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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg DBAK podcast. Good Morning is find

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Speaker 2: at the twelfth of December. I'm Caroline Hepkat in London.

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Speaker 1: And I'm Stephen Carolin Brussels. Coming up today. US President

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Speaker 1: Donald Trump says America would help with Ukraine's security as

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Speaker 1: he expresses frustration over a lack of progress on ending

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Speaker 1: the war.

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Speaker 2: Traders say the UK's borrowing penalty, sparked by the Liz

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Speaker 2: Trust mini budget crisis, is starting to fade.

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Speaker 1: Plus how the European company underpinning the global AI boom

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Speaker 1: is planning to keep its irreplaceable status.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 1: Ukraine and the United States are pitching new compromises in

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Speaker 1: an attempt to make progress on talks to end Russia's war.

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Speaker 1: President Vladimir Zelenski has proposed a referendum that would let

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Speaker 1: Ukrainians vote on whether to hand the Donbass region to Russia.

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Speaker 1: That's part of the eastern territories the Russian military has

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Speaker 1: failed to capture in its nearly four year invasion. US

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Speaker 1: President Donald Trump told reporters Ukrainians would back the peace

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Speaker 1: plan he proposed after talking with Russia.

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Speaker 3: I thought that we were very close with Russia to

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Speaker 3: having a deal. I thought we were very close with

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Speaker 3: Ukraine to having a deal. In fact, other than President

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Speaker 3: Zelensky's people loved the concept of the deal.

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Speaker 4: You know, we threw.

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Speaker 3: Something out of the four of our dealer. Well, there's

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Speaker 3: four or five different parts. It's a little bit complicated

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Speaker 3: because you're cutting up land in a certain way. It's

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Speaker 3: that the easiest thing is sort of like a complex

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Speaker 3: real estate deal times one thousand, right.

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Speaker 1: The US president added he would be willing to provide

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Speaker 1: security assistance to Kiev to get an agreement over the line,

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Speaker 1: but without specifics. Whether the Ukraine gives up land has

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Speaker 1: become a key sticking point among its backers, with the

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Speaker 1: rift between America and its European allies becoming increasingly apparent.

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Speaker 1: Ukraine and several European countries are meeting over the weekend

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Speaker 1: to discuss that as US offer, but it's unclear if

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Speaker 1: an American representative will attend, with Trump branding the talks negative.

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Speaker 2: The US has sanctioned six oil tankers, as well as

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Speaker 2: three of Venezuelan President Nicolas Maduro's nephews. It comes after

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Speaker 2: the seizure of a crude supertanker on Wednesday, which sources

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Speaker 2: tell Bloomberg is just the start of a new US campaign.

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Speaker 2: White House Press Secretary Caroline Levitt was asked by reporters

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Speaker 2: if more vessels will be seized.

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Speaker 5: We're not going to stand by and watch sanctioned vessels

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Speaker 5: sail the seas with black market oil, the proceeds of

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Speaker 5: which will fuel narco terrorism, of rogue and illegitimate regimes

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Speaker 5: around the.

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Speaker 2: World, Caroline Levitt, speaking there. The US actions aim to

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Speaker 2: put pressure on Maduro, deny him oil revenue and force

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Speaker 2: of Venezuelan's strongman from office. It comes after Donald Trump

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Speaker 2: ordered a massive US military build up in the region.

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Speaker 2: US officials have made the case that change in government

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Speaker 2: and in Venezuela could have a transformative impact across Latin America.

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Speaker 1: The premium paid by the UK government to finance its

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Speaker 1: debt has narrowed after Chancellor Rachel Reeves increased her fiscal

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Speaker 1: buffer in last month's budget. The rate the government pays

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Speaker 1: to borrow for ten years has fallen twelve basis points

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Speaker 1: in the past three months, as the US, Germany, France

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Speaker 1: and Italy have seen increases. Guilty halls have become unusually

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Speaker 1: politicized since the twenty twenty two mini budget crisis that

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Speaker 1: forced out then Prime Minister Liz Tross. Since then, there

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Speaker 1: have been repeated sudden yield spikes on fiscal jitters. Speaking

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Speaker 1: to Bloomberg, former Prime Minister Teresa May acknowledged her party's

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Speaker 1: fiscal mistakes.

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Speaker 6: You wouldn't use a term like VI indicate. What I

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Speaker 6: would say is I think that we, unfortunately as a

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Speaker 6: conservative party, was seen to have lost our value of

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Speaker 6: integrity and our economic competence.

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Speaker 1: Teresa May there speaking to Bloomberg's leaders with Francine laqueb

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Speaker 1: The UK still has the highest bond yields among a

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Speaker 1: group of seven nations, but the shift is a boost

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Speaker 1: for the government after seventeen months in power, marreged by

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Speaker 1: missteps and policy u turns that have occasionally spooked bond markets.

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Speaker 2: Shares in the chip firm Broadcom fell by more than

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Speaker 2: four percent in post market trading after its sales outlook

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Speaker 2: failed to meet investor expectations. CEO Hocktan said the company,

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Speaker 2: which competes with Nvidia, has a backlog of seventy three

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Speaker 2: billion dollars in AI product orders, disappointing some investors, later

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Speaker 2: clarifying the figure as a minimum. Bloomberg Intelligence is senior

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Speaker 2: analyst Kunjun Sabani says the market reaction is surprising.

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Speaker 7: There seems to be an overall fatigue coming into the

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Speaker 7: AI space, but fundamentally, when we just look at Broadcom,

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Speaker 7: this was one of the most strongest AI semes report

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Speaker 7: this quarter. I mean they beat the AI revenue numbers

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Speaker 7: for next quarter their fiscal one queue by almost one

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Speaker 7: point four billion, which is in twenty sent upside to

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Speaker 7: what the street was.

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Speaker 2: That was Counjasabani from Bloomberg Intelligence. Bootcom has held off

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Speaker 2: on giving an annual AI revenue forecast, with CEO Tan

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Speaker 2: saying it was a moving target.

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Speaker 1: One of China's biggest homebuilders is racing to averted default

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Speaker 1: on nearly two billion dollars worth of local debt. Chinavanka

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Speaker 1: is seeking to delay two payments are payments on two

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Speaker 1: bonds that are due this month. The company is one

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Speaker 1: of the few major Chinese developers that hasn't defaulted. In

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Speaker 1: the past, Vanka has relied on financial lifelines from its

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Speaker 1: largest state shareholder, but recently that company's shifted its stance

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Speaker 1: and titened financing terms, adding to the developers stress. Bankers

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Speaker 1: and fund managers are now rushing to weigh the damage

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Speaker 1: of what could be one of the biggest corporate restructurings

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Speaker 1: in China's history. More than seven billion dollars of the

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Speaker 1: firm's debts are held by lenders and bond investors overseas.

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Speaker 2: And lastly, in football, there has been criticism of FIFA's

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Speaker 2: price of tickets for the World Cup next year. The

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Speaker 2: Football Supporter's europe Fan Group described the current prices as

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Speaker 2: extortionate and a monumental betrayal. According to the BBC, tickets

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Speaker 2: for FIFA's show piece event are as much as seven

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Speaker 2: times more expensive than the twenty twenty two World Cup,

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Speaker 2: which took place in Kuta. For England fans, watching all

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Speaker 2: eight matches through to the final will cost a minimum

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Speaker 2: of about twenty five pounds from one four hundred and

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Speaker 2: sixty six pounds in twenty twenty two. FIFA has not

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Speaker 2: yet commented on its pricing decisions. According to the BBC.

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Speaker 1: Those are your top stories on the markets. Themsciosh Pacific

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Speaker 1: Index one point three percent higher this morning. The topics

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Speaker 1: in Tokyo's up by two percent. European stock features looking

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Speaker 1: much stronger as well, up six tenths of one percent.

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Speaker 1: At the moment, the tenure treasury yield holding steady at

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Speaker 1: four point one six percent.

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Speaker 2: Now in a moment, we'll bring you the latest on

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Speaker 2: efforts to end Russias war in Ukraine, plus a special

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Speaker 2: report on the future of ASML, the Dutch company underpinning

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Speaker 2: the global AI boom. But before we get to that,

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Speaker 2: something else is caught our Rye. This Friday, our opinion

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Speaker 2: columnist Davelye's been writing about the mega deal between Disney

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Speaker 2: and open Ai.

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Speaker 1: So it's licensed around two hundred characters to for use

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Speaker 1: on open AI's Sora video apps, so Lilo and Stitch, Aerial,

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Speaker 1: Simba all the favorites. They can be used then for

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Speaker 1: generating AI videos in response to user prompts. Soone exchange,

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Speaker 1: Disney gets fees and a one billion dollar stake in

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Speaker 1: open Ai. Davely points out though, well, well, this looks

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Speaker 1: like a great deal for Disney. Open Ai gets the

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Speaker 1: ability to make these short clips of characters, but they

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Speaker 1: won't be able to talk. That's part of the deal.

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Speaker 1: So he also points out that this app is for

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Speaker 1: over thirteens, and perhaps the people who might be most

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Speaker 1: interested in seeing these characters might be under thirteens. But

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Speaker 1: if you look at the long game of all of this,

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Speaker 1: he says that essentially it's good for open AI because

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Speaker 1: they're trying to make sure they hold on to those

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Speaker 1: younger AI, your chatch ebt users. Essentially they have a

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Speaker 1: lead over their rivals on as well. And he says

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Speaker 1: it's also a win for the creative industries because it

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Speaker 1: essentially sends the message to that if you want to

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Speaker 1: use these sorts of characters created by human ingenuity, you

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Speaker 1: have to pay for them, And that's the part that

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Speaker 1: he thinks we should take away from this deal.

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Speaker 2: Yeah, I think it's a really fascinating moment. I just

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Speaker 2: think that with the unpredictable world of AI, it's not

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Speaker 2: actually clear who's going to end up being the winner

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Speaker 2: or the loser in these sorts of deals, because I

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Speaker 2: think it's it's so unforeseeable what the future of consumption

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Speaker 2: is really going to look like. But I think, yeah,

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Speaker 2: it's very very interesting that you're going to be able

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Speaker 2: to interact with these I mean hugely meaningful characters to

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Speaker 2: so many people. Yeah, that's a great piece you can find.

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Speaker 1: At bloomberok dot com. Slash Opinion will put a link

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Speaker 1: to it on our podcast show notes as well. Let's

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Speaker 1: bring you more though on our top story in President

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Speaker 1: Trump saying the US being would be offered, would be

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Speaker 1: willing to contribute to Ukraine's security, but showing signs of

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Speaker 1: frustration with the talks over the country's future. Let's discuss

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Speaker 1: with Bloomberg Tony howpit it leads our coverage of Russia's

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Speaker 1: economy and government Tony. President Trump is dramatically scaled back

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Speaker 1: direct military aid to Ukraine and seems deeply frustrated by

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Speaker 1: not being able to force peace on the country quickly enough.

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Speaker 8: Why good morninge Well, yes, essentially, President Trump, if you remember,

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Speaker 8: in his election campaign, said he would come to parent

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Speaker 8: and finish this war quickly, even within a day, and

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Speaker 8: almost a year later, that hasn't happened. So that's leading

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Speaker 8: somewhat to the frustration levels that's being expressed from the

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Speaker 8: White House, and he's focused some of his ire on

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Speaker 8: President Zelensky. He seems to take an issue with Zelenski's

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Speaker 8: insistence on things like security guarantees on a refusal to

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Speaker 8: concede territory to Russia that Russia insists that it must

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Speaker 8: have as part of any peace steal. And it's really

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Speaker 8: quite no notable that he doesn't apply the same sort

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Speaker 8: of pressure on President Putin, who, after all, was responsible

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Speaker 8: for the invasion and could end the war tomorrow simply

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Speaker 8: by declaring a cease fire and pulling back troops from

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Speaker 8: Ukrainian territory. So essentially, President Trump would like to get

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Speaker 8: on and do business deals with Russia and with Ukraine.

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Speaker 8: He sees a very little American interest in the territory

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Speaker 8: that's being fought over, and so he wants to get

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Speaker 8: a deal done basically in any way possible. And when

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Speaker 8: he sees people objecting to particular details of a plan,

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Speaker 8: that leads to frustration in the White House quite quickly.

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Speaker 2: Despite Russia's size and scale or so, President Putin hasn't

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Speaker 2: succeeded on the battlefield, but there is a huge battle

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Speaker 2: about the narrative of the war. I mean, is Ukraine

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Speaker 2: losing that narrative?

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Speaker 8: Yeah, this is a key issue, I think, because Russia

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Speaker 8: wants to present the idea that inevitably it will win

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Speaker 8: and that that somehow therefore influences President Trump's view about

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Speaker 8: the need to pressure President Zelenski into a deal to

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Speaker 8: end the war on Russia's terms, and of course Ukraine

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Speaker 8: takes issue with that. They would point out correctly mostly

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Speaker 8: that Russia has made very little advance since it was

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Speaker 8: pushed back in late in twenty twenty two, after advancing

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Speaker 8: almost as far as Kiev. The war has essentially been

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Speaker 8: limited to areas of eastern and southern Ukraine, and that

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Speaker 8: frontline hasn't changed a great deal. We're talking you know,

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Speaker 8: kilometers here and there. But Ukraine is a very large country.

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Speaker 8: So it's difficult for President put into assert that he

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Speaker 8: is won the war in the sense that Ukraine has capitulated.

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Speaker 8: In Ukraine clearly isn't capitulating. But it's equally difficult for

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Speaker 8: Ukraine to claim that it's managing to push back Russian

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Speaker 8: forces because the frontline isn't showing that the front line

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Speaker 8: is showing a kind of gradual Russian advance, and it's

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Speaker 8: quite difficult for Ukraine to hold the line. But we're

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Speaker 8: talking here about you know, kilometers, twenty to thirty kilometers

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Speaker 8: over a period of a year, and so both sides

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Speaker 8: are really bogged down and they're trying to persuade Trump

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Speaker 8: that really that means that they have the advantage and

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Speaker 8: that the other side should be pressured into a deal

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Speaker 8: on their terms.

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Speaker 1: How should we consider the proposal from the Ukrainian president

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Speaker 1: of a referendum on the Donbas region as well? Is

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Speaker 1: this something that could help to advance the conversation in Ukraine?

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Speaker 8: Yeah, this is interesting because President's Antico until now has

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Speaker 8: basically said that he doesn't have the right to sign

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Speaker 8: away Ukrainian territory. By constitution, he doesn't have the right

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Speaker 8: and as president he's not entitled to do it. And

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Speaker 8: so now he's floating the idea of a referendum in

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Speaker 8: some ways to say, well, okay, if this forms any

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Speaker 8: part of a piece deal that I can agree to,

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Speaker 8: it's still going to need the endorsement of the Ukrainian

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Speaker 8: people in order to stick. And he's come under some

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Speaker 8: criticism from the US, in particular that Ukraine hasn't held

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Speaker 8: elections presidential elections simply because martial law is in force

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Speaker 8: and Ukraine is at war. And so he said that,

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Speaker 8: you know, well, the referendum on the Dombas region could

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Speaker 8: be one way forward, or it could be put to

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Speaker 8: the people in elections themselves. But there are all kinds

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Speaker 8: of questions here about how this would actually be implemented.

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Speaker 8: I mean, if you imagine that these areas have large populations,

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Speaker 8: you know, how would you enforce these people? Basically if

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Speaker 8: they voted against being part of Russia or being part

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Speaker 8: of some demilitarized zone, you know, you're essentially compelling them.

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Speaker 8: The rest of Ukraine will been compelling them if they

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Speaker 8: voted yes. And what happens if Ukraine votes not, you know,

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Speaker 8: does that actually then negate the whole of the deal?

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Speaker 8: So there are lots of questions, but it's an interesting

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Speaker 8: development that he's actually now floating this idea that it

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Speaker 8: should be something that the people should decide on.

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Speaker 2: What about the meeting this weekend? The White House non

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Speaker 2: committal about sending a US representative to these talks between

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Speaker 2: Ukraine and European leaders. And there's still the question of

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Speaker 2: the frozen Russian assets, you know that Europe has yet

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Speaker 2: to decide on.

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Speaker 8: Yeah, so there are two elements. One of the key

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Speaker 8: elements for Ukraine is getting clarity on what security guarantees

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Speaker 8: it would receive in the event of any peace steel

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Speaker 8: because the Budapest Memorandum of long ago was supposed to

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Speaker 8: assure its security and it was shown not to do so,

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Speaker 8: and they don't want to repeat of that exercise. So

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Speaker 8: there was a big meeting between Zelenskin and top US

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Speaker 8: officials yesterday on this very subject. There'll be more talks

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Speaker 8: over the weekend to try and hammer out some clarity

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Speaker 8: on what security guarantees would actually mean. And from the

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Speaker 8: Europeans perspective, they're trying to say, okay, well, you know,

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Speaker 8: if push comes to shod, we're ready to continue funding

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Speaker 8: Ukraine and to support its defense, and that involves Russian assets,

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Speaker 8: and they've already they're due to make a decision today.

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Speaker 8: In fact, that would allow them to lengthen the time

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Speaker 8: between when they have to approve a continued freeze on

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Speaker 8: these assets, because they're concerned that one member country could

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Speaker 8: simply object and that that would then undo the freeze

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Speaker 8: and threaten the eusability to make use of those assets.

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Speaker 8: But the big test will come next week when they

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Speaker 8: have to make a decision about a big loan secure

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Speaker 8: on these assets, which is essential from Ukraine's point of

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Speaker 8: view for continuing to fund basic government and defense operations.

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Speaker 8: Early next year, Tony.

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Speaker 1: Thank you very much for joining us Tony halberin leading

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Speaker 1: our coverage of Russia's economy and government. Will be watching

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Speaker 1: for developments out of those meetings in Brussels today. Stay

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Speaker 1: with us more from Bloomberg Daybreak Europe coming up after this.

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Speaker 2: Now to a European company at the heart of the

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Speaker 2: AI boom. SML is the foundation on which much of

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Speaker 2: the tech industry has been built over the past few years,

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Speaker 2: and today we're taking a deep dive into the company's

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Speaker 2: future with an exclusive conversation with the CEO, Christophe Fouquet.

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Speaker 2: Our reporter Sarah Jacob joins us now for more. Sarah,

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Speaker 2: good to speak to. SML has a monopoly when it

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Speaker 2: comes to the machines for these very advanced chip making powers,

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Speaker 2: the ones that obviously are on the underpinning of the

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Speaker 2: AI development. How serious is their competition though, and can

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Speaker 2: they keep their grip then on this industry?

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Speaker 4: Good morning, Yes, ASML manufactures the machines that are needed

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Speaker 4: to produce the most advanced chips you know, for Nvidia,

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Speaker 4: which in turn run the artificial intelligence models for firms

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Speaker 4: such as open Ai. They're the only maker of these

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Speaker 4: cutting edge machines in the world, and it you know,

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Speaker 4: it wasn't easy to develop their so called extreme ultra

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Speaker 4: Violet lithography or EUV machines. It took them decades of research,

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Speaker 4: then fine tuning these machines with a network of suppliers

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Speaker 4: and close collaboration with chip makers to create breakthroughs in lasers,

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Speaker 4: glass and other components. In fact, we spoke to Chris Miller,

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Speaker 4: the author of the book Chip War for the story,

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Speaker 4: and he says, ASML is irreplaceable. But it's true, you know,

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Speaker 4: geopolitical tensions are asking other regions are pushing to develop

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Speaker 4: their own ship industries and in lithography. Take for instance,

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Speaker 4: in China's Shanghai Microelectronics Equipment has received government backing to

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Speaker 4: compete in the space. But we understand that those machines

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Speaker 4: lag asmls by ten to fifteen years. Then there's a

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Speaker 4: startup in San Francisco called Substrate, which raised money from

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Speaker 4: Peter Thl but it's also years away for production. So

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Speaker 4: certainly there are many players that are attempting to rival

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Speaker 4: a SML. But as ASML CEO Christopher Fuke says, the

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Speaker 4: you know, the entire ecosystem is very dependent, they have

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Speaker 4: locked in suppliers, they have loyal customers, and Fuku says

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Speaker 4: that it's still a very challenging technology to be able

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Speaker 4: to replace.

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Speaker 1: So what does ASML then need to achieve in their

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Speaker 1: technological development to stay on top?

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Speaker 2: Serrah.

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Speaker 4: Yeah, Fuka was very clear, you know when he said

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Speaker 4: that a SML most knows what it wants to do

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Speaker 4: for its customers in the next ten to fifteen years.

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Speaker 4: They're working on the three axes of better resolution, better accuracy,

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Speaker 4: and productivity of their lithography machines for many years. His

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Speaker 4: next big test, and we write this in the story,

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Speaker 4: is whether he can lead a transition from EUV to

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Speaker 4: high ANAEUV machines. Now high ANAA is aimed at enabling

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Speaker 4: customers to move to chips below two nanometers, so the

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Speaker 4: smaller the circuits on chips that means better performance, lower

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Speaker 4: heat and less power consumption. So it's working with intels

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Speaker 4: and other customers on this who they are experimenting with

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Speaker 4: the high NA machines, which would make chips even more

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Speaker 4: capable of running advanced applications in AI and our fears

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Speaker 4: a SML will work with its customers and getting these

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Speaker 4: high name machines to the point that they can operate

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Speaker 4: with minimal downtime through next year, and it expects to

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Speaker 4: achieve high volume manufacturing in twenty twenty seven and twenty

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Speaker 4: twenty eight, sometimes next decade. ASML also plans to introduce

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Speaker 4: an even more advanced technology technology sorry called the hyper Eda.

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Speaker 2: Okay, so that's for the future. But what about the

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Speaker 2: market in China which has been a massive growth driver

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Speaker 2: for the company in recent years, and the big question

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Speaker 2: about whether political pressures become more challenging for SML.

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Speaker 4: Yes, China has been ASML's largest market. In the third quarter,

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Speaker 4: it accounted for about forty two percent of net system sales.

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Speaker 4: ASML has said previously that it expects sales in China

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Speaker 4: to be significantly lower in twenty twenty six. The company

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Speaker 4: basically faces curbs and what it can sell to China.

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Speaker 4: It has never been allowed to sell its EUV machines

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Speaker 4: as a result of export controls. The Dutch government also

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Speaker 4: plays restrictions on some of its most advanced DUV machines.

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Speaker 4: So if the current political climate sort of persists, the

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Speaker 4: company will remain subject to these kind of curbs or

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Speaker 4: export controls. But growth must come from elsewhere as well.

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Speaker 4: So the global market for semiconductors is projected to rise

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Speaker 4: twenty two percent this year and more than twenty five

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Speaker 4: percent next year. And chip makers that ESML delivers its

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Speaker 4: machines to are diversifying their geography. So the US government

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Speaker 4: is offering billions of dollars in incentives to TSMC, Samsung

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Speaker 4: and others to build factories for chips in the US.

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Speaker 4: And the more fabs that are being built, the more

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Speaker 4: machines from ASML that are needed. So that's how we

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Speaker 4: see that market the other markets growing from here.

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