Speaker 6: Yeah, as you say, the anti monopoly concerns around in
Speaker 6: Vidia are quite broad. It's not just China, it's also
Speaker 6: the United States. France here has taken a look at it.
Speaker 6: That's because they have essentially a monopoly one hundred percent share,
Speaker 6: almost one hundred percent share in the most advanced chips
Speaker 6: to train AI models. But you're exactly right. Also, there's
Speaker 6: this broader trade conflict that we've seen that creates all
Speaker 6: sorts of problems for companies in between the US and China.
Speaker 6: In Vidia still sells a lot of chips into China.
Speaker 6: It had sold more in the past, but two years
Speaker 6: ago we got this news that Washington was going to
Speaker 6: cut off their ability to sell the most high end
Speaker 6: AI chips used to train AI models. Those restrictions have
Speaker 6: been steadily tightened since then, so in Vidia has suffered
Speaker 6: because of that.
Speaker 4: But it's beyond that too.
Speaker 6: It's the chip equipment makers that have been restrained, ASML
Speaker 6: here in Europe has been restrained from selling their most
Speaker 6: advanced gear. So in response, Beijing has taken a number
Speaker 6: of actions that we're seeing them retaliate in kinds of
Speaker 6: ways where they cut off a couple of minerals that
Speaker 6: are very important to the chip industry, in the defense industry,
Speaker 6: in particular Gallium and Germanium. So they're beginning to show
Speaker 6: that they also have some cards to play some lovers
Speaker 6: the poll in this broader trade conflict.
Speaker 4: Peter Elstrom always bringing us the context.
Speaker 5: Thank you so much, and look, let's just stick with
Speaker 5: China and the US. Because President elect Donald Trump said
Speaker 5: he did have an exchange with Chinese leader Jijingping in
Speaker 5: recent days, the first clear indication of direct contact between
Speaker 5: the two men since Trump's reelection in November. Here he
Speaker 5: is in an interview with NBC's Meet the Press with
Speaker 5: Kristin Walker.
Speaker 4: Have a listen, I.
Speaker 3: Had any agreement with President she who I got along
Speaker 3: with very well, we've had communication as recently as this week,
Speaker 3: and I had communication with him where they were going
Speaker 3: to give the death penalty to anybody sending drugs into
Speaker 3: the United States.
Speaker 5: Let's get out to Mike Shepherd in Washington, and that
Speaker 5: was notable. The fact that conversation has already started in
Speaker 5: the environment where we're seeing actually China having to respond
Speaker 5: to its own economic issues, particularly as they have to
Speaker 5: look to what Trump might do to their economy come
Speaker 5: twenty twenty five.
Speaker 8: Well highlights the uncertainty surrounding the US China relationship as
Speaker 8: we enter this change over here in Washington. On the
Speaker 8: one hand, Trump is coming in with very much a
Speaker 8: hawkish agenda towards China when you look at his promises
Speaker 8: during the campaign to impose tariffs of as much as
Speaker 8: sixty percent on Chinese goods and his follow on promise
Speaker 8: to put ten percent tariffs on Chinese goods over his
Speaker 8: complaint is mentioned in that interview over the flow of
Speaker 8: fentanel from China into this country. But at the same time,
Speaker 8: Beijing is sort of looking to the change in administration
Speaker 8: as possibly a way to engage with an incoming president
Speaker 8: who has shown a tendency to be a little bit
Speaker 8: more transactional. Maybe they can engage with him in a
Speaker 8: way they have been able to with President Joe Biden
Speaker 8: and his team. So they have signaled that. And in fact,
Speaker 8: when you were talking just now with Peter about some
Speaker 8: of the restrictions that China recently imposed on some of
Speaker 8: those sensitive critical minerals like gallium and germanium, their statement
Speaker 8: also included an overture to the US that we look
Speaker 8: forward to engaging more positively at some point. So there
Speaker 8: is sort of a we don't know which exactly which
Speaker 8: way this is going to go, but the direction of travel,
Speaker 8: based on the people in Trump's team, looks to be pretty.
Speaker 5: Tough, tough, and particularly around tariffs. Just take listen to
Speaker 5: what he said in that particular interview on tariffs too.
Speaker 3: I can't guarantee anything. I can't guarantee tomorrow, but I
Speaker 3: can say that if you look at my just pre COVID,
Speaker 3: we had the greatest economy of the history of our country,
Speaker 3: and I had a lot of tariffs on a lot
Speaker 3: of different countries, but in particular China. We took in
Speaker 3: hundreds of billions of dollars and we had no inflation.
Speaker 5: Finding that to consumer impact in terms of inflationary pressure.
Speaker 4: But businesses are eyeing this very closely.
Speaker 8: To Mike, they should be, because businesses really are consumers.
Speaker 8: A lot of those goods that are coming in from
Speaker 8: China as key inputs to their industries and key components,
Speaker 8: and an increase in tariffs would not just hit consumers
Speaker 8: at the end of the very end of the supply chain,
Speaker 8: it would also hit businesses and they would have to
Speaker 8: think about.
Speaker 6: Well, what do we do with our costs?
Speaker 8: Do we pass those along? And from that interview you
Speaker 8: really get the sense that Trump is not inclined to
Speaker 8: back away from any of those pledges. He was pressed
Speaker 8: during the interview about the impact on consumers and he
Speaker 8: insisted that no, there was no cost to consumers. He
Speaker 8: was asked that he said so twice during the interview
Speaker 8: that there is no cost, and he actually tried to
Speaker 8: tout the benefits of it, and moreover, he actually pointed
Speaker 8: to tariffs as a way to gain in other areas
Speaker 8: when it comes to non economic policy as well. So
Speaker 8: it'll be interesting to see how he approaches this not
Speaker 8: only as an economic tool, but maybe as a way
Speaker 8: to gain leverage in other policy areas, including immigration and
Speaker 8: who knows what else.
Speaker 5: Who knows what else Mike sheppin, We appreciate it now,
Speaker 5: all of this geopolitical risk, but we haven't even mentioned
Speaker 5: Syria yet. There's also this week the likelihood of another
Speaker 5: sticky inflation print here in the United States. All of
Speaker 5: it is sending US tech stocks lower on the day, despite,
Speaker 5: of course, what had been a bit of optimism around
Speaker 5: stimulus potential from China.
Speaker 4: That's going to market take.
Speaker 5: Brian Cosman is with US portfolio manager at GQG.
Speaker 4: You'll read on the.
Speaker 5: Market trends, look any of these latest issues in video
Speaker 5: China giving you pause, Brian.
Speaker 2: Yeah, So further starts in terms of technology. We did
Speaker 2: have a very heavy waiting to a lot of technology
Speaker 2: names earlier in the year about in terms of our
Speaker 2: US secuity portfolio, more than fifty percent of the portfolio
Speaker 2: was in it and also communications services types of names.
Speaker 2: And we have seen a lot of hype kind of
Speaker 2: build up in a lot of these technius. In recent months,
Speaker 2: we've adjusted and gotten a little bit more of a
Speaker 2: neutral posture at this point in time. So, you know,
Speaker 2: coming back to in Vidia specifically, they do seem to
Speaker 2: be still garnering the majority of economics within sort of
Speaker 2: this capital cycle and its tech cycle that we're seeing
Speaker 2: at this point in time. And I think you're seeing
Speaker 2: that in terms of the power and their ability to
Speaker 2: sort of you know, capture the market and sort of
Speaker 2: you know, circle of wagons, if you will, in that sense.
Speaker 2: With regards to China, they do have a slightly reduced
Speaker 2: exposure to China then they've had in recent years and months,
Speaker 2: and I think that's because you're just seeing the overall
Speaker 2: strength in the other areas that they're selling through to
Speaker 2: the hyperscalers and things like that. So China's now fifteen
Speaker 2: sixteen percent of their revenue at this point in time.
Speaker 2: So I think this is a little bit less of
Speaker 2: an issue than maybe what we saw a couple of
Speaker 2: years ago when you saw some of those US restrictions
Speaker 2: sort of pulling back you know, in video's ability to
Speaker 2: sell into China.
Speaker 5: So ultimately, the valuations when we're still seeing in video
Speaker 5: and excess of three trillion dollars that's been dedicat by
Speaker 5: the extend to the market opportunity despite some curtailment to
Speaker 5: China for example.
Speaker 2: Yeah, so when I think you look at in video,
Speaker 2: you look at sort of the hardware implication and sort
Speaker 2: of the technology that they have, and they have a
Speaker 2: better mouse trap in terms of the GPUs that they're
Speaker 2: selling into folks, and I think you're seeing that in
Speaker 2: terms of the strength of their business. But I think
Speaker 2: goes underappreciation is the software element of the thesis as well.
Speaker 2: That gives them a lot longer tail in terms of
Speaker 2: the ability to continue to sell through that software angle.
Speaker 2: The thesis pulls up the margin structure of the video
Speaker 2: over the course of time. People talk about kudos or
Speaker 2: being that base software layer, and then these software stacks
Speaker 2: that they're building on top of this. This all creates
Speaker 2: a very system wide approach and it's hard to sort
Speaker 2: of disrupt. That creates really good economics for them, and
Speaker 2: I think there's a plenty of hetero for them to
Speaker 2: continue to grow on an ongoing basis. I think it
Speaker 2: gives a little more stickiness than maybe some of their peers,
Speaker 2: even within the GPU space.
Speaker 5: Interesting, Brian take us there for to software more broadly,
Speaker 5: we have seen the shift out of perhaps chip stocks
Speaker 5: semi conductors into the software space. Thinking how generative AI
Speaker 5: is going to make their valuation suddenly ever more inflated.
Speaker 4: Is that the right way to go?
Speaker 2: Yeah, So, in terms of the software names, we have
Speaker 2: seen so multiples really inflate and sort of expectations go up.
Speaker 2: In terms of the ability for these folks to sort
Speaker 2: of capture the economics from GENAI and things like that,
Speaker 2: I think we're still in early stages. I think we
Speaker 2: need to see where some of the impacts are going
Speaker 2: and where folks are able to sort of monetize the
Speaker 2: economics of how generative AI work. I think enterprise is
Speaker 2: a little bit slower to adopt and it's going to
Speaker 2: take some time to get there. Where we see the
Speaker 2: impact more immediately is on the advertising space. So we
Speaker 2: are seeing that by using sort of GENAI, using this
Speaker 2: unstructured data to predict what people want to see, what
Speaker 2: people want to sort of buy in terms of the
Speaker 2: advertising and things along those lines, matching up that media
Speaker 2: content with those advertising components. That's an area where we're
Speaker 2: seeing real returns at this point in time. The economics
Speaker 2: are actually going in that direction. So that's more of where
Speaker 2: our focus has been on a your to day basis
Speaker 2: and where we're positioned in the portfolio at the moment.
Speaker 5: Interesting of course, we've seen Meta outperform on the back
Speaker 5: of that alphabet as well.
Speaker 4: Brian, What was so interesting about what you said.
Speaker 5: Earlier was that the fact that you have gone more neutral,
Speaker 5: and I'm interested as to therefore are you putting allocation
Speaker 5: into other AI tangential industry groups if it's not just
Speaker 5: all about semiconductors and software right now.
Speaker 2: Yeah, So when I describe sort of the neutral posturing,
Speaker 2: I think that's the overall sort of exposure that you've
Speaker 2: seen in the portfolio has come down. We still have
Speaker 2: higher conviction calls in those select names like an Nvidia,
Speaker 2: like a Meta, even like a Microsoft, a little bit
Speaker 2: lesser extent in our portfolio. You see some fairly decent
Speaker 2: sizing in those anes. Lean knows is a tech show
Speaker 2: and a tech program that we're talking about, But we
Speaker 2: are seeing some more interesting areas and some of the
Speaker 2: more boring areas of the economy as well. So consumer
Speaker 2: staples to some extent utilities, not necessarily because they're defensive
Speaker 2: by nature, but quite frankly because they're a little bit
Speaker 2: or less trend. The multiples look more attractive and you're
Speaker 2: getting a little bit more in a bank for your buck,
Speaker 2: so to speak. In terms of the returns, you get
Speaker 2: to a high single digit, low double digit type of
Speaker 2: return with a divid and eel on top of it
Speaker 2: for a reasonable multiple. You don't have to worry about
Speaker 2: the higher So it's almost like a barbell approach, if
Speaker 2: you will, having some of these punchier names, some of
Speaker 2: these higher conviction names within the tech ecosystem where we
Speaker 2: are seeing the economics coming through, and then you're seeing
Speaker 2: some of these other things where we can get some
Speaker 2: really good quality compounding at a reasonable price.
Speaker 4: Diversification key no matter who the audience is.
Speaker 5: Brian Kersman, we thank you, GQG portfolio manager there, appreciate it. Meanwhile,
Speaker 5: let's just check in on super micro shares for a moment.
Speaker 5: Jumping earlier in the training session, we're now up just
Speaker 5: two percent.
Speaker 4: But all of this after the battle.
Speaker 5: Server makers said that the Nasdaq has granted the firm
Speaker 5: more time to become compliant with listing rules. Ultimately, this
Speaker 5: is all regarding whether or not they've got time to
Speaker 5: serve their teen filings.
Speaker 4: Take whose filings.
Speaker 5: We're seeing that the company has now been given till
Speaker 5: February the twenty fifth the file. It's financial report for
Speaker 5: the fiscal year ended June thirtieth alphabet, and it's revealing
Speaker 5: new details on the progress it's made in quantum computing.
Speaker 5: The exponential advancements are being done with a new Willow
Speaker 5: quantum chip that is helping overcome some of the biggest
Speaker 5: challenges in the field. Now the next step is of
Speaker 5: course coming up with real world use for all the
Speaker 5: theoretical power. Here to talk about all of it, hartman
Speaker 5: Naven here's the vice president of Engineering at Google as
Speaker 5: well as a founder and manager of the Quantum Artificial
Speaker 5: Intelligence Lab, And the biggest challenge thus far has been.
Speaker 4: Ultimately error correction. Can you just talk us through what
Speaker 4: you have just achieved.
Speaker 9: Yeah, The biggest news for today is that we developed
Speaker 9: a new very high quality quantum ship and this enabled
Speaker 9: to break through computations. And one is an error correction
Speaker 9: where we showed for the first time that as we
Speaker 9: use more cubits, the error rate comes down, and it
Speaker 9: comes down exponentially. The second important achievement breakthrough achievement, is
Speaker 9: that we did benchmark computation took just five minutes on
Speaker 9: our new chip that would take the top supercomputer ten
Speaker 9: septillion years to perform, so ten septillion audience may not
Speaker 9: know that's one with twenty five zero. So it's a
Speaker 9: mind bogglingly long time and it.
Speaker 4: Took five minutes.
Speaker 5: What I want to understand is what this benchmark test
Speaker 5: is benchmark random circuit sampling?
Speaker 4: What does this prove?
Speaker 9: Yes, So this benchmark problem we often say, it's not
Speaker 9: a problem that people on mainstream have yet, but it's
Speaker 9: a suitable benchmark to compare different quantum processors to each other,
Speaker 9: or to compare quantum processors quantum chips against classical computers.
Speaker 5: What's so mind boggling about quantum more generally is that
Speaker 5: we have been talking about it for decades, but it
Speaker 5: always feels another five, another ten years off.
Speaker 4: Is it different this time? Hartlett?
Speaker 9: Yeah, Queen computing is definitely not that field. There's a
Speaker 9: steady progress, and our new chips that we just released
Speaker 9: a Willow will form the basis to start doing useful
Speaker 9: computations that will enable or solve problems that humankind has.
Speaker 4: Let's talk about those problems.
Speaker 5: Then everyone immediately goes to healthcare drug discovery. Is that
Speaker 5: the most obvious place with which this sort of computing
Speaker 5: is going to be helpful.
Speaker 9: So the well understood killer application of Queen computers is
Speaker 9: to model systems where quantum effects are important, and that
Speaker 9: is more often the case than you may think. For example,
Speaker 9: if you want to understand how drugs pharmaceuticals bind to cells,
Speaker 9: or if you want to design a nuclear fusion reactor
Speaker 9: or something as mundane as improving the batteries for an
Speaker 9: electric are all these engineering challenges involve quantum problems, and
Speaker 9: their quantum processes are just the tool of choice to
Speaker 9: solve those problems.
Speaker 5: Put it in the perspective of generative AI, the hype
Speaker 5: that our audience that we have had over the past
Speaker 5: couple of years.
Speaker 4: What does quantum mean for that? Is it?
Speaker 5: Is it superior even in its effects versus generative AI,
Speaker 5: and does itself the same issues in terms of energy
Speaker 5: and infrastructure.
Speaker 9: I wouldn't compare it in those terms. AI as well
Speaker 9: as quantum computing will be the most transformative technologies of
Speaker 9: our time. But there's a lot of cross fertilization between
Speaker 9: AI and quan computing. So AI can help work for
Speaker 9: quantum ships to work better and vice versas. There are
Speaker 9: many key computational tasks in AI where a quantum ship
Speaker 9: will just be the tool of choice to handle laws.
Speaker 4: It's a phenomenal step.
Speaker 5: Please come back as you start to apply the significance
Speaker 5: of this computing. Heartment name and he's the VP of
Speaker 5: Engineering at Google and founder of the Quantum Malt Official
Speaker 5: Intelligence Lab.
Speaker 4: Meanwhile, coming up, we're going to.
Speaker 5: Be discussing the limits of power grids and how they're
Speaker 5: running up against the ambitions of both Big Tech and
Speaker 5: Wall Street when it comes to generator of AI. What
Speaker 5: we're just finishing on conversation there on. Meanwhile, just check
Speaker 5: in on some key stories today. Comcast one of those,
Speaker 5: off by seven percent, key drops on the SMP at
Speaker 5: the moment and the Nasdaq shares sliding, and this after
Speaker 5: the Comcast Cable president's CEO David Watson is saying is
Speaker 5: projects broadband subscribing losses and more than one hundred thousand
Speaker 5: in the fourth quarter, hurricans Helene and Milton causing around
Speaker 5: ten thousand broad band losses. We're also looking at Vivendi
Speaker 5: Big News out of France, as this company does look
Speaker 5: to break itself apart, saying it's very likely though it
Speaker 5: would drop out of the CAC forty after it did
Speaker 5: indeed approve that three spin off listing December the sixth,
Speaker 5: Steek investors approving that and plans spin off of three
Speaker 5: multi billion euro units.
Speaker 4: This is bluembg technology time now for talking tech.
Speaker 5: First up, Hello Fresh, But it's facing allegations that one
Speaker 5: of its facilities in Illinois used migrant teen labor chars
Speaker 5: fell after ABC News reported it is under investigation by
Speaker 5: the US Labor Department along with a staffing agency that
Speaker 5: hired employees for the facility, plus Finance Holding CEO Richard
Speaker 5: Teng told Bloomberg that quote, the future is bright for
Speaker 5: crypto and encouraging other countries to follow the lead in
Speaker 5: the US just.
Speaker 4: Take a listen.
Speaker 10: Yeah, Now, very crypto friendly president in the States and
Speaker 10: extremely smart strategy appointing AI in crypto za on that
Speaker 10: front because this tool represents the most innovative technology for
Speaker 10: the future.
Speaker 5: And Jack Maher made a rare public appearance Sunday to
Speaker 5: Mark and Group's twentieth anniversary, spoke optimistically about the future
Speaker 5: of the company while acknowledging its challenges and also the
Speaker 5: hype around the company's AI powered products. Let's just talk
Speaker 5: about AI a little bit more because Blackstone has been
Speaker 5: big data center investor and its ambitions are huge, but
Speaker 5: not everyone is into it. After it bought data center
Speaker 5: developer QTS in twenty twenty one, it's turned it into
Speaker 5: a major profit driver for the firm.
Speaker 4: But around Fairttville, Georgia.
Speaker 5: The data center has stirred discord in the community over
Speaker 5: its unprecedented power needs. No most Josh Saul is here
Speaker 5: with more to deliver. This sort of infrastructure impacts real people,
Speaker 5: real citizens', real ground.
Speaker 11: Yes, people in Fairville were unhappy when the local power
Speaker 11: company came around and started knocking on the door saying
Speaker 11: they wanted to buy easements. Basically wanted to run big
Speaker 11: transmission lines through their yards. And that's because these data
Speaker 11: centers take so much power. The one that QTS is
Speaker 11: building in Georgia will take about as much power as
Speaker 11: a million horns.
Speaker 5: Wow, what does this mean in terms of scaling that
Speaker 5: across different states, different towns, Because there's not only just
Speaker 5: one data center in.
Speaker 4: Georgia right now.
Speaker 11: Exactly, Georgia isn't even one of the hotspots. It's not.
Speaker 11: It's not data center Alley, it's not it's not in Arizona.
Speaker 11: So it means that there'll be more and more of
Speaker 11: this more power infrastructure being built all over the US
Speaker 11: and people unhappy when power lines runs run across. But
Speaker 11: at the same time, data centers in AI we all
Speaker 11: use all the time, so there's certainly no indication that
Speaker 11: it's going to slow down.
Speaker 5: So is there a price point or is there just
Speaker 5: money recompense what happens?
Speaker 11: It seems like pretty much all the systems are set
Speaker 11: up for more data centers to get built faster and faster.
Speaker 11: Power power companies have a lot of power sorry to
Speaker 11: build transmission lines across in order to provide electricity, So
Speaker 11: it seems like most of our systems and most of
Speaker 11: the profit and in centers are set up to have more
Speaker 11: data centers and more transmission lines at a pretty rapid
Speaker 11: pace and.
Speaker 5: More discord perhaps among communities. It's great reporting. I urge
Speaker 5: you to go and read the story in full.
Speaker 4: Welcome back to Blue Megtechnology and Karen Hide in New York.
Speaker 5: As the course of the show continues, we've actually seen
Speaker 5: a build up in risk a version surrounding tech. At
Speaker 5: the moment, we're off by seven tenths of a percent
Speaker 5: all fixation on the CPI print that inflationary print here
Speaker 5: on Wednesday in the United States. What does that mean
Speaker 5: for FED policy going forward? What about the geopolitical risks
Speaker 5: that are currently affecting in video for example, once again
Speaker 5: a new probe being announced by China that tip for
Speaker 5: tach continues to build anxiety.
Speaker 4: We're seeing though, Crypto off by about two percent.
Speaker 5: No, we're still in a ninety eight thousand level close
Speaker 5: to that one hundred, but then too seeing a little
Speaker 5: bit of a sell off as we get out of
Speaker 5: those riskier assets. Move on to some of the individual
Speaker 5: movers that I want to shine a light on. I mean,
Speaker 5: PDD don't remember there is some optimism, particularly around in
Speaker 5: China and its own monetary policy, fiscal policy stimulus, some
Speaker 5: of the most positive that we've seen in more than
Speaker 5: a decade. According to Morgan Stanley, we're up some eleven
Speaker 5: percent as Chinese names do well off the.
Speaker 4: Hints coming from the politboro.
Speaker 5: We're looking at work Day up six percent this as
Speaker 5: we get new announcements of who and who is in
Speaker 5: and out of the next S.
Speaker 4: And P five hundred.
Speaker 5: It's a real and we're seeing Workday software company up
Speaker 5: six percent because it will make the S and p
Speaker 5: five hundred everyone, or rather I hope app love and
Speaker 5: it's Investibatis thought it might, but it's down fourteen percent
Speaker 5: as it doesn't make the cut. Meanwhile, let's just talk
Speaker 5: about Reddit as well. Currently testing a new AI powered
Speaker 5: chatbot called Reddit Answers to help users find information and
Speaker 5: surface discussions from across the platform's forums. That's why I
Speaker 5: am Bluemokes Asia Council. What's so interesting is I feel
Speaker 5: as a user, you and I use Generator AI of Googles.
Speaker 5: I often get Reddit citations and I'm being pushed to
Speaker 5: Reddit more and more. But this is about keeping people
Speaker 5: within the platform absolutely.
Speaker 12: Like you said, right, you search on Google and you
Speaker 12: end up on Reddit. Sometimes I search Google specifically, so
Speaker 12: if I'm trying to find la versus San Francisco, I
Speaker 12: might search for that and then add Reddit at the end,
Speaker 12: and that's how I find stuff on the site. Because
Speaker 12: sometimes on Reddit site it can be a little bit
Speaker 12: difficult to find things. They have like one hundred thousand communities,
Speaker 12: billions of posts, and so with this new chatbot, you
Speaker 12: can just search on the Reddit site and find all
Speaker 12: the things that you're looking for. It or give you
Speaker 12: a summary or give you links, and it just makes
Speaker 12: the experience a lot easier.
Speaker 5: What's so interesting is Reddit, of course have been signing
Speaker 5: deals with generative AI companies Google for example, and getting
Speaker 5: money for its own website and data to be used
Speaker 5: by these generative AI large language models.
Speaker 4: What then are they doing in terms of their own
Speaker 4: lms to build its products? Are they agnostic? Are they
Speaker 4: using one or a couple?
Speaker 12: They're using a few, so they have their own models.
Speaker 12: They also use models from Open AI and Google. So
Speaker 12: they have really interesting partnerships with these companies where they're
Speaker 12: using their large language models. But then, like we mentioned,
Speaker 12: if you go on Google and you find Reddit results,
Speaker 12: that's because of a partnership that they have with Google
Speaker 12: that allows Reddit posts to appear in Google searches. So
Speaker 12: it's a mixture of all those different things. But they're
Speaker 12: definitely building their own models.
Speaker 4: Internally, and then they're using some from some of these
Speaker 4: other companies, becoming evan more integral to the business model
Speaker 4: generator of aiish accounts. Great to have me, thank you.
Speaker 5: Now let's just stick with social media a little bit
Speaker 5: more because TikTok's Chinese parent company, bite Dance now faces
Speaker 5: of course a ban in the US next month as
Speaker 5: a result of a federal appeals court decision Friday, But
Speaker 5: the ruling has sparked opposition from civil liberties groups and users,
Speaker 5: with only thirty two percent in fact of US adults
Speaker 5: supporting the ban according to a recent Pew survey. Let's
Speaker 5: bring in Annapam Chandra is professor of law at Georgetown University.
Speaker 5: And what's so interesting is this is of course ban
Speaker 5: or divest. You have written at length prior to this
Speaker 5: talking about some of the legal issues, perhaps with the
Speaker 5: government arguing, highlighting in particular, two key sentences in the
Speaker 5: briefing to the DC circuit that you thought basically cast
Speaker 5: doubt on the national security arguments.
Speaker 4: Didn't you just go through them for us?
Speaker 10: Sure?
Speaker 13: So, I think some of the key issues in the
Speaker 13: case revolve around whether or not there is in fact
Speaker 13: national security risk from the app, and the nationaleus risk,
Speaker 13: as the government tells us, is that the Chinese government
Speaker 13: might manipulate the app to push Chinese propaganda, or that
Speaker 13: it might manipulate the app to surveil Americans. And in
Speaker 13: order to avoid this, the United States government has negotiated
Speaker 13: has been negotiated for the last handful of years with
Speaker 13: TikTok to kind of locate the data entirely within Texas
Speaker 13: essentially and also put all these controls over that data.
Speaker 13: But the United States government has been dissatisfied with the
Speaker 13: level of protection. But the US government says that it
Speaker 13: has no information that there has in fact been any
Speaker 13: Chinese government manipulation of the app. So it's all speculative,
Speaker 13: and that's part of the difficulty for the government in
Speaker 13: this case.
Speaker 5: But is potential and speculation enough ultimately to argue that
Speaker 5: we're protecting citizens here exactly?
Speaker 13: The Circuit Court of Appeals believed it was that the
Speaker 13: government had was uncomfortable, did not trust Bitedance, did not
Speaker 13: trust TikTok, and therefore could move to ban it from
Speaker 13: the country if it's so decided. And so I think
Speaker 13: that is in fact the question now that we'll be
Speaker 13: posed to the Supreme Court of the United States. Should
Speaker 13: the Supreme Court take the case.
Speaker 5: Can you give us context ugus examples in the past
Speaker 5: where we've really seen court side with a government in
Speaker 5: this way around national security that even though it is
Speaker 5: theoretical in nature, it's important enough to overcome any well
Speaker 5: rights to free speech.
Speaker 13: So this is a very unusual case. There's nothing that
Speaker 13: is on all fours with this case. The closest case
Speaker 13: involving foreign propaganda in the United States is a case
Speaker 13: from the nineteen sixties involving literally Chinese communist propaganda, and
Speaker 13: the Supreme Court unanimously in that case said Americans have
Speaker 13: a right to receive Chinese communist propaganda if they so want.
Speaker 8: So.
Speaker 13: There's not an ideal case. I think if cases around
Speaker 13: national security, like the Pentagon Papers case, where the US
Speaker 13: government said it's too dangerous for the New York Times
Speaker 13: to reveal the secret history of the Vietnam War, and
Speaker 13: the Supreme Court said, actually, no, we don't believe that
Speaker 13: it's not a kind of immediate risk that you are
Speaker 13: pointing to. And that's what the TikTok's argument is going
Speaker 13: to be to the Supreme Court.
Speaker 5: Do you think that it's argument will carry weight if
Speaker 5: indeed it does get to the level of the Supreme Court.
Speaker 13: Well, if it goes to the Supreme Court, I think
Speaker 13: the same question is going to be before those judges
Speaker 13: as was before the DC Circuit. Do you defer to
Speaker 13: the judgment of the political branches of Congress and the
Speaker 13: President when they insist that there is a national security
Speaker 13: risk and there's no other way to protect Americans than
Speaker 13: to ban the app.
Speaker 5: What's so interesting is it feels as though perhaps the
Speaker 5: worries coming from the user base have diminished significantly, and
Speaker 5: as we're just saying just a third of US users
Speaker 5: or in the US population supports such a ban, So
Speaker 5: is there context as to how that might need to change.
Speaker 4: I mean, you're no.
Speaker 5: Marketing expert, but it almost feels as though the government
Speaker 5: needs to go out and make its case.
Speaker 4: A little louder.
Speaker 13: The government tried to make its case for the last
Speaker 13: six months. So the ban has been in place, has
Speaker 13: been you know, the law has been in place threatening
Speaker 13: this ban since April, and so since that time, we've
Speaker 13: seen the government say that China controls this app and
Speaker 13: therefore it's unsafe. But Americans have continued using the app,
Speaker 13: so they you know, Americans have decided that they don't
Speaker 13: feel unsafe despite the government's use. In fact, Donald Trump
Speaker 13: started using the app. In fact, Joe Biden started using
Speaker 13: the app, Kamala Harris started using the app. Every politician
Speaker 13: is now using the app, despite it's the fact that
Speaker 13: it's apparently possibly prone to foreign manipulation, though the government
Speaker 13: again has said we have no evidence of that thus far.
Speaker 4: January in the nineteenth.
Speaker 5: Therefore it gets banned, it has to be sold during
Speaker 5: foresee that being the outcome.
Speaker 13: Here, I think that's becoming closer and closer to the
Speaker 13: likely outcome that TikTok goes dark on January nineteenth.
Speaker 4: And it's great to have some time with you. Thank you.
Speaker 4: Anamam Chandra is of Georgetown University Law Center.
Speaker 5: Meanwhile, let's talk about a network of Facebook accounts posting
Speaker 5: more than forty one hundred political ads against Romania's pro
Speaker 5: EU presidential candidate while also promoting far right figures. Digital
Speaker 5: threat research groups reset tech and check First say the
Speaker 5: posts were.
Speaker 4: Viewed by nearly two hundred million times.
Speaker 5: Facebook's parent company Meta did not comment on the report,
Speaker 5: but says it has not seen any evidence of major
Speaker 5: incidents on its platforms in Romania. Now coming up, Lily
Speaker 5: Lyman underscore VC Managing Partner.
Speaker 4: Is here with a look VC funding where it's heading next.
Speaker 4: In twenty twenty five, this Bloomberg technology.
Speaker 5: Investment strategies of major multi billion dollar firms and then
Speaker 5: small specialized VC funds, Well, they're showing that venture the
Speaker 5: asset class is kind of bierfurcating.
Speaker 4: Here heading into the new year.
Speaker 5: According to Linny Lyman, who is managing partner at Underscore VC,
Speaker 5: joining us now from Boston and nearly the theory here
Speaker 5: is that you're getting two very different strategies, not both
Speaker 5: of particularly complementary.
Speaker 1: That's right, Carolin, It's great to be here. Thanks for
Speaker 1: having me again. I'm Lily Lyman. I'm at Underscore BC.
Speaker 1: We are a community driven early stage venor from BC
Speaker 1: here in Boston. We invested the preceed and seed stages
Speaker 1: in the world of B to B software. In your questions,
Speaker 1: the right one. We're seeing the emergence of two very
Speaker 1: different strategies in venture, and it's bifurcating the market in
Speaker 1: a way that almost looks like a barbell. On one hand,
Speaker 1: you have these big, multi billion dollar multi stage venture
Speaker 1: firms that our megafirms. They're really sort of financial institutions
Speaker 1: at this point, and I hear LPs refer to these
Speaker 1: as venture beta. On the other side of the spectrum,
Speaker 1: you have smaller funds, more specialized targeted strategies. That's where
Speaker 1: we at Underscore play and it's because our that's our
Speaker 1: belief of where you can still get venture alpha that
Speaker 1: three to five even ten x return. What's happened over
Speaker 1: the last eighteen months or so, though, is we're seeing
Speaker 1: a heavy concentration of LP dollars going into the megafunds.
Speaker 1: So eighty percent of capital rais last year went to
Speaker 1: established managers of firm sizes over five hundred million, and
Speaker 1: the representation of these firms is increased, so it's gone
Speaker 1: from about two percent to twenty five percent in the
Speaker 1: venture market. And that overrepresentations has a lot of implications
Speaker 1: for LPs, for managers and for founders.
Speaker 5: Okay, let's talk about what means for onto school VC. Ultimately,
Speaker 5: you're going to see more consolidation aman among the seed
Speaker 5: the pre seed stage or actually do need the breadth
Speaker 5: of more focused funds, and it's actually in consolidation that
Speaker 5: you have in the middling.
Speaker 1: I think what it means is for I think we're
Speaker 1: going to see, you know, more specialization at the earliest stages,
Speaker 1: so firms like ours that you need to really lean
Speaker 1: into differentiation and get to founders early and also back
Speaker 1: perhaps non consensus, non not obvious both founders and ideas
Speaker 1: because that's how you can capture true alpha. What's happening
Speaker 1: with the multi stage strategy at the at the seed
Speaker 1: stage is that they play more of an index game
Speaker 1: and putting out a lot of a lot of checks
Speaker 1: and then backing the ones that are that are winners.
Speaker 4: But the implications of that is that.
Speaker 1: They're not always very pre sensitive in that and it
Speaker 1: can dilute the entire early stage class if you can't
Speaker 1: know counter that and and really dig in and go
Speaker 1: earliest and non consensus. So that's how we've been thinking
Speaker 1: about it in order to counteract some of the implications
Speaker 1: of the multi stage indexing model at seed stage.
Speaker 5: It kind of takes me back to when Softbad first unveiled.
Speaker 5: There are one hundred billion dollar fund and everyone feeling
Speaker 5: that the vision FuMB was just going to give enormous
Speaker 5: amounts of money to individual founders or companies that sort
Speaker 5: of drown out the rest of the competition. Is that
Speaker 5: what happens or is it just more that it inflicts valuations.
Speaker 5: What is a real impact on those very early stage bets.
Speaker 1: I think it can have multiple impacts. I think, on
Speaker 1: one hand, the indexing can impact valuations for everyone, and
Speaker 1: so it can actually dilute the returns across the board.
Speaker 1: And but on the other hand, if you can get
Speaker 1: in early, or if you can do you know, invest
Speaker 1: in sort of non consensus, I think you still can
Speaker 1: generate that.
Speaker 4: That real alpha.
Speaker 1: I think part of the implications are questions for founders
Speaker 1: as well. I think we're seeing founders think a lot
Speaker 1: about who do they bring around their table at which
Speaker 1: stages of company building. You know, in the in the
Speaker 1: market peak during the zerp era, there's a lot speed dating,
Speaker 1: there's a lot of capital that went out of the
Speaker 1: door very quickly, and then two years later we had
Speaker 1: a much tougher environment and it was hard for founders.
Speaker 1: And so I think we're seeing founders, both new founders
Speaker 1: and sophisticated founders, think about, you know, what kind of
Speaker 1: investments and investors do they want around their table for
Speaker 1: each stage of company building, and thinking more about this
Speaker 1: question of alignment. You know, what does that check mean
Speaker 1: to that firm and how does that infer how they'll
Speaker 1: show up during the company company building process.
Speaker 5: I'm assuming that most founders you're seeing are having to
Speaker 5: lean into generative AI, even if they are not an
Speaker 5: AI specific company.
Speaker 4: But what does that mean, in terms of trying to.
Speaker 5: Uncover the least covered areas or the particularly non consensus
Speaker 5: builders and founders you want to find.
Speaker 1: We're certainly seeing a ton of opportunity in AI and
Speaker 1: and you know, over thirty percent of venture capital this
Speaker 1: past year went into AI companies, and we expect that
Speaker 1: number to increase next year. But what we're seeing is
Speaker 1: is companies that are AI native, both in their products
Speaker 1: that they're offering, but so in terms of how they're
Speaker 1: being built. I think one of the things that makes
Speaker 1: this time particularly exciting to be an investor at the
Speaker 1: earliest stages is companies are being built with a new model.
Speaker 1: I think with a new capital structure you can do
Speaker 1: a lot more things more efficiently. Engineering can be much
Speaker 1: more efficient, sales and marketing can be much more efficient,
Speaker 1: and so I think there's a mentality of you do
Speaker 1: more with less, achieve more with less, and so in
Speaker 1: many ways, you know, outside of a certain bucket of
Speaker 1: types of investments like foundational models and infrastructure, I think
Speaker 1: where we invest a lot of the applied AI vertical
Speaker 1: AI applications, I actually think you can build pretty big
Speaker 1: companies with a totally different capital structure given the increased
Speaker 1: efficiencies of building with AI itself.
Speaker 4: How many of them are in Boston? Are you looking
Speaker 4: across the US?
Speaker 1: We invest across the US, but we're very bullish on Boston.
Speaker 1: So over half of our capital is deployed here here
Speaker 1: in Boston. And it's because this is an ecosystem that
Speaker 1: continuously produces the top talent in the world. It continuously
Speaker 1: produces some of the top research and development the world,
Speaker 1: and increasing you know, it consistently solves really hard problems,
Speaker 1: so things like healthcare and biotech and life sciences and
Speaker 1: financial services, and so cybersecurity and energy and climate. So
Speaker 1: you know, these three factors are you know, are part
Speaker 1: of what gets us very excited to invest in the
Speaker 1: bus and ecosystem, particularly in this age of applied.
Speaker 5: Ailey Lyman, great to have you, managing partner of Underscore VC,
Speaker 5: Wishing well for the rest of the year. Meanwhile, Elsewhere
Speaker 5: and VC, a startup founded by the former lead researcher
Speaker 5: of Open AI, is raised forty million dollars in funding.
Speaker 4: Waveforms AI.
Speaker 5: It makes AI audio software that improves verbal interactions with machines,
Speaker 5: and is one of several AI companies developing.
Speaker 4: More human length voice features. Bloomberg's Rachel Mets is here
Speaker 4: with more. It's come out of stealth.
Speaker 5: There's only five people there, but it's got quite a
Speaker 5: head evaluation already.
Speaker 14: Yeah, this is It's still a pretty small company. They
Speaker 14: don't have a demo to share publicly yet, but they
Speaker 14: are working on software to improve the kind of interactions
Speaker 14: that people have with computers when we're speaking to computers.
Speaker 5: And this is all around Alexis Kono, who was very
Speaker 5: senior at open Ai. So I assume that even though
Speaker 5: small and without a demo, people are betting on him
Speaker 5: his expertise in his background.
Speaker 14: Yeah, he has quite a long tale of experience working
Speaker 14: on voice computer human interactions and he was pretty instrumental
Speaker 14: in helping Opening Eye build its advanced voice mode. This
Speaker 14: is the more recent version of the voice mode that
Speaker 14: works with chat GPT that is meant to feel more
Speaker 14: lifelike than it had in the past, more feeling like
Speaker 14: you're having a conversation with an actual person than with
Speaker 14: a computer business model.
Speaker 5: I mean the fact that we don't have a demo,
Speaker 5: but ultimately, how is this company going to be returning
Speaker 5: value to its vcs?
Speaker 14: That is a great question. What they told me is
Speaker 14: they are going to be releasing at some point products
Speaker 14: that are both B to B and also consumer oriented.
Speaker 14: So you might imagine something like an app perhaps that
Speaker 14: would be for consumers from the company to kind of
Speaker 14: give people a sense of what their technology is and
Speaker 14: how it works. But then also perhaps they might work
Speaker 14: with other companies to let other companies use their software
Speaker 14: as well.
Speaker 4: And the San Francisco based yes, that is true. They
Speaker 4: are based in San Francisco.
Speaker 5: Rachel Matz all things open ai and ex open ai.
Speaker 4: We appreciate it, thank you very much.
Speaker 5: Indeed, Oracle stock having its best year since nineteen ninety nine.
Speaker 5: It's all thanks to the momentum of its cloud business.
Speaker 5: We'll find out if that momentum will continue when the
Speaker 5: company releases its earnings today after the closing bell.
Speaker 4: Luberg's Brodie Ford with a preview. I mean, what an
Speaker 4: extraordinary chart.
Speaker 5: It's just done so well because people are now like, oh,
Speaker 5: the cloud thing, it's actually relatively doing well compared to competitors.
Speaker 7: There were many years that people would make jokes to
Speaker 7: me about Oracle's cloud about how we know, will this
Speaker 7: ever actually be a serious player, And within the last
Speaker 7: two years, the answer has become yes, right, And a
Speaker 7: large part of that is because the AI workloads are
Speaker 7: so demanding that the traditional giants like AWS and Azure
Speaker 7: just don't have the capacity, right, And so it's become
Speaker 7: that Oracle's cloud is seriously taken as the kind of
Speaker 7: fourth hyperscaler, and it's been able to grow in such
Speaker 7: an accelerated way that very few other software companies can
Speaker 7: you know, compete with.
Speaker 5: It's got some I wouldn't call it a key Man risk,
Speaker 5: but certainly I'm talking about Uber as a client, but
Speaker 5: also TikTok, and we've been talking a lot about some
Speaker 5: concerns around the deal around TikTok.
Speaker 7: Absolutely right. I mean, yeah, we saw the court ruling
Speaker 7: that the there's increased odds that TikTok could go ahead
Speaker 7: and go poof, But there is you know, at the
Speaker 7: end of the day, if anybody buys TikTok, the odds
Speaker 7: that you say, hey, let's go ahead and switch out
Speaker 7: our cloud infrastructure. Nobody wants to do that, right, I mean,
Speaker 7: so it is a risk for Oracle, But you know,
Speaker 7: when TikTok was one of their only marque customers two
Speaker 7: years ago for OCI, it was a bigger deal today,
Speaker 7: they have a lot of customers, and I think the
Speaker 7: risk isn't quite as acute as it once was.
Speaker 5: What about other things in infrastructure and cloud provision, i
Speaker 5: mean software, other services.
Speaker 4: What else are they managing to do well on?
Speaker 12: Yeah.
Speaker 7: Well, one that's really interesting is that for a long
Speaker 7: time they really tried to get you to run their
Speaker 7: key iconic database software on prem and kind of control that.
Speaker 7: And they finally said, you know what, you could run
Speaker 7: it on Azure, you could run it on AWS. And
Speaker 7: that's kind of been a pretty big exciting thing for
Speaker 7: investors that you know, a lot of the world is
Speaker 7: on AWS or Azure and they want to use the
Speaker 7: Oracle database and so being able to kind of update
Speaker 7: that customer segment, you know, breathe some growth into the
Speaker 7: database segment, which you know dates back to the late seventies.
Speaker 7: That is another thing that's been exciting folks about a Oracle.
Speaker 5: But a lot of it is probably priced in when
Speaker 5: you're looking at an eighty percent run up and the shares.
Speaker 5: So what do you tend to hear in these calls
Speaker 5: post earnings.
Speaker 7: Oh god, we're building data centers across the world, you know,
Speaker 7: no one's ever seen a data center build out like this, right,
Speaker 7: I mean that's.
Speaker 4: The general energy informative. Yes, absolutely, I.
Speaker 7: Mean the amount of hype right now about the AI
Speaker 7: fueled data center buildout is massive, right. You see you
Speaker 7: sat pricing the shares. You know they are near an
Speaker 7: all time high. And so the question is so much
Speaker 7: that how quickly are they going to be able to
Speaker 7: convert demand into actually offering these services, because you know
Speaker 7: they just like Microsoft and Amazon, they can't get these
Speaker 7: centers up quick enough. They can't get enough chips to
Speaker 7: deal with the demand.
Speaker 5: Well, despite the run up, they've got twenty five buys,
Speaker 5: fifteen holds and not a single cell rating.
Speaker 4: Bodie Ford, all things are coole.
Speaker 5: We'll be checking in on him tomorrow, I'm sure, after
Speaker 5: those earning drop. But meanwhile, that does it for this
Speaker 5: addition of Blomberg technology. You don't want to forget a
Speaker 5: podcast find out on the terminal as well as online
Speaker 5: on Apple, Spotify, and iHeart this is Bloomberg technology.