Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 3: Colle in Silicon Valley. N Beyond.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed lud.
Speaker 4: Love live from New York. This is Bloomberg Technology.
Speaker 5: Let's get to it with n Video back beating Microsoft
Speaker 5: in market capitalization.
Speaker 6: We talk with a top shareholder in the chip.
Speaker 5: Giant mean while Palatin jumps one better than expected earnings.
Speaker 6: We talk turnaround efforts.
Speaker 5: As it pushes for profitability, and Apple's app store reorg.
Speaker 5: We discussed the executive shake up as made a regulator scrutiny.
Speaker 5: That is so much more coming up. Let's get to
Speaker 5: what has been the market capitalizing story that we reference.
Speaker 5: Nvidia clipsing Microsoft again to tech chalants, when you have
Speaker 5: been justing over the world's second most valuable company title
Speaker 5: a few time said for the past week, pace to
Speaker 5: say Emoni Graffeo joins us to talk it all through,
Speaker 5: and in Vidia, just as we look towards earnings August
Speaker 5: the twenty eighth, still seems to be getting momentum from
Speaker 5: who's purchasing what from them?
Speaker 7: Yeah, I mean that's exactly right. We haven't had in
Speaker 7: Video's earnings yet. But from the earnings that we've seen
Speaker 7: so far, we're noticing and investors are noticing, that these
Speaker 7: big tech companies are still willing to spend a lot
Speaker 7: on AI, and in Vidia is the biggest beneficiary of that.
Speaker 7: If you look at just Microsoft, Amazon, Alphabet, and Meta
Speaker 7: all in their earnings reports, they kind of underscored this
Speaker 7: idea that we want to continue to spend on AI.
Speaker 7: And I was looking at a note this morning from
Speaker 7: Nick Colos of Data Trek, and he pointed out that
Speaker 7: for Amazon, Microsoft, and Meta, the operating cash flow growth
Speaker 7: exceeds capex, so that means that these companies still have
Speaker 7: a lot more cash toy on the capex. So he
Speaker 7: takes that as a sign that the companies will continue
Speaker 7: to spend even more on AI and that's going to
Speaker 7: benefit in Video. Whether or not we'll see that in
Speaker 7: the results next week, that's really the big question. But
Speaker 7: like you said, the stakes are very high right now,
Speaker 7: especially after TSNC earnings were good. Everyone's just watching for
Speaker 7: Nvidia to see if they can keep up with that, and.
Speaker 6: There's a load of anxiety.
Speaker 5: We have seen how basically bullish the market was and
Speaker 5: a few concerns and then the market the beginning of
Speaker 5: August and we saw a significant sell off, and we've
Speaker 5: actually been seeing the sell off since July. What do
Speaker 5: flows telling in terms of people's appetite to get into
Speaker 5: a company that has got such a high market cap?
Speaker 6: People are buying the dip.
Speaker 7: It's surprising because all year I keep asking sources, okay,
Speaker 7: well is it time to finally pivot out of big tech?
Speaker 7: But we're actually seeing people the rotation into small caps
Speaker 7: that's really not a theme anymore. Investors still have this
Speaker 7: appetite to hide out in big tech, even in mid
Speaker 7: concerns that the economy is slowing.
Speaker 6: If you look at the.
Speaker 7: Flows QLD, this is an ETF that goes two x QQQ,
Speaker 7: so big tech but going ultra bullish QQQ. It's taken
Speaker 7: in flows nearly every day for the last two weeks,
Speaker 7: and just in the last session it took about two
Speaker 7: hundred and fifty million dollars in, which is the biggest
Speaker 7: flow since April. So even after the sell off that
Speaker 7: we saw to start August, we're still seeing that appetite
Speaker 7: to buy.
Speaker 5: Okay, we're seeing some long positions in this market. Emini
Speaker 5: Graffe talks us through it when it comes from video. Look,
Speaker 5: let's talk about one.
Speaker 6: Of those lungs. Tony Wong is one of them, one
Speaker 6: of the key holders of.
Speaker 5: In Vidia, portfolio manager at tro Price Trow. In fact,
Speaker 5: Tony holds what about two percent of video shares outstanding, that.
Speaker 6: Fifty six billion dollars worth.
Speaker 5: That makes you the seventh largest individual shareholder as an
Speaker 5: overall company. But at your fund, the Science and Technology Fund,
Speaker 5: why remain vullish on Nvidia?
Speaker 3: Yeah, Well, I think there's a lot of reasons to
Speaker 3: still like the company. I mean, they've driven a salary
Speaker 3: compute about one thousand x for the last ten years,
Speaker 3: and they continue your leaders in the space, and AI
Speaker 3: is right now just too important of an area to
Speaker 3: let up the gas. And so I think that the
Speaker 3: large companies will still spend. I think there's a tension
Speaker 3: of like, just you know, what does spending more mean
Speaker 3: and does that need expectations? And that's what the market's
Speaker 3: really going to be focused on going forward, And so
Speaker 3: I think like there's a lot of great reasons to
Speaker 3: like the stock long term. I think that at the
Speaker 3: same time, you have to remember that semi conductors are
Speaker 3: very cyclical and they're also secular. So I think that's
Speaker 3: part of our job to navigate navigate the environment.
Speaker 5: So basically, brace yourself with potential short term volatility, but
Speaker 5: longer term you're still bullish on money coming into the
Speaker 5: likes of video. But does it broaden out. At the moment,
Speaker 5: it's felt like in video is the only picks and
Speaker 5: shovels game in town. You're started seeing Rawcom doing relatively
Speaker 5: well on some AI wins. What do you make of
Speaker 5: in video really raining the main place to win on AI?
Speaker 3: Yeah, well, I think that the reason why in video
Speaker 3: has been so good in terms of it's because it's
Speaker 3: a platform, right, It's not just a chip, and so
Speaker 3: they have a big ecosystem with a loss of developers
Speaker 3: writing on their code and Kuda and so it's all
Speaker 3: built like an ecosystem and platform, and so I think
Speaker 3: that's why it's such a defensible business. And you know
Speaker 3: there it's available everywhere, is ubiquitous on the cloud, you
Speaker 3: can have it on prem and they've got great support
Speaker 3: for their for their chips, and so I think that's
Speaker 3: largely the reason. I know, I think it is it
Speaker 3: could be changing in terms of the complexion going forward
Speaker 3: is more concentrated the hyperscale players, and they're very sophisticated
Speaker 3: buyers of chips. They can do a lot of their
Speaker 3: own software, and so I think there will always be
Speaker 3: a balance between the hyperscale making their own chips with
Speaker 3: like significant volumes like you see in Google with their
Speaker 3: TPU that's very aimed at search, and so I think
Speaker 3: that will continue, you know, in other ways, and so
Speaker 3: I think they can coexist essentially.
Speaker 5: I like that point that you've been making, and we
Speaker 5: were just hearing how data track is seeing the same
Speaker 5: thing that there is a willingness on a capital expenditive
Speaker 5: perspective coming from hyperscalers. You are in a number of
Speaker 5: those hyperscalers Microsoft Meta, for example, Alphabet and metas seem
Speaker 5: to manage to nuance the argument of why they put
Speaker 5: money in there, whereas Alphabet people were worried about just
Speaker 5: spending capex at all costs. What do you make of
Speaker 5: the hyperscale is decision to keep on putting money in.
Speaker 3: Yeah, I think that that Marke did a nice job
Speaker 3: of kind of illuminating why he's spending so much in AI,
Speaker 3: like with personalized chatbots, and like how that can go
Speaker 3: through the platform. You know, I think that you should
Speaker 3: Google out at the same time, and they have a
Speaker 3: lot of AI expertise, they've been leaders in the field,
Speaker 3: that they have great chips as well, and so, you know,
Speaker 3: I think that it's too early to call who's going
Speaker 3: to be the winner or loser. They all have big
Speaker 3: platforms and user bases where they can scale their AI investments,
Speaker 3: and so you know, it's it's I think it's too
Speaker 3: early call like who's going to win or lose. But
Speaker 3: at the same and at the same time, they all
Speaker 3: have really great businesses.
Speaker 5: Return on AI ro o AI is this horrible acronym
Speaker 5: that's suddenly coming into the marketplace.
Speaker 6: What do you make of though, the that we need
Speaker 6: to start seeing?
Speaker 5: You're a keyholder in Apple, I think again tro Price
Speaker 5: of Rule is about the seventh biggest holder of Apple
Speaker 5: stock out there. That company again managing to tell us
Speaker 5: why they can be an AI bet. Where does the
Speaker 5: money end up flowing in terms of return on an
Speaker 5: AI investment.
Speaker 3: Yeah, I think that we'll be looking for return on
Speaker 3: AI investment. I think Apple specifically is in a great
Speaker 3: position because they're kind of the ecosystem owner, right so
Speaker 3: they can integrate great technologies into their phones, into their hardware,
Speaker 3: you know, just like they did with Google Search, and
Speaker 3: so they didn't have to develop Google Search, but they
Speaker 3: definitely benefit from users using Google Search, and so CHATCHBT
Speaker 3: is the same thing going forward. They don't have to
Speaker 3: develop a frontier model, they can integrate it with their phones. Now.
Speaker 3: I think you can argue whether long term a company
Speaker 3: should own the frontchier model here, but right now, Apple
Speaker 3: strategies really focus on what they're really good at, which
Speaker 3: I think is design and integration with your life of
Speaker 3: their products and services. So it's an interesting way to
Speaker 3: like be a capital like player and this kind of
Speaker 3: AI proliferation here.
Speaker 5: It's interesting that you're in Salesforce and that's been a
Speaker 5: company that's trying to show off it's AI prowess, but
Speaker 5: make clear that they are going to be able to
Speaker 5: reap rewards from their investment.
Speaker 6: Do you think it can?
Speaker 3: You know, I think that Salesforce is a really sticky
Speaker 3: software company. I don't think it's going anywhere. It's kind
Speaker 3: of like they're kind of game to lose I think
Speaker 3: at this point. And so I think they have a
Speaker 3: good mode. They have AI products that are coming out.
Speaker 3: I think the question is like, how do they price them,
Speaker 3: how do they drive ROI for their customers. And I
Speaker 3: think the whole space is kind of going through this
Speaker 3: seat versus consumption of AI, and so like if AI
Speaker 3: works you, well, you might not have many seats that
Speaker 3: you need. So I think there's that business model that's
Speaker 3: being figured out. But I do think that if you
Speaker 3: look at startups that are in the space, it can
Speaker 3: be hard for them to get into large enterprises where
Speaker 3: salesforce sits just because you need to let them into
Speaker 3: your your whole system, and that can be actually a
Speaker 3: pretty big mode.
Speaker 5: Well said, there has been other companies that we've been
Speaker 5: questioning how much they can align themselves with the AI tailwinds.
Speaker 6: One of them Cisco, for example. Dell.
Speaker 5: Initially we thought, yes, really, within this ecosystem, they're going
Speaker 5: to be there for the service, for the networking, and
Speaker 5: then every now and then we get caught off guard
Speaker 5: and feel that perhaps they're not so well placed. What
Speaker 5: do you make of like the bottoming out story of
Speaker 5: a Cisco for example, Yeah.
Speaker 3: Well, you know, I think that what we've seen is
Speaker 3: that kind of legacy tech has in some ways reinvented
Speaker 3: itself like Dell and become an AI beneficiary. And I
Speaker 3: think here Cisco has been largely kind of not on
Speaker 3: the AI beneficiary list, and I think in the recent
Speaker 3: quarter they have some of AI revenue coming through. The
Speaker 3: business is bottoming. It's a value idea. It's you know,
Speaker 3: it's got a lot of a good amount of cashflow
Speaker 3: and dividend yield, and so from that aspect, it adds
Speaker 3: a little bit to the portfolio that you know the
Speaker 3: rest of the tech stocks might now not offered. So
Speaker 3: you know, I think that there's a place for you know,
Speaker 3: various stocks in portfolio construction and with bonding fundamentals and
Speaker 3: potentially like an attractive valuation. You know, it could be good.
Speaker 5: You've been great at articulating why you believe AI is
Speaker 5: such a winning story. But JUX suppose that with the
Speaker 5: overall macro picture here we see the market get hit
Speaker 5: on the fact.
Speaker 6: The whether or not we will have interest rate cuts.
Speaker 5: How much do you factor that in in the here
Speaker 5: and now when you're looking at a portfolio allocation.
Speaker 3: Yeah, I mean it's definitely an area that you can't ignore.
Speaker 3: The macro is super important. You have to be aware
Speaker 3: of like what's going on top down. At the same time,
Speaker 3: I think that we kind of take a stock by
Speaker 3: stock and look at where expectations are, like the likelihood
Speaker 3: that they beat expectations, how well the company is positioned.
Speaker 3: So no matter you're like what direction the macro is going, like,
Speaker 3: you should be able to like create alpha either way
Speaker 3: just by relative selection of stocks. And so you know
Speaker 3: why I think about kind of in Nvidia, like a
Speaker 3: lot of it, you know, is it's going to be
Speaker 3: a really big point here, Like we never had this
Speaker 3: amount of debate I think in terms of, you know,
Speaker 3: are we kind of near the sickle peak or is
Speaker 3: it going to continue? And so you know, we do
Speaker 3: a lot of fundamental work to understand like kind of
Speaker 3: where the products are positioned and how to think about
Speaker 3: the setup of the.
Speaker 5: Stock you're managing the Science and Technology Fund. Does it
Speaker 5: suddenly amaze you that the whole world now thinks in
Speaker 5: video is a macro moment its earnings might dictate the
Speaker 5: rest of the benchmarks.
Speaker 3: Yeah, it's a phenomenal moment. I mean you think about it.
Speaker 3: The stock as has just been amazing, and I remember
Speaker 3: I started covering it about seven eight years ago and
Speaker 3: you never have thought it would be three trillions. So
Speaker 3: everybody has like underestimated the company, you know, through like
Speaker 3: multiple cycles, and so it's been you know, phenomenal because
Speaker 3: you know, they offer so much value and and like
Speaker 3: we've seen this like kind of AI vision of cellar
Speaker 3: compute play out, and so I think everyone now recognizes
Speaker 3: it and so you know, it is it is pretty
Speaker 3: fun opmble. And I think that's part of the reason
Speaker 3: why in video is so important, is because there are
Speaker 3: a lot of AI multipliers through the economy and there's
Speaker 3: a lot of market captreation because in video is doing well,
Speaker 3: and there is this like kind of idea that long
Speaker 3: term value creation productivity driving through the economy. So I
Speaker 3: think it's a big moment for the market for sure,
Speaker 3: and so we're we're excited to see what happens in the.
Speaker 6: Next Political risk in any way affect.
Speaker 3: That sorry, can you say again?
Speaker 6: Political risk in any way affect that.
Speaker 3: The macro risk?
Speaker 5: Yeah, the politics, the element that maybe we have a
Speaker 5: change change in the White House, would that in any
Speaker 5: way change the innovation focus?
Speaker 3: Yeah, you know, it's really hard to kind of call politics.
Speaker 3: I think, you know, I think there's a tension of
Speaker 3: like how much you regulate AI and Nvidia as such
Speaker 3: a dominant player perhaps you know, pushing computing versus like
Speaker 3: there we are in an AI space race kind of
Speaker 3: with other countries, and at the same time we're trying
Speaker 3: to kind of signy China's efforts to develop AI, like
Speaker 3: I think that we can. Also it's hard to then
Speaker 3: also like kind of restrict our own companies. So my
Speaker 3: view is that, like the space is moving so fast,
Speaker 3: we're trying to push the envelope here. I don't think,
Speaker 3: you know, politics will really change that given how important
Speaker 3: AI is to the economy in the future.
Speaker 5: Well said, we really appreciate your time today such an
Speaker 5: important shareholder and indeed view on AI from t row
Speaker 5: Price Science and Technology Fund portfolio manager Tony One Stay, well, look,
Speaker 5: there's an update on a story that we've been following.
Speaker 5: Italian search and rescue teams now say they have retrieved
Speaker 5: a fifth body from a sunken yacht of Sicily, but
Speaker 5: it's tech tycoon Mike Lynch and Morgan Stanley International chair
Speaker 5: Jonathan Bloomer are among those feared to have died. The
Speaker 5: fifth body was recovered Thursday morning as search on the
Speaker 5: wreck resumed for a fourth day. According to an Italian official,
Speaker 5: No statements identifying any of the bodies have so far
Speaker 5: been issued officially. Now we move on and coming up,
Speaker 5: we're going to be assessing Platon for you shares as
Speaker 5: you'll see on the up and up, because maybe we
Speaker 5: see signs of a turnaround paying off details. Next, this
Speaker 5: is Bloomberg cany of earnings to be digesting. Look, let's
Speaker 5: take a look at both Zoom and Snowflake Zoom as well.
Speaker 6: See on the up more than twelve percent high. This
Speaker 6: is the biggest moves. That's November twenty twenty two.
Speaker 5: Forecasts looking good even as the CFO is handing over
Speaker 5: the rains, Kelly Steckelberg saying she's going to be moving
Speaker 5: from the business mean while Snowflake the polar opposite perspective
Speaker 5: here forecasts not living up to expectations, worrying about AI
Speaker 5: with down more than twelve percent. Let's get to brodie
Speaker 5: forward on these because Snowflake first and foremost, what's the
Speaker 5: worry the anxiety here, Berdy.
Speaker 8: What's interesting about these two companies is it's a similar
Speaker 8: set of concerns. Can you expand from a hit core
Speaker 8: product to Zoom with video conferencing, Snowflake with data warehousing,
Speaker 8: to a new set of products. Expand your portfolio, especially
Speaker 8: with AI as it relates to Snowflake. Yeah, it's that
Speaker 8: concern that you were a hit viral product a couple
Speaker 8: of years ago, but a lot of folks want the
Speaker 8: AI products now. These are things that people associate more
Speaker 8: with data bricks, increasingly with Microsoft, and so Snowflake is
Speaker 8: working to expand. It has released a lot of new
Speaker 8: products this year. But what set off investors is them
Speaker 8: saying last night that maybe we're not going to see
Speaker 8: money from them until fiscal twenty twenty six, and that's
Speaker 8: further out than folks who are hoping.
Speaker 5: Meanwhile, I just want to pivot to a story that
Speaker 5: you've been chasing throughout, which is Autodesk and the accounting
Speaker 5: risks there. Can you just get us up to speed
Speaker 5: what Starboard, the activist investor, is saying.
Speaker 8: Yeah, Essentially, Autodesk had a issue with their accounting earlier
Speaker 8: this year, caused some disruption, and now activist investor Starboard
Speaker 8: is saying that there's got to be some accountability. This morning,
Speaker 8: they have a statement out saying that the board needs
Speaker 8: to hold management accountable and really ask themselves if the CEO,
Speaker 8: who interestingly enough, has been there since a previous activist episode,
Speaker 8: is still the right guy for the job.
Speaker 5: We'll keep an eye and then it's one that you've
Speaker 5: been breaking a lot of news on Brady for me.
Speaker 6: Thank you so much on all those stocks.
Speaker 5: Meanwhile, sticking with the earning story more and Peloton beating
Speaker 5: estimates on this quarter, just announced I made a turnaround
Speaker 5: effort that does look like it is working. However, the
Speaker 5: outlook for revenue a little bit of a concern. This
Speaker 5: comes to the company is continuing to search a course.
Speaker 6: For a new CEO.
Speaker 5: Stretch Conjuria is with us of courst managing director at
Speaker 5: Wolf Research, and you put your notes out.
Speaker 6: You're sort of saying that they're rolling along.
Speaker 5: More broadly, what did you make for the fourth quarter
Speaker 5: versus though the first quarter forecasts?
Speaker 9: Well, first of all, thanks for having me, I guess
Speaker 9: the results for the fourth quarter were pretty good, partly
Speaker 9: in our view because the guidance itself was a bit conservative,
Speaker 9: but also because they did a lot of cost cutting
Speaker 9: and so revenue EBIDA as well as connected fitness numbers
Speaker 9: came in relatively in line or better slightly soft and
Speaker 9: connected fitness actually, but nothing to worry about. The guidance
Speaker 9: clearly was lower than expected on all fronts on the
Speaker 9: top line, but better on the IBIDAH, largely because of
Speaker 9: the restructuring. Our view is that this is going to
Speaker 9: be a very difficult transition. You can we don't think
Speaker 9: that you can make growth by cutting costs. They'll have
Speaker 9: to eventually show top line growth and that they're not
Speaker 9: tapping out of the market. With a down nine percent
Speaker 9: decline in year of a year revenue for next year,
Speaker 9: that's not a good sign. Whether it is macro or
Speaker 9: whether it is pulling back on their marketing spend because
Speaker 9: they have to, and whether it is restrategizing as the
Speaker 9: new CEO comes in and there's this leadership change, it's
Speaker 9: just not a good sign.
Speaker 6: Where should they be leaning into.
Speaker 5: Is it more app users, is it more online and subscription.
Speaker 5: Should they back away from the hardware or do they
Speaker 5: need to re up some of the marketing around the hardware,
Speaker 5: which for many there have been too many recalls and worriesover.
Speaker 9: Well, it's a very tough challenge. One is because their
Speaker 9: hardware is premium quality or premium priced, and so it's
Speaker 9: not for any average consumer, which is why they're going
Speaker 9: through with the rental as well as they're refurbished. In
Speaker 9: our view, we think that they should focus more on
Speaker 9: the app subscription piece, even if the churn is hired,
Speaker 9: just because of the margin profile.
Speaker 6: If the app.
Speaker 9: Product experience is very, very good and superior to everything
Speaker 9: else in the market, even if it is a crowded market,
Speaker 9: they could gain shared and show some real margin expansion
Speaker 9: while they deliver product expansion, whether it is an international
Speaker 9: markets or in North America. The other question with hardware
Speaker 9: is is there any way they can bring their prices
Speaker 9: down for hardware, whether it is through supply chain changes
Speaker 9: or product innovation or technology innovation to drive greater adoption
Speaker 9: because an average consumer it could be prohibitive.
Speaker 6: And never realizes.
Speaker 5: The issue is that suddenly it was a luxury one
Speaker 5: and everyone pivoted, just very quickly shorted the CEO.
Speaker 6: You're expecting that anytime soon.
Speaker 9: Yes, they are expecting to make an announcement before or
Speaker 9: at least during the next earnings quarter earnings call, so
Speaker 9: it'll be another quarter. We think that they may lean
Speaker 9: towards a retail CEO. I'm not sure and I don't
Speaker 9: want to speculate, but I wouldn't be surprised if a
Speaker 9: retail CEO is broad on board.
Speaker 6: Short extra Juria, great to have you on. We thank you.
Speaker 6: WILF search there memhile.
Speaker 5: Talking about succession planning, Disney has a new chair in
Speaker 5: its succession plan Committee. It's former Morgan Stanley CEO James Gorman,
Speaker 5: who will be taking the lead in the search for
Speaker 5: Bob Eiger's successor now. Gorman joined the Disney board earlier
Speaker 5: this year and oversaw the recent succession process, of course
Speaker 5: at Morgan Stanley in his time. Now for Talking Tech
Speaker 5: first Up by Doo, sales stall revenue for the three
Speaker 5: months ending in June came in below estimates, dropping two
Speaker 5: four point seven billion dollars. This is the company transitions
Speaker 5: from ADS to AI Amerjan economic downturn in China. Now
Speaker 5: by Do founder Robin Lee has hopes for creating Chinese
Speaker 5: equivalent to chatchupt plus. Shaomi may be set up for
Speaker 5: a sales boost, with potential revenue growth for twenty twenty
Speaker 5: four near the mid twenty percent level held by its
Speaker 5: premium phones and new electric vehicles now. According to Bloomberg Intelligence,
Speaker 5: China's tech giant may experience some tailwinds from its expansion
Speaker 5: of overseers, channels, internet services, and it's EV push. Of course,
Speaker 5: here's what the Shomi CFO told Bloomberg earlier about the
Speaker 5: EV growth.
Speaker 10: So if you look at our delivery right now, we
Speaker 10: are over ten thousand vehicles that we delivered per month
Speaker 10: in June and in July, most likely in August as well.
Speaker 10: So we've been able to scale our production facility as
Speaker 10: well as our delivery capabilities.
Speaker 5: Alan Lamb there now coming up, we're going to be
Speaker 5: joined by Robert Lane, senior crypto analyst at Pitchbook, to
Speaker 5: walk through the company's latest insights into the world of
Speaker 5: venture capital in the crypto space.
Speaker 6: From New York.
Speaker 5: This is the Blue Meg Technology. Welcome back to Blue
Speaker 5: Meg Technology and Caroine Hyde. We just also wanted to
Speaker 5: keep an eye what's happening in the world of crypto
Speaker 5: because well, overall benchmarks are on the downside. Nasdaq of
Speaker 5: by five ten percent s and P five hundred had
Speaker 5: been near that all time high. We're back lower by
Speaker 5: three tens percent as we ij Powell, And of course
Speaker 5: what's happening at Jackson holl tomorrow. Within that risk of tone,
Speaker 5: bitcoin is off by one and a quarter percent, but
Speaker 5: it's still about sixty thousand dollars level. But let's just
Speaker 5: talk about the inner workings of what's happening in the
Speaker 5: crypto space right now. Finance, we understand, is hiring one
Speaker 5: thousand people this year, with many earmarked for compliance roles.
Speaker 5: Now that the crypto exchange is annual, spending to meet
Speaker 5: regulatory requirements has been boosted, including US oversight under a
Speaker 5: Plea deal. It's now apparently going to be topping two
Speaker 5: hundred million dollars promotional anybasi joins US for more. And
Speaker 5: really this is as we see a new leadership come
Speaker 5: and really trying to make sure that they're taken seriously
Speaker 5: by regulators and taking more boxes than they were.
Speaker 11: Well, what's incredible here is that you've had cz step
Speaker 11: down after that Plea deal, and you're going to wake
Speaker 11: that Plea deal rather and Richard Tang take over in
Speaker 11: the United States, really because they have monitors here assigned
Speaker 11: to them from the US Department of Justice and also
Speaker 11: through the Treasury's Financial Crimes Enforcement Network. Now, what he
Speaker 11: didn't say to US is whether he met with the
Speaker 11: SEC here as well, who is suing Finance.
Speaker 6: What's interesting is this two hundred million.
Speaker 11: Dollar figure is an increase over the last couple of years,
Speaker 11: and he told us that he expects to increase that
Speaker 11: figure more. And of the thousand people he's hired in
Speaker 11: the past year, five hundred, more than five hundred are
Speaker 11: solely really dedicated to compliance and regulatory matters. That number
Speaker 11: will go up to about seven hundred hundreds of people
Speaker 11: really being hired for compliance. So when it comes to
Speaker 11: the goals that Finance has here, compliance is certainly chief
Speaker 11: among them. Remember, Finance is also privately held and cz
Speaker 11: is still a major major shareholder here. So what we
Speaker 11: don't know, like you can look at Coinbasis stock and
Speaker 11: their financials every quarter and know how well they're doing
Speaker 11: in the crypto boom. How much is two hundred million
Speaker 11: compared to how well they've done this year. Certainly they
Speaker 11: want to clear up a lot of these compliance issues
Speaker 11: so they can continue to grow around the world. They
Speaker 11: are seeking to go around the world. We don't understand
Speaker 11: quite what their strategy will be in the US, but
Speaker 11: their compliance figure issues being cleared up here will set
Speaker 11: the state for further clarity and what that could look
Speaker 11: like in years ahead.
Speaker 5: I mean, this new CEO says he's a regulator at
Speaker 5: his heart, always has been, so he's got a lot
Speaker 5: of experience there.
Speaker 11: He does have a lot of experience. But you can't
Speaker 11: shake this idea here that you still have CZ still
Speaker 11: a major shareholder. He's not allowed to really be involved
Speaker 11: in the company and its operations, but still is able
Speaker 11: to have this financial claim over Binance. Ultimately, in the past,
Speaker 11: CZ has received dividends through that stake. I don't believe
Speaker 11: he has had any this year, but it is unclear
Speaker 11: on what that would look like for the future, what
Speaker 11: the parameters would be around it. So certainly a fascinating thing, Caroline.
Speaker 11: I know you guys are also watching something else here
Speaker 11: when I am to Finance exactly. I think this is
Speaker 11: a fascinating one too, because claims being resolved all over
Speaker 11: the place, including with Finance's promoters. Let's say, Jimmy Butler,
Speaker 11: the Miami Heat basketball star, and also Ben Armstrong, a
Speaker 11: YouTube influencer, agreeing to resolve claims to the tune of
Speaker 11: three hundred and forty thousand, three hundred and forty thousand
Speaker 11: dollars here from a class action and lawsuit that also
Speaker 11: cites that Department of Justice issue and the sec issues
Speaker 11: that finance has been facing. And this idea here that
Speaker 11: clients have been privy to buying unregistered securities by the
Speaker 11: quest here of these promoters, that really helped push more
Speaker 11: people into these tokens.
Speaker 5: Certainly was a hit for a few influences over the years.
Speaker 5: We thank you so much, nanibassec on all things crypto.
Speaker 5: And look, we actually want to stick with crypto in
Speaker 5: the fundraising environment, actually because it's increased slightly.
Speaker 6: In the second quarter of this year.
Speaker 5: According to the latest Pitchbook data, startups secured two point
Speaker 5: seven billion dollars across five hundred and three deals, but
Speaker 5: there was a twelve and a half percent decline in
Speaker 5: deal volume compared with the previous quarter. It's been in
Speaker 5: Robert Lay, senior crypto analysts at Pitchbooks, So what's happening here?
Speaker 5: A few amount of businesses isn't getting bigger checks?
Speaker 3: Thy care larn here, thanks for having me again.
Speaker 2: Yeah though, so like you said, although deal value is
Speaker 2: upder deil kalns down. So what this means is that
Speaker 2: investors are writing larger checks into a smaller number of projects,
Speaker 2: and so what you're seeing is really a concentration of
Speaker 2: capital into you know, the fact the teams that investors
Speaker 2: think are the shamas and the ones that are building,
Speaker 2: you know, projects that have real value. And you know,
Speaker 2: I think also when you look like just a total
Speaker 2: deal value that's being invested. You know, part of what's
Speaker 2: driving this is also a lot of the crypto funds
Speaker 2: that were raised in twenty twenty one and twenty twenty two,
Speaker 2: they're nearing the end of their deployment periods. And then
Speaker 2: there's also new capital, new funds that are coming to
Speaker 2: market as well. So we do expect a lot more
Speaker 2: capital to be invested and these checks sizes to over
Speaker 2: time over the next year to become larger and larger.
Speaker 3: Also kind of sawt in the last cycle.
Speaker 5: So you just see at that, Okay, I mean that's
Speaker 5: not going to be music to many people's is that
Speaker 5: basically they're fighting a timeline issue here and going to
Speaker 5: have to start allocating as quickly as possible or hand
Speaker 5: it back. Where are they allocating, Where are vcs seeing
Speaker 5: value being created?
Speaker 6: What problems are being solved.
Speaker 3: Right now?
Speaker 2: We've been seeing a lot of capital go into infrastructure,
Speaker 2: even like last quarter we saw two hundred million dollars
Speaker 2: plus rounds going into mo net and bear Chain, which
Speaker 2: are later one blockchains. I think the challenge is that
Speaker 2: they're from our views, there's way too much capital going
Speaker 2: into infrastructure and not enough going into applications. You know,
Speaker 2: you know, you go back to cycles ago, most of
Speaker 2: the capital went into applications, coin basis and circles. Right
Speaker 2: the last cycle was you know, FTX and block five
Speaker 2: and Celsius, and that relapsed. I think at the end
Speaker 2: of the day, you still have to go to where
Speaker 2: your end users are. And right now investors are not
Speaker 2: funding projects and applications and services that are serving those
Speaker 2: end users, whether they're retail end users or whether they're
Speaker 2: they're business end users. Right now, most of it is
Speaker 2: going into infrastructure, and you know, we just see way
Speaker 2: too much capital going into that area. But I think
Speaker 2: that's going to change over the next year of two years,
Speaker 2: where you're going to see more investment dollars go into
Speaker 2: the application later.
Speaker 6: Why is there a reticence to get into the application layer.
Speaker 2: Again with the last cycle we saw what happened. I
Speaker 2: just mentioned those names right, FTX block by Celsius, So
Speaker 2: there's a huge residence to get into that because of
Speaker 2: what happened.
Speaker 3: You know, there's also a regulatory overhang.
Speaker 2: You know, investors think a lot about that because these
Speaker 2: a lot of these projects have tokens associated with it,
Speaker 2: but it doesn't necessarily have to be. You know, we
Speaker 2: saw Parcasters they raise one hundred and fifty million dollars
Speaker 2: round in May, and they're building a decentralized version of Twitter.
Speaker 2: So I think that is kind of the bell weather
Speaker 2: where we're going to see investment go like Farcaster doesn't
Speaker 2: have a token and they're serving end users who are
Speaker 2: using social media for instance.
Speaker 5: It's interesting that you mentioned tokens and also still nervousness.
Speaker 5: I mean, it was all in the press yesterday the
Speaker 5: day before the McDonald's instagram seemed to get hack and
Speaker 5: it was all regarding a scam of a cryptocurrency named
Speaker 5: Grimace that was involved. But how much when we're seeing
Speaker 5: these vcs putting money to work, are they generally just
Speaker 5: wanting equity at this moment? Are any of them deploying
Speaker 5: capital into tokens rather part of the layer of capital structure.
Speaker 2: I think there has been a shift over the last
Speaker 2: year to invest in more equity deals versus you know,
Speaker 2: only token deals that we saw on the last cycle.
Speaker 2: But honestly, I think even from our view point, a
Speaker 2: lot of investments are still going to tokens. We're looking
Speaker 2: about seventy percent plus of the projects have some kind
Speaker 2: of token, whether it's an equity deal with a token warner,
Speaker 2: or is a staff which is you know, a promise.
Speaker 3: For future tokens. So there's still a lot of it
Speaker 3: out there.
Speaker 2: I think, you know, what investors are betting on is
Speaker 2: that these segans will have utility, and if they have utility,
Speaker 2: then they're little out of the purview of you know,
Speaker 2: being in security.
Speaker 3: We just don't We just don't know yet.
Speaker 2: It's still really early, but there are still a lot
Speaker 2: of investments for tokens in this cycle.
Speaker 5: Well, I know you've been doing a deep dive on
Speaker 5: how the AI and cryptospheres intersect. Would love to have
Speaker 5: you back on when you've finished up some of those reports.
Speaker 5: Robert Lee, senior crypto analyst at Pitchburg. Now, after a
Speaker 5: litany of battles with regulators over the app store, Matt Fisher,
Speaker 5: who has run Apple's app Store Businesses twenty ten.
Speaker 6: Is leaving the company.
Speaker 5: According to people familiar the matter the most, Mark German
Speaker 5: joins us for more and actually he's been a veteran
Speaker 5: of the business for more than two decades.
Speaker 3: Why move on, Mark, Yeah, that's right.
Speaker 12: Matt Fisher, the vice president of the app store business
Speaker 12: across Apple's product lineup, including Apple Arcade. He's leaving the
Speaker 12: company in October. This is coming as part of a
Speaker 12: reorganization of the app store business.
Speaker 3: Now.
Speaker 12: The app store launched in two thousand and eight, and
Speaker 12: for the better part of a decade and a half,
Speaker 12: the app store was the only game in town. If
Speaker 12: you wanted applications on Apple devices, right, you were in
Speaker 12: Apples walled garden. You had to work within the parameters
Speaker 12: of the app store rules and the commission and Apples
Speaker 12: payment platforms. But the European Union, other regulated and developers
Speaker 12: have all pushed for Apple to open up. So Apple
Speaker 12: really needs to change with the times, especially if it
Speaker 12: wants this business to continue to grow.
Speaker 3: So they've essentially split the app.
Speaker 12: Store organization within the company in two there's now a
Speaker 12: team related to the in house app store run right,
Speaker 12: the one that ninety nine percent of people are probably
Speaker 12: going to use.
Speaker 3: And there's another team.
Speaker 12: Now dedicated to third party app distribution, so that's alternative
Speaker 12: app stores, alternative payment methods and technologies. And those groups
Speaker 12: were being run by two sort of younger Apple executives.
Speaker 12: One is Carson Oliver, the others and Tie. They've been
Speaker 12: a big part of the app Store for the last
Speaker 12: several years. And as part of that, Matt Fisher, who
Speaker 12: has been their boss, reporting to Phil Schiller, an Apple
Speaker 12: fellow who's ultimately responsible to Tim Cook for the app store.
Speaker 12: Fisher is leaving and the other two executives will now report.
Speaker 5: To Shiller, so Phil Schiller stays and ultimately a lot
Speaker 5: of this is trying to crossthts dot theis when it
Speaker 5: comes to regulators, will it Ultimately, with this reorganization, shouldn't
Speaker 5: be able to make a more streamlined area of communication.
Speaker 12: At least, what I think this reorganization is going to
Speaker 12: do is internally put more emphasis on working with regulators
Speaker 12: and acknowledging that the app paradigm is quickly shifting right.
Speaker 12: App distribution on Apple's platforms is no longer going to
Speaker 12: be only about the app store, and Apple can no
Speaker 12: longer be stubborn about that, right, and so it has
Speaker 12: realized that there's no going back and things are only
Speaker 12: going to change, not only in the European Union potentially
Speaker 12: in other places, but probably globally over the next five
Speaker 12: years or so. So all of that needs to be
Speaker 12: re architected, right or Developers are going to continue to
Speaker 12: push back against Apple. Regulators are going to continue to
Speaker 12: push back against Apple. So they sort of are coming
Speaker 12: from approaching this from a position of strength where they're
Speaker 12: going to enact new changes. Now they're going to put
Speaker 12: a bigger focus on app distribution from third party methods
Speaker 12: onto the iPhone. They can't afford to be stubborn about
Speaker 12: this because ultimately they're going to lose revenue over time
Speaker 12: and create more issues with developers and regulators. So I
Speaker 12: think this is a positive move for the company in
Speaker 12: terms of that reorganization. And you know, Matt Fisher obviously
Speaker 12: had been dealing with a lot. He'd had been in
Speaker 12: a lot of meetings with lawyers, he had been in
Speaker 12: front of judges, lots of talks going on there with
Speaker 12: the regulators globally, So that's been a hard job.
Speaker 3: For the last few years.
Speaker 5: Well undressed, maybe pumpexs Mart Gvin. Great analysis, Thank you
Speaker 5: so much as always. Meanwhile, let's just talk about open AI,
Speaker 5: because it is opposing a bill in California that would
Speaker 5: place new safety requirements on official intelligence companies.
Speaker 6: Now, the Sam Altman led company joins a.
Speaker 5: Chorus of techniquas and politicians who have actually recently come
Speaker 5: out against the state level legislation, knowwhere as Sharene Gafari
Speaker 5: joins us some more so what they don't like being
Speaker 5: regulated by California, but they still do say they want regulation.
Speaker 6: That's right.
Speaker 13: The company is saying that they believe that AI should
Speaker 13: be regulated at a federal and not a state level,
Speaker 13: particularly because this bill deals with certain catastrophic risks such as,
Speaker 13: you know, the use of AI to create bioweapons or
Speaker 13: cause mass property damage, and they think those kinds of
Speaker 13: threats should not be ultimately left to a patchwork of
Speaker 13: state legislation.
Speaker 5: It feels as though Scott Weena has made some adjustments,
Speaker 5: right because before developers could incur criminal penalties for potentially
Speaker 5: submitting false information about their safety plans, and now that
Speaker 5: sort of been changed up. He's been listening to some
Speaker 5: of the concerns, right, But it feels as the whole
Speaker 5: wall of voices, whether they be private companies or indeed
Speaker 5: Nazi Pelosi itself think that this is a misguided set
Speaker 5: of regulations.
Speaker 13: Right, So, this bill has received a lot of criticism
Speaker 13: both among Silicon Valley investors as well as some other
Speaker 13: politicians at the federal and state level. However, you know,
Speaker 13: it still did pass the California Senate by a wide majority,
Speaker 13: and you know it's going to be voted on in
Speaker 13: the House pretty soon, so we'll see how it does
Speaker 13: in the California's House. But ultimately Senator Wiener's office has
Speaker 13: been trying to work with a tech community to you know,
Speaker 13: mitigate their concerns. And as you say, he's taken out
Speaker 13: any before in a very limited capacity. If someone lied
Speaker 13: under you know, under oath to about their AI models
Speaker 13: safety testing, they could be accused of perjury and could
Speaker 13: have some criminal penalties there. Now that's totally removed from
Speaker 13: the bill. It's only civil penalties. So you know, we'll
Speaker 13: see if that's enough to appease his critics. But we're
Speaker 13: still seeing a lot of controversy and debate about this bill,
Speaker 13: and with open AI a formidable you know, opponent and
Speaker 13: company going.
Speaker 6: Up against it.
Speaker 5: I mean, ultimately, if it did get past, Kevin Newsom
Speaker 5: would then be analyzing it. But very briefly, show mean,
Speaker 5: does this help will hinder from real perspective smaller developers, smallest.
Speaker 6: Thought ups, not just the massive open eyes. You know,
Speaker 6: I think a bill like this, it's really up for debate.
Speaker 6: I hear some smaller developers.
Speaker 13: Saying they worry that if a company like let's say Meta,
Speaker 13: which provides major open source models, starts to limit offering
Speaker 13: those open source models because it's worried about liability through
Speaker 13: this bill, that that could hurt them. But I also
Speaker 13: hear arguments that, you know, this would kind of level
Speaker 13: the playing field and make sure that everyone's on the
Speaker 13: same page and around safety and that no one can
Speaker 13: kind of skate by with doing less than what's responsible.
Speaker 13: So you know, it's really out to the jury and ultimately,
Speaker 13: as you say, up to Governor Newsom. Ultimately, if this
Speaker 13: bill does pass, to either sign it or vtail.
Speaker 5: Cherin Gafari and the latest on legislation coming from California
Speaker 5: or not, just in case, maybe we really appreciate it.
Speaker 5: It is day four of the Democratic National Convention, where
Speaker 5: presidential nominee Kamala Harris is set to speak tonight.
Speaker 6: Among those attending include.
Speaker 5: A sm of social media influencers getting the VIP treatment
Speaker 5: at the event. Our own VIP is there, Ploomberg's Brad
Speaker 5: at Stone live in Chicago and give us the feel
Speaker 5: of what last night was like.
Speaker 6: There's a lot of heavy hitters, a lot of Internet
Speaker 6: reaction to it all.
Speaker 1: Hi Caroline, Yeah, no, I mean it was an amazing evening.
Speaker 1: Lots of memorable speeches. Oprah calling for common sense over nonsense,
Speaker 1: Tim Walls the appeal to patriotism. Haakim Jeffreys I thought
Speaker 1: was very memorable saying we broke up with you for
Speaker 1: a reason, talking of course about Donald Trump. But look,
Speaker 1: I mean this is sort of the triumph of a
Speaker 1: vibe based convention. Not a lot of policy details, you know,
Speaker 1: general kind of nods to affordability and lowering inflation. But look,
Speaker 1: this is a different kind of convention. The Democrats clearly
Speaker 1: believe they can win by making one point, and that
Speaker 1: is we are the good guys.
Speaker 5: One point, whether it be through speeches, through rap, however
Speaker 5: you want to be consuming it. It's going to be
Speaker 5: a massive night now for Kamala Harris as well, and
Speaker 5: what are.
Speaker 6: We expecting any will surprise us as well?
Speaker 1: I think there probably will be. You know, people are
Speaker 1: rumoring Beyonce tonight to introduce her pink is performing, But look,
Speaker 1: I mean, I do think she has to get serious
Speaker 1: and tell the American people, tell the voters what she
Speaker 1: wants to do in office. You know, I interviewed here
Speaker 1: Deval Patrick, the former governor of Massachusetts, and I asked
Speaker 1: him whether you know he believed Donald Trump's insinuation that
Speaker 1: black voters are moving away from the Democrats, and he
Speaker 1: actually said, you know, that might be true. Democrats have
Speaker 1: to do something to make their appeal directly to those voters.
Speaker 1: And I do think that that is kind of the
Speaker 1: challenge for Democrats tonight. Tell voters what you want to do,
Speaker 1: how you're going to lower prices, what the concrete proposals are.
Speaker 1: So I think we're going to get you know, more
Speaker 1: of the broad appeal, more of the wor the good guys,
Speaker 1: but also perhaps from Vice President Harris a little bit
Speaker 1: more of a vision about what her priorities are.
Speaker 5: I mean, I hate to bring it back to tech,
Speaker 5: but I will, Well, will you see any sort of nuance,
Speaker 5: any poss that affect the tech community. There's a lot
Speaker 5: being talked about in terms of taxes, for.
Speaker 6: Example, right, I mean, I don't think so.
Speaker 1: We saw a couple of weeks ago, Caroline, when Reid Hoffman,
Speaker 1: of course, the Venture Capital has talked about replacing Lena
Speaker 1: Khan at the head of the FTC, and the progressive
Speaker 1: wing of the Democratic Party really rebelled against that that
Speaker 1: a donor would be calling for that. I mean, these
Speaker 1: are issues that were Democrats themselves just don't agree. And
Speaker 1: I think you know, this party, this convention has focused
Speaker 1: on unity and defeating Donald Trump. So I think tech
Speaker 1: brings forward some of those hot button issues that they
Speaker 1: would rather leave to another time.
Speaker 6: Rad Stone, we so appreciate it.
Speaker 5: Enjoypink made a little Beyonce as well later today, and
Speaker 5: of course listening in and Kamala Harris meanwhile, now does
Speaker 5: it from this edition of Bloomberg Technology, We do not
Speaker 5: want to forget to check out our podcast of course,
Speaker 5: confine it on the terminal as well as online on Apple,
Speaker 5: on Spotify, and on iHeart from New York, wishing Ed
Speaker 5: Ludlow getting well in San Francisco. This is a BlueBag technology,