Speaker 1: From the heart where innovation, money and power Collie in
Speaker 1: Silicon Vallet and beyond. This is Bloomberg Technology with Caroline
Speaker 1: Hyde and Ed Ludlow.
Speaker 2: I'm Scarlett who in for Caroline Hide at Bloomberg World
Speaker 2: headquarters in New York, and.
Speaker 3: I'm Alex Burnka in for Ed Ludlow in San Francisco.
Speaker 3: This is Bloomberg Technology.
Speaker 2: Coming up an escalation in the US China tensions as
Speaker 2: China bans microns chips on cybersecurity risks.
Speaker 4: Will bring you all the details, plus a.
Speaker 3: Record find for Meta, the social media giant ordered to
Speaker 3: pay one point three billion dollars to the EU after
Speaker 3: regulators said it failed to protect personal information. We'll break
Speaker 3: that decision down and forward.
Speaker 2: Stepping up its electric vehicle output after reaching a series
Speaker 2: of deals to buy lithium from projects in Canada to
Speaker 2: We're going to be hearing from the CEO later this hour,
Speaker 2: but first we want to give you a check on
Speaker 2: markets and where things stand at midday here in New York.
Speaker 4: It's very much weight and.
Speaker 2: See game when it comes to the broader equity market,
Speaker 2: both on the debt selling negotiations and what the Federal
Speaker 2: Reserve decides to do with interest rates. Negotiating teams, by
Speaker 2: the way, are back on at the table today in Washington,
Speaker 2: d C. However, we do see the Nazak one hundred
Speaker 2: leading the way. Tech stocks continue to be the outperformers here,
Speaker 2: even as chip makers are under pressure. We'll get to
Speaker 2: that a little bit later on the Nazak one hundred,
Speaker 2: by the way, at a thirteen month high, and excel UF,
Speaker 2: which is the ETF that tracks financial stocks, up by
Speaker 2: a third of one percent, thanks very much. In focus
Speaker 2: today with JP morgan Chase holding its investor day and
Speaker 2: also helping to boost sentiment is pack West. The Beverly
Speaker 2: Hills based lender is not a holding in this ETF,
Speaker 2: but it is taking steps to boost its liquidity by
Speaker 2: selling two point six billion dollars of real estate loans
Speaker 2: at a discount and the two year yield ticking up
Speaker 2: to four point three to three percent. There's no ECO
Speaker 2: data today, so expect a lot of movement based on
Speaker 2: incremental movement, hopefully progress in those debt sealing discussions. Let's
Speaker 2: switch it up here and take a look at commodities.
Speaker 2: Crude oil has now flipped to the upside, up by
Speaker 2: four tenths of one percent, even as copper is down
Speaker 2: by one point three percent. Still a lot of concerns
Speaker 2: over what's going on in China. That post COVID rebound
Speaker 2: has not been as strong as many people had hoped,
Speaker 2: and the lack of fresh stimulus measures in China is
Speaker 2: certainly holding back some of the medals.
Speaker 4: And I wanted to point.
Speaker 2: Out the Hanksaying Index closing up by more than one
Speaker 2: percent after Joe Biden, the President said that he expects
Speaker 2: US China relations to improve very shortly.
Speaker 4: Details on that coming up.
Speaker 2: And finally, Greek stocks getting a big, big day here.
Speaker 2: They made a new ten year high after national elections.
Speaker 2: It looks like the incumbent Prime Minister is in position
Speaker 2: to get another four year term, which is certainly a
Speaker 2: good thing for all his investment friendly policies. That investors
Speaker 2: are keeping a very close eye on alex What about you?
Speaker 4: What are you watching? I'm watching the top tech.
Speaker 3: Mover today, Scarlett first with Meta Investors are really taking
Speaker 3: that one point three billion dollar fine in Stride coming
Speaker 3: over from the EU. Perhaps that's because the company has
Speaker 3: actually in the past threatened to leave if there's not
Speaker 3: a resolution on the EU's kind of push for them
Speaker 3: not to send userdata over overseas to the US. I'm
Speaker 3: also looking at Albermarle. Now, this is a company that
Speaker 3: just inked a lithium partnership with Ford. Ford has a
Speaker 3: fifty billion dollar electric vehicle plan and for Albemarle to
Speaker 3: be in the mix. Investors are liking a little bit
Speaker 3: of that now. In terms of what's going on in
Speaker 3: the cybersecurity space, there is.
Speaker 4: Kind of our top name of the day, Micron.
Speaker 3: China's cybersecurity regulator said it found relatively serious cybersecurity risks
Speaker 3: when it comes to the company's chips. Whether this is
Speaker 3: political banter or there are actual risks. We're going to
Speaker 3: break all that down in the show, but for now,
Speaker 3: investors drove the stock down around five percent. It's pairents
Speaker 3: some of those laws, but we'll get into the details here,
Speaker 3: Suit Scarlett, all right, and let's stay on that right now,
Speaker 3: because we're going to go now to San Francisco and
Speaker 3: bring in Ian King, who's covered semiconductors in Asia and
Speaker 3: now on the West Coast. So Ian, with his decades
Speaker 3: of experience, is certainly the best person to speak on this.
Speaker 2: Ian, as Alex was setting up for us. It's curious
Speaker 2: this ban on Micron products. What kind of history does
Speaker 2: Micron have with China specifically? Is there a notable significant
Speaker 2: history between the two.
Speaker 5: Yeah, I mean there are a number of incidents. The
Speaker 5: big thing to point out is that Micron, unlike it's
Speaker 5: South Korean competitors Sam Song and s Khaynix, doesn't have
Speaker 5: a production plant in China. Those guys do, which obviously
Speaker 5: makes them a little bit closer to Beijing's heart in
Speaker 5: terms of what that country wants to do with domesticating
Speaker 5: its own chip industry. And the other sort of negative
Speaker 5: thing that's happened for Micron in the past is Micron
Speaker 5: went caught with a Taiwanese company arguing that that company
Speaker 5: with stealing its IP to give to China. So there's
Speaker 5: there's some real kind of tension there in the past.
Speaker 3: Now Ian Micron obviously caught in the middle of this
Speaker 3: political banter.
Speaker 4: If your Qualcom, if you're Broadcom.
Speaker 3: If you're Intel, should you be worried that your next
Speaker 3: And if not, why is Micron the target of Beijing's
Speaker 3: ire at the moment?
Speaker 5: I mean, the way to think about this is China
Speaker 5: needs Qualcomm, China needs Intel. China needs Broadcom, it doesn't
Speaker 5: need Micron. The chips that Micron makes, the DRAM and
Speaker 5: the non flash memory chips are basically exactly the same
Speaker 5: as the ones that Samsung makes, as the ones at
Speaker 5: sk Henex makes, So literally you can drop them into
Speaker 5: a piece of electronics, pull one out, put one in.
Speaker 5: You can't do that with other products from those companies
Speaker 5: you mentioned. So that's what's going on here.
Speaker 2: That's incredible context here because Micron's memory chips are kind
Speaker 2: of commoditized. They're pretty standard components as opposed to say,
Speaker 2: in videos graphics chips. How much of this is trying
Speaker 2: to buying time or giving its own domestic industry some
Speaker 2: time to bloom.
Speaker 5: I mean, if that's the plan, we're talking a decade
Speaker 5: two decades before they'll have equivalent capabilities. What this is
Speaker 5: being seen as more of Scarlett is really Beijing has
Speaker 5: just really had to take it on the chin. We've
Speaker 5: seen all of these actions by the US government against
Speaker 5: Chinese technology companies, and really Beijing has had nothing to
Speaker 5: fight back with apart from Micron. It can take a
Speaker 5: swing at them.
Speaker 3: Ian King, our in house semiconductor expert, Thank you. I
Speaker 3: want to now bring in the Washington angle on this.
Speaker 3: We have Bloomberg's Haley Lines. Kayley, as we see this
Speaker 3: kind of back and forth between Beijing and DC, what
Speaker 3: do you think is next here or does dec have
Speaker 3: a response to this.
Speaker 4: Micron move from China.
Speaker 6: Yeah, well, we've already heard from the Commerce Department on this,
Speaker 6: saying that Beijing's conclusion here that micro imposes a cybersecurity
Speaker 6: national security threat has no basis in fact, and that
Speaker 6: this action, along with some other recent action that Beijing
Speaker 6: has taken, is inconsistent with China's assertions that it's opening
Speaker 6: up its markets and is committed to a transparent regulatory framework.
Speaker 6: So that's the US response. Of course, China, for its
Speaker 6: part in releasing this conclusion from this review, says it
Speaker 6: wasn't political, that it is about national security, but it
Speaker 6: does kind of have this sense of escalating a fight
Speaker 6: between the world's two largest economies when it comes to
Speaker 6: this technology. Because we have to keep in mind the
Speaker 6: US has already taken plenty of action on its own.
Speaker 6: It's blacklisted certain Chinese technology firms, and of course late
Speaker 6: last year also introduced a pretty sweeping restriction on selling
Speaker 6: advanced semiconductor manufacturing equipement to China.
Speaker 2: You know, it's ironic that this is happening right as
Speaker 2: President Joe Biden is in Asia attending the G seven
Speaker 2: summit and making comments about how he sees he has
Speaker 2: China relations actually improving very shortly. Give us some context
Speaker 2: for when he made those comments and what he might
Speaker 2: be referring to.
Speaker 6: Well, that was him speaking before he left the G
Speaker 6: seven seven in Japan, your right, Scarlett or Ambrey Horden,
Speaker 6: was asking him about China. Also the question around sanctions
Speaker 6: to facilitate a meeting between Defense Secretary Lloyd Austin and
Speaker 6: his counterpart, which that we understand is under review by
Speaker 6: the administration, still something potentially in the works. But he
Speaker 6: did say referring to the Chinese spy balloon incident that
Speaker 6: captured all of our attention earlier this year, calling it silly,
Speaker 6: saying that he does expect relations between the US and
Speaker 6: China too thaw in the near term. It poses a
Speaker 6: very interesting contrast between the tone of the President's remarks
Speaker 6: over the weekend versus then just hours later later China
Speaker 6: making this move against a US company.
Speaker 3: Now, Kaylee, this isn't the only big conversation happening in DC.
Speaker 3: It is start of the week. Where are we next
Speaker 3: on the debt ceiling debate? What do we expect today
Speaker 3: on this Monday.
Speaker 6: Well, at five point thirty pm, there is going to
Speaker 6: be a meeting between President Biden and House Speaker Kevin McCarthy.
Speaker 6: So that's really what we're all looking forward to.
Speaker 4: Now.
Speaker 6: Those two did speak on the phone yesterday when the
Speaker 6: President Biden was on Air one on his.
Speaker 4: Way back to the US.
Speaker 6: It seemed that their tone coming out of that phone
Speaker 6: call was one of more optimism. But really this is
Speaker 6: going to be about real progress being made.
Speaker 7: We understand that.
Speaker 6: The two sides are still really far far apart in
Speaker 6: the negotiations, as their different parties have been working over
Speaker 6: the weekend, working again at the Capitol this morning on
Speaker 6: this But the issue of spending cuts, spending caps, stricter
Speaker 6: work requirements for entitlements, permitting reform, all still on the table,
Speaker 6: all still needing to be ironed out into an ultimate compromise.
Speaker 6: Because even once we get a deal between Speaker McCarthy
Speaker 6: and President Biden, it still needs to work. It's the
Speaker 6: way through both chambers of Congress to make it back
Speaker 6: to the President's desk for him to sign off on it.
Speaker 6: And we're just ten days out now from June first,
Speaker 6: which Treasury Secretary Jenneyellen reiterated over the weekend could be
Speaker 6: the earliest possible X State.
Speaker 2: Yeah, Cluck is sticking. Kelly, Thank you so much. Kelly
Speaker 2: Lines joining us from Washington.
Speaker 4: It's time now for talking tech.
Speaker 3: First up, Uber, the ride sharing company, is placing its
Speaker 3: head of diversity on leave after complaints of insensitivity.
Speaker 7: CEO Dara Kashrashahi asked.
Speaker 3: Bo Young Lee to take a leave of absence after
Speaker 3: workers complained that an employee event she moderated called Don't
Speaker 3: Call Me Karen was insensitive to people of color. And
Speaker 3: turmoil in the cyber insurance market. Global insurers are racing
Speaker 3: to figure out how to avoid covering government sponsored cyber
Speaker 3: attacks and catastrophic hacks. Ransomware attacks increased by eighty seven
Speaker 3: percent in twenty twenty two from the year prior, with
Speaker 3: global cyber premiums expected to exceed twenty three billion dollars
Speaker 3: by twenty twenty five.
Speaker 4: Plus.
Speaker 3: Instagram ran into some technical difficulties on Sunday night. Tens
Speaker 3: of thousands of users reported that they could not access
Speaker 3: the app and what was the second widespread disruption in
Speaker 3: just over two months. Down detectors now reporting that the
Speaker 3: problem lasted for about an hour and the app is
Speaker 3: back up and running.
Speaker 4: Now, Scarlett, all right, well we're going.
Speaker 2: To stick with Instagram because his parent company Meta now
Speaker 2: faces a record one point three billion dollar fine in
Speaker 2: the EU. So we want to bring in Alex Webb
Speaker 2: of Bloomberg Quick Take, who covers all things tech, to
Speaker 2: give us some more context here.
Speaker 4: Alex, this is.
Speaker 2: Something that was not a total surprise, but the amount
Speaker 2: is certainly a surprise.
Speaker 8: Yes, it is a record fine for Facebook. The question
Speaker 8: is whether ultimately they will end up paying it. There
Speaker 8: sort pertains to the so called US EU privacy Shield.
Speaker 8: This was the agreement that previously let companies transfer data
Speaker 8: from Europe to the US without any major questions asked.
Speaker 8: Then all of a sudden there were concerns that actually
Speaker 8: US intelligence agencies might have access to this data, so
Speaker 8: they scrapped the privacy shield. Facebook has, according to this decision,
Speaker 8: at any rate, failed to prevent data from being shipped
Speaker 8: over to the US. There is, however, a new privacy shield.
Speaker 8: Talks about it are in the offering that could be
Speaker 8: agreed upon by the end of the Northern Hemisphere summer.
Speaker 3: Now alex The investors, though, are not necessarily seeing this
Speaker 3: as about thing. Perhaps that's because the company in the
Speaker 3: past has threatened to actually pull out of the EU.
Speaker 3: How are you taking this stock reaction that the shares
Speaker 3: are up about two percent on the news even though
Speaker 3: this is a record fine for Meta.
Speaker 8: Well, Often in these sort of cases, when a fine
Speaker 8: is sold out, stocks do tend to pop because investors
Speaker 8: have clarity. They know how much this is likely to
Speaker 8: cost the company if it does end up costing them
Speaker 8: anything at all. That clarity therefore results in a stock
Speaker 8: price gain. Often then, don't forget you know, Facebook has
Speaker 8: met as oodles of money, has very healthy free cash flow,
Speaker 8: even before the savings program that they've been putting into place.
Speaker 8: They've reported twenty eight billion of revenue in the first quarter.
Speaker 8: So one point three billion, you know, while clearly painful,
Speaker 8: is not going to bankrupt the company.
Speaker 4: Yeah.
Speaker 2: Absolutely, And we've seen how those tech companies with their
Speaker 2: free cash flow have been regarded as safe havens for
Speaker 2: investors in this turbulent time in the markets. One thing
Speaker 2: that I did notice in the reporting is that metal
Speaker 2: was given time to suspend any future transfer of data.
Speaker 2: Does that mean that there is a way out for
Speaker 2: the company where perhaps a fine could be whittled down.
Speaker 8: No, it means that if they don't do it by
Speaker 8: that date, then there could be there's the risk of
Speaker 8: further punishment. The real act. One of the really interesting
Speaker 8: piece of reporting on this About a year ago, Motherboard
Speaker 8: managed to get hold of an internal document from Facebook
Speaker 8: which likened data to a pot of ink that is
Speaker 8: thrown into a swimming pool. That the ink is in
Speaker 8: the pool, Now, how do you gather that ink back up?
Speaker 8: The internal Facebook document heavily implied that that was essentially impossible.
Speaker 8: That's the real challenge they face right now. Perhaps over
Speaker 8: the course of the past year since this reporting was published,
Speaker 8: they have found a way of putting the ink back
Speaker 8: in the pot, but it is a real challenge and
Speaker 8: will be interested to see how or if they do it.
Speaker 3: Alex, this is meta cotton and crosshairs. This beats out
Speaker 3: the record fine that was previously applied to Amazon. Are
Speaker 3: there other companies in the EU that should be looking
Speaker 3: at this as kind of a warning sign? Who should
Speaker 3: be actually looking at where their ink is spread throughout
Speaker 3: their organizations.
Speaker 8: I think that the EU has been very slow on GDPR,
Speaker 8: on the general Data Protection regulation, and they are that
Speaker 8: clearly picking the big most egregious victims first. It's still
Speaker 8: five years, so first, it's a very long timeline. It
Speaker 8: is a warning shot to other people to say, you know,
Speaker 8: sort your stuff out. I'm sure there are plenty of
Speaker 8: other companies who have done this. Facebook also sits on
Speaker 8: one of the biggest pools of consumer data in the world,
Speaker 8: so it's unsurprising therefore that they are gone for first.
Speaker 8: I wouldn't like to name names on who else might
Speaker 8: be in the firing line, but I'm sure there is
Speaker 8: a very long list of people who could be vulnerable
Speaker 8: to this well.
Speaker 3: Bloomberg's Alex Webb thanks for joining and some clarity on
Speaker 3: that situation. Rory Harvey, executive vice president of General Motors,
Speaker 3: spoke exclusively to Bloomberg's Matt Miller about its new line
Speaker 3: of evs, including an electric Chevrolet Varado.
Speaker 4: Take a listen.
Speaker 9: We have our Altium platform, and the Altium platform actually
Speaker 9: gives us the ability to be able to configure battery
Speaker 9: packs in many different formats in terms of the amount
Speaker 9: of modules that are in there, so dependent upon the
Speaker 9: capabilities of the vehicle, dependent upon the prices of the vehicle,
Speaker 9: dependent upon what functionality we want from the vehicle, then
Speaker 9: we can figure those atium battery packs in a way
Speaker 9: that fits the customer needs. So there's a huge decree
Speaker 9: of commonality within autium. But it also provides us with
Speaker 9: ultimate flexibility.
Speaker 10: Is altm able to scale from you know, a thirty
Speaker 10: thousand dollars vehicle all the way up to one hundred
Speaker 10: and fifty thousand dollars vehicle.
Speaker 9: It certainly is. That's one of the great things about
Speaker 9: otium as a product.
Speaker 10: That's that's very impressive. Now, having said that, more people
Speaker 10: who are ordering your vehicles are paying closer to the
Speaker 10: upper end. I saw that of the Silverado HD orders,
Speaker 10: which is a work truck. Let's be fair, right, eighty
Speaker 10: four percent or for AT four and Denali trims. In
Speaker 10: fact more than fifty percent or for Denali and Denali
Speaker 10: Ultimate trims.
Speaker 4: So they're paying top dollar for these trucks.
Speaker 9: Yeah, no, I mean, and I think that's again it's
Speaker 9: just credibility in terms of the desirability of the product portfolio.
Speaker 9: If you looked at the general Motors product portfolio today,
Speaker 9: I think it's outstanding. And if you looked at it
Speaker 9: in terms of what customers are looking at to buy
Speaker 9: to meet their needs. As an example, they're paying a premium.
Speaker 9: So again it just shows the desirability of our vehicles
Speaker 9: and the fact that we've got vehicles that are attractive
Speaker 9: to our customers.
Speaker 10: You have a small electric vehicle in the bolt that
Speaker 10: addresses that issue. How are your EV sales as a
Speaker 10: percentage of the total what do you expect for example,
Speaker 10: Rory in twenty twenty three and twenty twenty four.
Speaker 9: Yeah, that one's really interesting because, as you know, Matt,
Speaker 9: the adoption rates continue to change. If you looked at
Speaker 9: the data for April, I think it was the highest
Speaker 9: penetration of evs in the industry as an example. So
Speaker 9: we adjust our production capabilities in line with could demand.
Speaker 9: So I guess I'm not going to give a definitive number,
Speaker 9: but suffice to say that you know it's increasing all
Speaker 9: of the time. And if you looked at the second
Speaker 9: half of the year, certainly if you take the Cadillac
Speaker 9: Lyric as an example, we know that we started off
Speaker 9: deliberately so with relatively low volumes and we're building significantly
Speaker 9: in half two, so it's going to take an ever
Speaker 9: greater proportion of general motor sales.
Speaker 10: Rory, let me finally ask you about the chip situation.
Speaker 10: Are you all cut up in terms of the supply chain?
Speaker 10: Can you get all the chips that you need to
Speaker 10: produce in the size that you want to.
Speaker 9: I would say work in progress. I would say it's
Speaker 9: significantly better than where it was historically. I would say
Speaker 9: that we are not in a position that we could
Speaker 9: declare that it's all totally behind us, but I would
Speaker 9: say that it's much more stable, and I would say
Speaker 9: that it's going to continue to improve going forward. So
Speaker 9: a much better position overall.
Speaker 2: And you can watch Ry Harvey's full interview with Bloomberg
Speaker 2: on the Terminal. Now, Matt Miller has been pretty busy
Speaker 2: because he also sat down with Ford CEO Jim Farley
Speaker 2: about that company ramping up its EV production, which includes
Speaker 2: striking a number of deals to buy lithium for batteries.
Speaker 2: Matt joins us now from Ford's production plant in Michigan. Matt,
Speaker 2: I thought you were going to wear a hard hat.
Speaker 2: I didn't realize you're outside in front of cars. But
Speaker 2: of course you are tell us a little bit about
Speaker 2: the Ford Lithium partnership that it made public today. How
Speaker 2: critical is this partnership to meeting Ford's edy goals.
Speaker 10: Yeah, it's very important because you know, last year Ford
Speaker 10: sold at least in the US, I think about sixty
Speaker 10: one sixty two thousand electric vehicles in total. In twenty
Speaker 10: twenty six, they want to sell two millions, so they've
Speaker 10: got to ramp up substantially, and the most difficult part
Speaker 10: of that, according to Jim Farley, is scaling up battery production.
Speaker 10: In order to build those batteries, they need a lot
Speaker 10: of chemicals and minerals like lithium, they need nickel, they
Speaker 10: need cobalt, and getting those things isn't particularly easy, especially
Speaker 10: since eighty percent of that refining process currently sits in China.
Speaker 10: So Ford has made a number of deals three on
Speaker 10: lithium with the biggest lithium producers in the world to
Speaker 10: get that refining done in North America and in South America,
Speaker 10: so in Canada and Mexico and in Chile. That's really
Speaker 10: key to keeping costs down, and that's really the biggest
Speaker 10: part of the vehicle. So they're going to be building
Speaker 10: their next generation electric vehicles in Tennessee as well as
Speaker 10: around the rest of North American plants that they already
Speaker 10: have production in. But getting these chemicals, getting these minerals
Speaker 10: is really important.
Speaker 4: And Matt, that sounds expensive.
Speaker 7: Are those costs being passed along to consumers?
Speaker 3: What's the pricing strategy look like for Ford's evs as
Speaker 3: they roll them out?
Speaker 10: Yeah, so it is very expensive. And right now they
Speaker 10: have a negative one hundred percent margin and change right
Speaker 10: they're losing three billion dollars this year on about three
Speaker 10: billion dollars in revenue. They hope to change that dramatically.
Speaker 10: So by twenty twenty six, remember is less than three
Speaker 10: years away, they want to have an eight percent margin
Speaker 10: on their entire electric vehicle fleet, so that would be
Speaker 10: a massive change, a ten percent margin on the internal
Speaker 10: combustion engine fleet.
Speaker 4: And they need.
Speaker 10: Those big margins which they already make on you know,
Speaker 10: the big trucks and the very expensive gas cars they sell,
Speaker 10: like the Mustang or the Bronco that you see behind me.
Speaker 10: They need those profits to invest into this battery electric
Speaker 10: vehicle business before it starts making its own money.
Speaker 4: Yeah, it's own virtuous circle. Matt, thank you. So much.
Speaker 2: Matt Miller, of course, joining us right now from outside
Speaker 2: Ford's production plant. Welcome back to Bloomberg Technology. I'm Scarlettfoo in.
Speaker 7: New York, and I'm Alex Brinkan San Francisco.
Speaker 4: All right, let's get you.
Speaker 2: A check on the market gets at midday here in
Speaker 2: New York, another day of muted price action when it
Speaker 2: comes to equities and the major indexes, the SMP moving
Speaker 2: up marshaling by one tenth of one percent. Clearly, investors
Speaker 2: are waiting for any kind of progress on debt selling negotiations,
Speaker 2: as well as responding to commentary from FED officials. Two
Speaker 2: FED Regional Bank presidents Neil Kashkari and James Buller giving
Speaker 2: some hawkish commentary talking about how a pause is not
Speaker 2: necessarily the thing that's going to come up next, perhaps
Speaker 2: a rat hike might be in order in the coming future,
Speaker 2: and also how inflation is still something the FED is
Speaker 2: keeping its eye on. Nevertheless, you continue to see those
Speaker 2: big cap tech stocks piling on gains. We have the
Speaker 2: NAZAQ one hundred already at a thirteen month high, gaining
Speaker 2: another two tenths of one percent.
Speaker 4: Apple among the big gainers.
Speaker 2: Here and XLF the ETF that tracks financial stocks in
Speaker 2: focus today as JP Morgan Chase holds its Investor Day
Speaker 2: and PacWest makes some moves to shortest liquidity, the two
Speaker 2: year yield inching up by six basis points these days,
Speaker 2: that kind of is an inching up at four point
Speaker 2: three to two percent. We know that Treasury Secretary Janet
Speaker 2: Yellen has said that the chances the US can pay
Speaker 2: all its bills by mid June, when the next round
Speaker 2: of tax receipts come in, are quite low. And we
Speaker 2: do know that President Joe Biden and Kevin McCarthy, the
Speaker 2: Speaker of the House, are scheduled to resume meeting at
Speaker 2: five thirty pm Eastern time today after the market's closed.
Speaker 2: So there's a lot of wait and see until we
Speaker 2: get to that point. Now, taking a look at one
Speaker 2: individual name, it's Micron, and the stock is in retreat today,
Speaker 2: falling as much as five percent from Friday's close to
Speaker 2: an eleven month high. But today it is coming down
Speaker 2: a little bit because, like so many other tech socks,
Speaker 2: Micron has had a banner twenty twenty three. So far,
Speaker 2: the memory chip maker had gained as much as thirty
Speaker 2: seven percent after giving indication that the industry has worked
Speaker 2: its way through most of the over supply of chips.
Speaker 2: But what happened today is that China said Micron's products
Speaker 2: fail to pass a cybersecurity review, and that's led to
Speaker 2: a decision to ban Micron products.
Speaker 4: Other US chip makers.
Speaker 2: Are falling in sympathy, while we've seen some Korean chip
Speaker 2: makers like Kinix and sk gain as a result alex.
Speaker 3: Now, increasingly leaders of AI companies are asking Congress to
Speaker 3: establish safeguards to mitigate threats their technology poses, like open Ai,
Speaker 3: CEO and many others. But what kinds of threats does
Speaker 3: AI pose to society exactly? We'll bring in Sarakraft's, director
Speaker 3: of the Technology Institute over at Cornell, a non resident
Speaker 3: senior fellow at the Brookings Institute who recently wrote that
Speaker 3: large language models quote may disrupt far more than just
Speaker 3: the economy. They also appear poised to challenge democracy too.
Speaker 3: Let's bring Sarah in for a deeper dive. Sarah, tell
Speaker 3: me challenges to democracy?
Speaker 4: What do you mean by that?
Speaker 11: Yeah? Thanks, It's great to be here. So one other things.
Speaker 12: So, I've been working with language models now for several years,
Speaker 12: and the concern I had was that if looking at
Speaker 12: twenty sixteen, there were bad actors that were trying to
Speaker 12: insinuate themselves in the democratic process. What happens now when
Speaker 12: these language models enter in and make it really easy
Speaker 12: to generate a lot of content, credible content, really quickly.
Speaker 12: So we wanted to map that terrain, and so we
Speaker 12: did an experiment and randomly sent AI generated texts and
Speaker 12: human generated texts to members of Congress the state legislatures
Speaker 12: around the country. And we saw that members of Congress
Speaker 12: cannot tell the difference. And anyone who's worked with CHAGBT
Speaker 12: can see just how plausible.
Speaker 11: Sounding this content is.
Speaker 12: And so I think it's important for us to understand
Speaker 12: the threat and by way of mitigating that threat.
Speaker 11: And I think that's what we were trying to uncover
Speaker 11: with this research.
Speaker 7: Sarah.
Speaker 3: When I think of where misinformation tiply lives, that's on
Speaker 3: social media. So I have to ask AI companies. Folks
Speaker 3: like Sam Altman are going to Congress saying hey, regulate
Speaker 3: us social media companies. You've kind of heard the same tune.
Speaker 3: Who do you think is actually where does the owners
Speaker 3: fall in terms of who needs to intervene here and
Speaker 3: make sure that AI misinformation and the impact on democracy
Speaker 3: doesn't get out of control, right.
Speaker 12: I think what we've seen with technology and regulation is
Speaker 12: that off it it's very reactive at.
Speaker 11: The federal level, and I think there are good reasons
Speaker 11: for that. This technology is moving so quickly.
Speaker 12: And by contrast, for example, the European Union is trying
Speaker 12: to really lean into regulation, but I think there's a
Speaker 12: real risk that they are going to pass this AI Act.
Speaker 11: And it will come into force and already be obsolete.
Speaker 12: So I think some of the onus actually is on
Speaker 12: the firms, and open AI has done some of this by.
Speaker 11: Making certain outputs not possible.
Speaker 12: So anyone who's done certain types of trying to push
Speaker 12: the boundaries on outputs might see that open AI.
Speaker 11: Doesn't actually permit those.
Speaker 12: So I think again this is a spirit of trying
Speaker 12: to understand through the public and private partnerships, you know,
Speaker 12: government and firms, kind of what that risk is, that
Speaker 12: threat is, but also to try to think through anticipate is.
Speaker 11: This a too early you know, to regulate or too late?
Speaker 12: And I think we're still really trying to understand what
Speaker 12: this technology is about, and so lurching into something at
Speaker 12: the federal level might be a little premature.
Speaker 2: So following on what you said, Sarah about the onus
Speaker 2: falling on the firms, firms are made up of people,
Speaker 2: so I wonder anytime there's a new leader in charge,
Speaker 2: or they have someone else looking over regulation or their
Speaker 2: policy side, whatever they propose could change as well.
Speaker 4: How concerned are you about I guess.
Speaker 2: The quality of people who are making these kinds of
Speaker 2: decisions at these big firms.
Speaker 12: Right, And this is the question is a great question
Speaker 12: because we've been thinking about this for several years in
Speaker 12: different contexts content moderation, when Facebook was under fire for
Speaker 12: what they were permitting and not permitting. And it's a
Speaker 12: real debate about kind of outsourcing the public market space,
Speaker 12: marketplace of ideas, for example, to private firms. And again
Speaker 12: that's something that I think in Europe they're less tolerant of,
Speaker 12: and in the US I think for a good reason,
Speaker 12: we're saying, let's let these firms innovate. But what we
Speaker 12: need to be thinking through is just what guardrails do
Speaker 12: we need in place to kind of guard against the
Speaker 12: more extreme consequences of those technologies.
Speaker 2: It's interesting that you said that Europe is already moving
Speaker 2: ahead and perhaps whatever policy they institute might become obsolete quickly,
Speaker 2: but because they are moving ahead, do they become do
Speaker 2: they set the precedent that the USN needs to kind
Speaker 2: of follow up with.
Speaker 12: You know, if we look at previous technologies, I don't
Speaker 12: think that we have. The US has fallen in lockstep
Speaker 12: at all with Europe when it comes to big tech
Speaker 12: and technology, and I think one reason is if you
Speaker 12: look at where big tech resides, it's almost exclusively in
Speaker 12: the United States, and so these things do become kind
Speaker 12: of circular, which is Europe is more inclined to lean
Speaker 12: into regulation in part because it's not harming their of
Speaker 12: their firms, and the US maybe because it has not
Speaker 12: leaned into regulation, has really I think fostered an environment
Speaker 12: of innovation, and again kind of consequently, there are fewer
Speaker 12: incentives for the US to be out in front. And
Speaker 12: I think again, you know, when we look at where
Speaker 12: there's an interesting story about Google's barred and they haven't
Speaker 12: they released it in one hundred and eighty countries, but
Speaker 12: not in Europe. And you know, when we look at
Speaker 12: the history of big tech and legal you know, litigation,
Speaker 12: big tech American companies have not always fared well in Europe,
Speaker 12: and so I think there is some wariness of these
Speaker 12: these you know, chat GPT, which was banned by the
Speaker 12: banned by the Italian government. Other firms actually not only
Speaker 12: not following an offset, but really trying quite apprehensive of
Speaker 12: engaging in that sort of European regulatory space.
Speaker 11: So I don't think the US will.
Speaker 12: Go in that direction, not just because of what we're
Speaker 12: seeing already, but what we've seen with other forms of
Speaker 12: technology in the past.
Speaker 3: Now, Sarah, you talk about the US being reactive when
Speaker 3: it comes to regulation, we haven't seen any meaningful regulation
Speaker 3: against raining and the power of big tach against reigning
Speaker 3: and social media. What actually do you think needs to
Speaker 3: happen for AI regulations to cross the line here in
Speaker 3: the United States.
Speaker 12: Yeah, it's a great question, because you know, again everything
Speaker 12: is so reactive when we look back to the history
Speaker 12: of arms control. No, there was some indication that we
Speaker 12: should do arms control on nuclear weapons early, but really
Speaker 12: it didn't happen until after the Cuban missile crazes and
Speaker 12: you know, where the world almost blew up. And unfortunately,
Speaker 12: I think that it takes kind of a real crisis,
Speaker 12: existential crisis like that to happen before meaningful regulation can
Speaker 12: take place, and I do think it raises this question
Speaker 12: of is are we at that point where meaningful regulation
Speaker 12: is needed? And I would submit that, you know, we
Speaker 12: have some threats on the horizon, but because this technology
Speaker 12: is evolving so quickly, and because frankly, I don't think
Speaker 12: these existential risks have presented and are really even a
Speaker 12: hypothetical risk.
Speaker 11: I think it is a little too early. But frankly,
Speaker 11: also we have to think about the political environment.
Speaker 12: In Washington, which is not really conducive to doing anything
Speaker 12: meaningful on really anything, because there might be an agreement
Speaker 12: that something needs to be done, but disagreement.
Speaker 11: On how to do it.
Speaker 2: That seems to be the way of Washington. Sarah, I
Speaker 2: really appreciate your joining us and sharing your insight. Sarah
Speaker 2: Krepps is Professor of law and director of the Tech
Speaker 2: Policy Institute at Cornell. Now coming up, there is more
Speaker 2: on AI, this time from an investing perspective. We're going
Speaker 2: to be joined by compounds of Michael Dempsey up next.
Speaker 2: And in the meantime, keeping an eye on shares of PayPal,
Speaker 2: which are popping today as Venmo introduces an account for
Speaker 2: teenagers who are between thirteen to seventeen years old for
Speaker 2: sending and receiving money. This feature will come with a
Speaker 2: debit card and plans to roll over to select customers
Speaker 2: starting next month. PayPal up by better than three percent,
Speaker 2: is Bloomberg.
Speaker 13: There are many companies that are going to struggle in
Speaker 13: their transition to really deliver AI solutions at scale.
Speaker 14: Consumers are really engaging with the AI in a way
Speaker 14: that just seems so much more real and authentic than
Speaker 14: they ever have.
Speaker 13: I think the bigger opportunity actually lies in the enterprise.
Speaker 4: I think AI is going to be deployed into every
Speaker 4: facet of work.
Speaker 13: I think we're at a moment here where there is
Speaker 13: a tremendous advantage for US based companies.
Speaker 8: I think on the application side, I think the Chinese
Speaker 8: companies potentially can do really, really well.
Speaker 2: I think we actually need to be going faster on
Speaker 2: the regulatory front.
Speaker 6: We are really thinking about generative AI as a tool
Speaker 6: for good.
Speaker 2: I do think that an opportunity for perhaps pro technology
Speaker 2: policy making. And that was a compilation of what our
Speaker 2: recent VC Spotlight guests are saying about AI investments here
Speaker 2: and around the world. We're going to continue the conversation
Speaker 2: now with Michael Dempsey. He is managing partner at Compound,
Speaker 2: which is a thesis driven, research centric seed stage investment
Speaker 2: firm that's focused on emerging technologies with more than two
Speaker 2: hundred and twenty five million dollars in assets under management.
Speaker 4: Michael, it's so good to speak with you. Thanks a
Speaker 4: lot for joining us.
Speaker 2: I guess I want to start with just the overall
Speaker 2: state of AI, because from traditional market watcher's perspective, AI seems.
Speaker 4: To be in a bubble.
Speaker 2: Bank of America strategist Michael Hartnett says tech is forming
Speaker 2: a bubble, and AI in particular, isn't a baby bubble
Speaker 2: bubbill start with easy money, they end with rate hikes.
Speaker 4: How much do you agree with that?
Speaker 15: You know, I think in some ways I do agree
Speaker 15: with it. I think that there's a kind of vacuum
Speaker 15: of conviction and areas to spend time in on the
Speaker 15: investor side today after kind of a very crazy the
Speaker 15: past few years, and you know, things cycling in and
Speaker 15: out of the zeitgeist, like crypto for an example. I
Speaker 15: do think that, unlike a lot of prior areas, there
Speaker 15: will be massive disruption and there is so much hard
Speaker 15: y that can hop in with a ton of different industries,
Speaker 15: and I think for the first time people can see
Speaker 15: it and feel it in a way that is very
Speaker 15: tangible to their day to day lives. And so that
Speaker 15: creates some sort of compounding effect of the kind of
Speaker 15: zeitgeist in the moment and how big it feels, because
Speaker 15: at every dinner, at every interaction, someone is talking about AI,
Speaker 15: someone's talking about the ethics of it, et cetera.
Speaker 3: Michael I used to cover tech deals and some of
Speaker 3: this vibe kind of throws me back to when Airbnb
Speaker 3: Uber we're doing their massive funding grounds around some consumer
Speaker 3: tech when they were still private. A lot of that
Speaker 3: was driven by folks like yourself, but also bigger investors'
Speaker 3: growth money, private equity firms piling in. Is that kind
Speaker 3: of money already moving into this market? Do you think
Speaker 3: that will fuel some of this potential for bubble that
Speaker 3: you're talking about.
Speaker 11: It's starting to.
Speaker 15: I think more and more people are trying to figure
Speaker 15: out what are the areas in which they can properly
Speaker 15: deploy hundreds of millions of dollars. And you've see that
Speaker 15: on the foundation model side of things. In the larger
Speaker 15: AI labs, and I think you're going to start to
Speaker 15: see it on the more application layer and middleware side
Speaker 15: of things, and so it's it's definitely starting. We're seeing
Speaker 15: it now with the full stack kind of larger scale
Speaker 15: VC firms, some of the growth firms, and then obviously
Speaker 15: on the hedge fund side, we're seeing on public markets
Speaker 15: people are trying to figure out outside of Nvidia, what
Speaker 15: are the plays that they should be having to get
Speaker 15: exposure to things that feel quite asymmetric from an upside
Speaker 15: perspective and just incredibly large scale if it does work,
Speaker 15: which is kind of our job.
Speaker 4: Michael.
Speaker 2: I'm curious about your investment portfolio. How much of it
Speaker 2: centers on AI? Is it less than half more than
Speaker 2: two thirds? And when we talk about centered on AI,
Speaker 2: are these companies that started with the goal of entering
Speaker 2: and building out AI or have they pivoted to AI
Speaker 2: and expanded to AI from where they started.
Speaker 4: Yeah.
Speaker 15: So we've been investing in AI or mL as we
Speaker 15: used to call it, since twenty fourteen, and I think
Speaker 15: probably about sixty percent of our portfolio falls within that
Speaker 15: area now, and that's because AI moved from a very
Speaker 15: kind of vertical specific misnomer too now being a horizontal platform,
Speaker 15: and so everything from biology company is using AI to
Speaker 15: kind of do more of a search and discover instead
Speaker 15: of a random walk in discovery too. Core companies like Runway, Mlwave,
Speaker 15: dot Ai that are doing kind of full stack building
Speaker 15: their own models, using it in very unique ways. And
Speaker 15: so I think for us, we ourselves as very AI
Speaker 15: native investors and think that most of how we like
Speaker 15: to invest is companies that either have a unique take
Speaker 15: on product as it's enabled by the bleeding edge of
Speaker 15: AI or our building and kind of pushing that bleeding
Speaker 15: edge into their core category.
Speaker 3: Let's talk regulatory risk or appetite for regulation from some
Speaker 3: of your portfolio companies.
Speaker 4: Which side of that debate are you falling on?
Speaker 3: Where do you think in the US, in particular, our
Speaker 3: government should be getting in and kind of laying out
Speaker 3: the guard rails for what this industry's impact could be
Speaker 3: on consumers, on businesses and tech writ large.
Speaker 15: Yeah, so I watched the entire hearing last week, and
Speaker 15: I think generally everyone did a really incredible job. Sam
Speaker 15: obviously is what who got the most praise for his
Speaker 15: embrace of regulation. I think he made a very strong
Speaker 15: point which I agree with which is that on the
Speaker 15: startup side and really even the mid sized company side,
Speaker 15: I don't think regulation should come into.
Speaker 11: Play just yet.
Speaker 15: I think there's all sorts of ethical dilemmas to discuss
Speaker 15: around how to use different types of training data, what
Speaker 15: data you can train on, how do you get opt in, etc.
Speaker 15: But I think a lot of our companies are taking
Speaker 15: an approach of making sure they're doing things responsibly and
Speaker 15: making sure that they're doing things transparently, and I think
Speaker 15: it's a little too early to be trying to put
Speaker 15: into effect things that could hamstering development, especially in the
Speaker 15: United States, because I do think this is some form
Speaker 15: of an existential technology and we want to make sure
Speaker 15: we're continually pushing the frontier of that. And while there
Speaker 15: are certain areas like these large models and kind of
Speaker 15: frontier models that could have regulation at the compute layer,
Speaker 15: I think more and more as people start to get
Speaker 15: better at miniaturizing model doing things locally, it's going to
Speaker 15: become really difficult. And I'm not sure on the government
Speaker 15: side we yet have an understanding or a group of
Speaker 15: people with enough understanding to properly regulate something that is
Speaker 15: so important and honestly is moving so quickly.
Speaker 2: Our previous guest, Sarahcrafts of the Cornell Tech Policy Institute,
Speaker 2: was just saying that the owners really falls on the
Speaker 2: firms themselves to propose regulation or to try to set
Speaker 2: up their own guardrails to that end.
Speaker 4: Is there anyone that you've.
Speaker 2: Encountered, that you've engaged with who you believe is a
Speaker 2: leader in thinking through some of these issues that you
Speaker 2: think people need to be paying attention to.
Speaker 15: To be honest, I think it's most of the people
Speaker 15: who are running thee these large labs, whether it's kind
Speaker 15: of people like Sam, I think Gary marcusly it's some
Speaker 15: really good points. As a professor in the hearing, I
Speaker 15: think there are people that are trying to take ethical approaches.
Speaker 15: The teament Runway cares a lot about making sure they
Speaker 15: work with creators. But I think to Sam's point, these
Speaker 15: people have day jobs that are probably the most exciting
Speaker 15: they've ever been and something they view as kind of
Speaker 15: their life's work. So I do think it's hard. I
Speaker 15: think more and more as more people who have been
Speaker 15: at large organizations and scene regulation and other lines of
Speaker 15: technology start to really dig in to AI, we will
Speaker 15: start to have people rise naturally. But to be honest,
Speaker 15: right now, most of the people are those who have
Speaker 15: the depth of understanding of knowing how quickly this moves
Speaker 15: in the scale at which it's moving, and those people
Speaker 15: are building right now.
Speaker 2: All right, Michael Dempsey, managing partner at Compound, thank you
Speaker 2: so much for giving us your perspective.
Speaker 3: SpaceX launched four private astronauts and route to the International
Speaker 3: Space Station, including the first woman from Saudi Arabia to
Speaker 3: travel to space. That crew lifted off a top of
Speaker 3: Falcon nine rocket Sunday evening from the Kennedy Space Center
Speaker 3: in Florida. That mission, operated by Axiom Space, is the
Speaker 3: second of four human space flight launches that SpaceX is
Speaker 3: set to handle for the company.
Speaker 4: Axium has plans to build its.
Speaker 7: Own space station in the future.
Speaker 3: Now, Apple is just a few weeks away from debuting
Speaker 3: its mixed reality headset. Bloomberg's Mark German has been following
Speaker 3: the project incredibly closely, and he joins us now for more, Mark,
Speaker 3: what do we need to know about what's coming.
Speaker 4: We've heard about this for a minute.
Speaker 7: Give us the top deal on this headset.
Speaker 14: Yeah, thank you so much for having me. Yeah, it's
Speaker 14: definitely been a minute. So we're actually right now two
Speaker 14: weeks away, two weeks and five minutes away, I should say,
Speaker 14: from that headsets launch event, this is going to be
Speaker 14: Apple's first feature new product in eight years, right, since
Speaker 14: the original Apple Watch was introduced and went on sale
Speaker 14: in twenty fifteen. This is going to be a really
Speaker 14: interesting test case for Apple, right. You know, Apple didn't
Speaker 14: necessarily create the MP three player markets, the smartphone markets,
Speaker 14: the tablet markets, but there was a sense that those
Speaker 14: areas were soon about to take off and explode.
Speaker 3: Right.
Speaker 4: Mixed reality is a little bit different.
Speaker 14: Apple is really going to have to come in here
Speaker 14: and maybe define this market.
Speaker 4: Right, Meta is there. HTC is a big player Sony,
Speaker 4: but it's super nascent.
Speaker 14: We're talking, you know, fewer than ten million units of
Speaker 14: these devices going on sale are being sold on an
Speaker 14: annual basis right now, Right, So Apple's going to have
Speaker 14: to come in here and shake it up from the
Speaker 14: very bottom. And they're coming in with a device that's
Speaker 14: a little bit experimental. It's going to be very expensive
Speaker 14: anywhere between I'm told twenty eight hundred dollars and thirty
Speaker 14: two hundred dollars, right, It's going to have some pretty
Speaker 14: intense technology, over a dozen censors on the outside. You'll
Speaker 14: control it with your eyes and hands. You'll use it
Speaker 14: for virtual reality, FaceTime and productivity. Very interesting to see
Speaker 14: how Apple positions it. I'm told they're going to push
Speaker 14: it towards creatives if people want to use it for
Speaker 14: productivity as the future of the computer. I definitely think
Speaker 14: this is going to be exciting for consumers, but there's
Speaker 14: a very big risk here for the company, right I
Speaker 14: think it's either going to be a huge flop or
Speaker 14: a huge success, and for Apple, there's really nothing in between.
Speaker 3: Quite the binary call there from our very own Mark German,
Speaker 3: thank you for joining us on Apple and their headsets.
Speaker 3: And that does it for this edition of Bloomberg Technology.
Speaker 3: Make sure to tune in tomorrow as our very own
Speaker 3: Caroline Heights is down for an exclusive interview with TikTok
Speaker 3: CEO show Chow that comes from the Qatar Economic Forum.
Speaker 4: You won't want to.
Speaker 7: Miss it, and don't forget to check out our podcast.
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Speaker 4: This is Bloomberg