WEBVTT - Netflix Shares Fall Despite Earnings Beat 0:00:00.280 --> 0:00:13.800 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.840 --> 0:00:17.639 from coast to coast with Caroline Hyde and New York 0:00:17.960 --> 0:00:19.880 and Eva Low in San Francisco. 0:00:22.960 --> 0:00:24.880 This is Bloomberg Tech coming up. 0:00:24.960 --> 0:00:28.440 Netflix beats expectations for second quarter results, but the bars 0:00:28.560 --> 0:00:30.440 high and it may not be enough to keep the 0:00:30.520 --> 0:00:35.400 rally going. Plus, we'll hear from TSMC's CFO on business opportunities, 0:00:35.400 --> 0:00:38.560 the impact of tariffs, and much more. In an exclusive 0:00:38.600 --> 0:00:41.680 interview and a look at the expansion plans of defense 0:00:41.760 --> 0:00:45.639 manufacturing company Hadrian to help build AI powered factories here 0:00:45.680 --> 0:00:46.199 in America. 0:00:46.440 --> 0:00:48.519 We speak to the CEO. I want to get to 0:00:48.600 --> 0:00:51.040 some news that broke in the last few minutes. 0:00:51.200 --> 0:00:54.960 JP Morgan, one of the biggest research shops on the street, 0:00:55.000 --> 0:00:58.280 is expanding its coverage to private companies and that includes 0:00:58.320 --> 0:01:01.120 some of the most important tech start up. Open ai 0:01:01.640 --> 0:01:03.600 is where their debut research has launched. 0:01:03.600 --> 0:01:04.280 So interesting. 0:01:04.480 --> 0:01:08.360 The analysts on that note saying basically they can't defend 0:01:08.400 --> 0:01:10.880 the moat that they have on llm's and in part 0:01:11.160 --> 0:01:15.119 because of no profitability till twenty twenty nine, they're worried 0:01:15.160 --> 0:01:19.120 about how much patience investors have. Really interesting development when 0:01:19.120 --> 0:01:22.240 you track the private sector and the world's biggest startups. 0:01:22.280 --> 0:01:24.240 Let's get to earnings and Netflix. 0:01:24.280 --> 0:01:29.200 Netflix shares down significantly right now, five percent in the session. 0:01:29.240 --> 0:01:31.760 That's the most since the beginning of April, as it 0:01:31.880 --> 0:01:34.560 stands on an inter day basis. But they beat on 0:01:34.680 --> 0:01:38.400 all of these classic financial metrics. Netflix has been saying 0:01:38.400 --> 0:01:42.400 for ages, judge us, please Wall Street on these financial metrics, 0:01:42.480 --> 0:01:45.160 and they did great in the second quarter, boosting their 0:01:45.160 --> 0:01:48.240 outlook as well. The content slate looks strong, and the 0:01:48.280 --> 0:01:51.440 ad supported cheer is going to grow doubling in twenty 0:01:51.440 --> 0:01:51.800 twenty five. 0:01:51.880 --> 0:01:53.080 Let's get out to blue both. Lucas. 0:01:53.080 --> 0:01:55.560 Sure, he's a managing editor for screen Time. That's our 0:01:55.600 --> 0:01:59.120 group that basically tracks the culture and our coverage of 0:01:59.160 --> 0:02:02.400 media entertainment and what was not to light with Netflix, Right, Lucas, 0:02:02.440 --> 0:02:04.640 this is just like a high bar that's been set 0:02:04.680 --> 0:02:06.800 by Wall Street and the company did really well. 0:02:06.960 --> 0:02:09.560 Yeah, I think you nailed it with the high bar. Look, 0:02:10.000 --> 0:02:13.200 there was nothing in the results to dislike. It's not 0:02:13.280 --> 0:02:15.920 like they beat on any metric by some huge amount, 0:02:15.919 --> 0:02:19.240 but they beat on everything. I think it's a stock 0:02:19.280 --> 0:02:21.680 that has doubled over the last year. It's a stock 0:02:21.720 --> 0:02:24.000 that had been up by forty to fifty percent so 0:02:24.080 --> 0:02:27.200 far this year, and it's even though it is now 0:02:27.360 --> 0:02:30.560 the most established and most valuable sort pure play entertainment 0:02:30.600 --> 0:02:34.600 company out there, it still has this momentum behind it 0:02:34.639 --> 0:02:37.080 where people think it has a lot of room to grow, 0:02:37.160 --> 0:02:40.840 and so by most conventional you know, PD ratio metrics, 0:02:41.040 --> 0:02:44.080 it's overvalued, and so if it only slightly beats, people 0:02:44.160 --> 0:02:45.079 just aren't as excited. 0:02:46.160 --> 0:02:48.760 Netflix does this thing where it basically like pre records 0:02:48.800 --> 0:02:51.320 its earnings cool and then dumps it as a YouTube video. 0:02:51.720 --> 0:02:53.880 This is what Ted Surroundos had to say on AI. 0:02:55.520 --> 0:02:59.280 We remain convinced that AI represents an incredible opportunity to 0:02:59.320 --> 0:03:03.120 help creators make films and series better, not just cheaper. 0:03:04.320 --> 0:03:07.560 There are AI powered creator tools, so this is real 0:03:07.600 --> 0:03:11.000 people doing real work with better tools. Our creators are 0:03:11.040 --> 0:03:15.200 already seeing the benefits in production through pre visualization and 0:03:15.240 --> 0:03:18.720 shot planning work and certainly visual effects. 0:03:20.000 --> 0:03:20.320 Lucause. 0:03:20.320 --> 0:03:22.079 I don't know how much attention the street was really 0:03:22.080 --> 0:03:24.480 paying to that commentary on AI. There was a lot 0:03:24.520 --> 0:03:27.000 of focus on the content slate, but do we learn 0:03:27.080 --> 0:03:29.800 anything new about Netflix's strategy going forward? 0:03:30.520 --> 0:03:33.000 Nothing kind of Macro High Level. 0:03:33.360 --> 0:03:36.080 Ted has been pretty consistent on his views on AI, 0:03:36.280 --> 0:03:38.920 which is that it is a tool, it will be used, 0:03:38.960 --> 0:03:41.280 and it's not just about cost cutting. They think it 0:03:41.320 --> 0:03:44.560 can make product better. But I think what was new 0:03:44.760 --> 0:03:48.080 was him talking about using it on a show. Most 0:03:48.080 --> 0:03:51.720 of these Hollywood companies have been very wary of kind 0:03:51.760 --> 0:03:55.040 of sharing how they're using AI, unless it's in sort 0:03:55.080 --> 0:03:57.520 of a gimmicky way, like they're going to dage someone 0:03:57.520 --> 0:04:00.000 for a character nobody are from a movie or show. 0:04:00.080 --> 0:04:02.600 But it gets two worked up about that. But this, 0:04:02.720 --> 0:04:05.240 along with this Amazon show House of David, are probably 0:04:05.280 --> 0:04:08.320 the two highest profile examples, just given how important Netflix 0:04:08.320 --> 0:04:10.960 and Amazon art of the ecosystem. 0:04:11.080 --> 0:04:14.880 Lucas all over the socials is Stephen Colbert saying that 0:04:14.920 --> 0:04:17.359 the Late Shows canceled? 0:04:17.400 --> 0:04:19.320 Do we know anything? What are the details here? 0:04:19.600 --> 0:04:21.480 Well, we know that the show is going to end 0:04:21.520 --> 0:04:23.960 in May of next year, and it's not just the 0:04:24.160 --> 0:04:26.599 you know, Stephen Colbert leaving the show. The Late Show, 0:04:26.600 --> 0:04:28.880 which started in I believe nineteen ninety three, will cease 0:04:28.920 --> 0:04:31.520 to exist. So it's the end of an era in 0:04:31.600 --> 0:04:34.080 late night television and there will be a lot of 0:04:34.080 --> 0:04:36.960 speculation as to what happens next to Jimmy Kimmel's Show, 0:04:37.080 --> 0:04:39.520 or to the Night to the Tonight Show with Jimmy Fallon. 0:04:39.880 --> 0:04:42.240 You know, CBS is really trying to position this as 0:04:42.279 --> 0:04:44.599 a financial decision. I don't think it would surprise anyone 0:04:44.640 --> 0:04:47.120 to know that ratings for late night shows have gone down, 0:04:47.160 --> 0:04:49.559 the cost of doing it hasn't gone up or hasn't 0:04:49.600 --> 0:04:53.280 gone down either, So you know, the profit made from 0:04:53.320 --> 0:04:55.560 these types of shows is now very slim. Some might 0:04:55.600 --> 0:04:58.240 even say they don't make money. But it's hard not 0:04:58.440 --> 0:05:01.880 to believe that there is some political angle to this, 0:05:02.000 --> 0:05:04.719 given what has happened between with the repair amount deal 0:05:04.720 --> 0:05:07.719 and the Trump administration. But nobody has any hard reporting 0:05:07.760 --> 0:05:07.960 on that. 0:05:08.720 --> 0:05:10.600 I know that was a jump from Netflix earnings to 0:05:10.839 --> 0:05:12.880 the Late Show, but it's what everyone's talking about right 0:05:12.880 --> 0:05:16.040 now online Bloombos. Lucashaw, who leads the screen Time team, 0:05:16.480 --> 0:05:18.160 thank you very much. I want to stick with Netflix. 0:05:18.200 --> 0:05:21.320 Dan kern Or Benchmarks Senior Anlyst joins us now. Benchmark 0:05:21.360 --> 0:05:25.080 currently has a hold on Netflix. What we didn't get into, 0:05:25.240 --> 0:05:29.960 Lucas was the ad supported tier. They're saying that that 0:05:30.960 --> 0:05:33.360 is in sort of a revenue contribution terms it's going 0:05:33.400 --> 0:05:36.480 to double in twenty twenty five. But did we learn 0:05:36.680 --> 0:05:40.320 anything more beyond the financials on how the consumer is 0:05:40.480 --> 0:05:42.159 engaging with that ad supported tier? 0:05:42.240 --> 0:05:45.920 Dan, Yeah, Can I actually just go back to something 0:05:46.279 --> 0:05:49.040 Lucas said for a second. I think that there was 0:05:49.360 --> 0:05:52.520 some bits to pick with relation to the report. I mean, 0:05:52.520 --> 0:05:54.880 if you wanted to be negative on the stack, you 0:05:54.880 --> 0:05:57.880 would basically say that almost all of the Guide inturies 0:05:57.920 --> 0:06:01.400 came from FX and less from member growth and growth 0:06:01.400 --> 0:06:03.880 and monetization, particularly in that ad supported chair that you 0:06:04.000 --> 0:06:07.120 just mentioned. And in addition, their engagement grew by only 0:06:07.160 --> 0:06:10.040 one percent, which while it's been stable for the last 0:06:10.040 --> 0:06:11.479 two and a half years, you've had the rest of 0:06:11.480 --> 0:06:14.000 Hollywood kind of pulling back on content spend, and so 0:06:14.600 --> 0:06:17.200 why are they not growing their engagement faster as they 0:06:17.200 --> 0:06:20.120 continue to spend I think sixteen eighteen billion dollars this 0:06:20.240 --> 0:06:22.000 year and then growing that a little bit less than 0:06:22.040 --> 0:06:24.920 revenue going forward. So that's just one point I'd make 0:06:24.960 --> 0:06:26.760 on the ad supported side. Yes, I think we did 0:06:26.880 --> 0:06:29.400 learn a little bit more last night. We learned that 0:06:29.640 --> 0:06:33.320 retention remains strong. We learned that ad supported is now 0:06:33.360 --> 0:06:36.200 more than fifty percent of new sign ups but we 0:06:36.279 --> 0:06:38.520 also learned later in the call and the callback that 0:06:38.839 --> 0:06:42.960 their pricing is improving on ad monetization, and so I 0:06:43.040 --> 0:06:44.880 do think if you wanted to be more positive on 0:06:44.920 --> 0:06:47.800 the story, you would say, okay. So even if most 0:06:47.880 --> 0:06:51.200 of the guidance rays came from FX, they still be 0:06:51.279 --> 0:06:53.320 it on member growth, which we thought would happened going 0:06:53.320 --> 0:06:56.320 to the print. And they also improve monetization on the 0:06:56.320 --> 0:06:58.560 ad supported, which is going to be the long tail 0:06:58.720 --> 0:07:02.120 of the growth story, and so numbers for twenty twenty. 0:07:01.680 --> 0:07:04.800 Six should also then move slightly higher. 0:07:06.160 --> 0:07:07.840 There are gonna be lots of people watching bluebexs Het 0:07:07.880 --> 0:07:09.920 right now saying hold on. If Netflix was so good, 0:07:09.960 --> 0:07:12.320 why is the stock down five percent? And of course, 0:07:12.640 --> 0:07:14.480 as of last night's close, it was a stock that 0:07:14.640 --> 0:07:17.760 was up forty three percent, market cap of five hundred billion, 0:07:18.120 --> 0:07:21.560 and that eclipses you know, your Disneys and your Warner 0:07:21.600 --> 0:07:25.800 Brother Discoveries by some distance. Right, this is a company. 0:07:25.800 --> 0:07:27.800 Would you say that's in good health? 0:07:29.480 --> 0:07:31.360 I think they're in fantastic health. I mean they're the 0:07:31.440 --> 0:07:32.280 king of the streamers. 0:07:32.360 --> 0:07:32.520 Right. 0:07:32.560 --> 0:07:35.400 You can argue YouTube, and you can argue YouTube monetization. 0:07:35.520 --> 0:07:38.680 You can argue how much room Netflix has to run, 0:07:38.760 --> 0:07:42.880 but by almost all engagement metrics, by subscriber metrics, they're 0:07:42.880 --> 0:07:45.720 dominating the streaming industry, and they're doing it as opposed 0:07:45.760 --> 0:07:47.520 to all the rest of the companies that you mentioned. 0:07:47.600 --> 0:07:51.280 They're doing it profitably and very much so. If anything else. 0:07:51.360 --> 0:07:53.600 You know, they actually took up their operating margin guidance 0:07:53.640 --> 0:07:56.160 this year and it continues to create higher and so 0:07:56.320 --> 0:07:59.080 maybe that's one of the reasons why they're not splashing 0:07:59.080 --> 0:08:01.280 out more cash on content spen. They're trying to do 0:08:01.280 --> 0:08:04.160 it in a thoughtful manner, which we saw others do 0:08:04.320 --> 0:08:06.480 in maybe a less thoughtful manner, and they're trying to 0:08:06.520 --> 0:08:08.960 dig out of their holes. So Netflix is a terrific 0:08:09.000 --> 0:08:12.920 position going forward. But as Lucas said, you know, expectations 0:08:12.920 --> 0:08:13.800 are very elevated. 0:08:14.720 --> 0:08:16.560 Dan, what are you watching right now on Netflix and 0:08:16.600 --> 0:08:18.840 what are you excited about in the content s Late. 0:08:21.320 --> 0:08:25.880 Squid Games three looks super exciting, the new animated stuff 0:08:25.880 --> 0:08:28.280 they've got coming out since we talked about that. Really 0:08:28.320 --> 0:08:32.240 interesting articles out today about how also kids content is 0:08:32.520 --> 0:08:35.680 leading sort of the retention charge. So very interested to 0:08:35.679 --> 0:08:39.680 see what they produce. Being a family guy here, really 0:08:39.720 --> 0:08:42.839 interested to see what they produce downslate, but you know 0:08:43.000 --> 0:08:45.200 there are gonna be some unique events fights in the 0:08:45.200 --> 0:08:45.920 back half. 0:08:45.679 --> 0:08:47.160 Of the year. I look forward to those. 0:08:47.280 --> 0:08:50.680 And then of course you've got the NFL Christmas Day 0:08:50.720 --> 0:08:54.040 Games and who could miss those, right, that's. 0:08:53.880 --> 0:08:56.600 A great summary of both the produced and live content. 0:08:56.720 --> 0:08:59.199 Dan khanas bench Mark Capital is seene around this. Great 0:08:59.240 --> 0:09:01.840 to have you on the show. Now let's get some news. Overnight, 0:09:02.120 --> 0:09:05.520 Meta hired a pair of key AI researchers from Apple, 0:09:05.800 --> 0:09:08.800 not long after already poaching their former boss from the 0:09:08.840 --> 0:09:12.360 iPhone maker. Sources say that Mark Lee and Tom Gunter 0:09:12.440 --> 0:09:16.040 were hired for Meta's Superintelligence Labs team, and one of 0:09:16.080 --> 0:09:18.360 them has even started the new job already. So a 0:09:18.480 --> 0:09:20.880 part of a scramble for AI talent across the tech 0:09:20.920 --> 0:09:25.360 industry lately, with Meta proving especially aggressive in its recruiting. 0:09:25.400 --> 0:09:28.079 That was another Bloomberg exclusive overnight. Now coming up, we're 0:09:28.080 --> 0:09:30.080 going to have to take a look at how uncertainty 0:09:30.480 --> 0:09:33.320 over whether President Trump will fire fed chair your own 0:09:33.400 --> 0:09:36.800 power is impacting technology investors. 0:09:36.840 --> 0:09:38.240 I also want to get out. 0:09:38.280 --> 0:09:41.360 To shares of crypto related stocks and take a look 0:09:41.360 --> 0:09:44.000 at bitcoin. This is more about stable coin, but the 0:09:44.040 --> 0:09:48.080 Genius Act has gone through the stable coin legislation. Coinbas 0:09:48.160 --> 0:09:51.720 is actually office section highs up four percent circles bin volatle. 0:09:51.960 --> 0:09:53.920 But what we know is that this will be sent 0:09:53.960 --> 0:09:56.560 to the President's desk today and that they'll be as 0:09:56.600 --> 0:09:58.760 signing ceremony later today. 0:09:59.080 --> 0:10:00.679 Stick with us. What im more on that this is 0:10:00.679 --> 0:10:01.440 Bloomberg Tech. 0:10:14.280 --> 0:10:17.720 It's been another wild week in tech, particularly in financial markets, 0:10:17.800 --> 0:10:21.120 lurching on every twist. In a saga around President Donald 0:10:21.120 --> 0:10:24.520 Trump and FED Chair Jerome Powell, the President says he's 0:10:24.640 --> 0:10:28.439 not firing Powell, but somehow that statement still felt like 0:10:28.480 --> 0:10:31.920 a threat that chaos has very real consequences for policy 0:10:32.400 --> 0:10:35.800 and for technology investors. Joining us now Joe Joub, managing 0:10:35.840 --> 0:10:39.239 partner at Lenia Capito and crucially a former FED insider 0:10:39.360 --> 0:10:43.000 and staffer who worked on markets and monetary policy inside 0:10:43.120 --> 0:10:44.680 the belly of the beast. Joe, it's going to have 0:10:44.760 --> 0:10:49.200 you back on Bloomberg Tech. You know what it's like 0:10:49.320 --> 0:10:52.439 being inside the FED. You understand the independence of the FED, 0:10:52.720 --> 0:10:55.840 But what have you made of this scenario as somebody 0:10:55.880 --> 0:10:59.000 that's now left the FED behind and works principally as 0:10:59.000 --> 0:11:00.480 a private markets stuff. 0:11:01.320 --> 0:11:01.520 Yeah. 0:11:01.600 --> 0:11:06.320 Look, I think the most direct relationship between FED policy 0:11:06.520 --> 0:11:10.480 and technology investing adventure capital investing is the path of 0:11:10.559 --> 0:11:13.200 interest rates, and in particular what that means is, you know, 0:11:13.240 --> 0:11:16.000 interest rates have such a huge impact on valuations and 0:11:16.040 --> 0:11:21.080 returns in private markets, especially as companies go public. So 0:11:21.080 --> 0:11:24.400 so now, as an entrepreneurial investor running my own firm, 0:11:24.880 --> 0:11:27.440 I don't you know, I don't think as much about 0:11:27.480 --> 0:11:33.160 who's sort of driving the buzzer because ultimately macroeconomics is 0:11:33.160 --> 0:11:37.160 a very much rules and and sort of a principle 0:11:37.160 --> 0:11:40.920 based uh sort of a profession, and whether it's this 0:11:41.080 --> 0:11:44.280 chair another chair, the path of interest rates between A 0:11:44.400 --> 0:11:47.160 and B wouldn't be that much different just because for 0:11:47.200 --> 0:11:49.400 a couple of reasons. One, if there's also eleven other 0:11:49.920 --> 0:11:53.360 voting members in the room, and so so in my book, 0:11:54.559 --> 0:11:56.800 you know rates are coming down, when whether they come 0:11:56.880 --> 0:12:01.920 down in July or September the start of the cut, 0:12:02.440 --> 0:12:07.280 it doesn't really significantly impact private markets valuations. Also, you 0:12:07.280 --> 0:12:09.440 know in private market, if there's a lag of many 0:12:09.480 --> 0:12:12.840 months before asset prices are just in the staff market, 0:12:13.040 --> 0:12:16.559 that might impact plus IPO stocks a bit more. But 0:12:17.000 --> 0:12:19.720 as to cut to sum it up, in private markets, 0:12:19.720 --> 0:12:22.560 we're working at often the path of interest rates to 0:12:22.640 --> 0:12:26.240 put into our financial models, and between you know, the 0:12:26.480 --> 0:12:29.960 chair or another chair, that the delta wouldn't be significant. 0:12:31.080 --> 0:12:33.640 There's a difference, of course, of being a staffer or 0:12:33.720 --> 0:12:38.080 working at the Federal Reserve and then being an appointed 0:12:38.600 --> 0:12:41.320 official at the top of the Federal Reserve. But would 0:12:41.320 --> 0:12:42.880 you just reflect a little bit like what it was 0:12:42.960 --> 0:12:45.920 like to work their research there at the time, and 0:12:46.000 --> 0:12:48.560 whether you or your colleagues would really pay any attention 0:12:49.120 --> 0:12:51.000 to the politics of the day. 0:12:52.880 --> 0:12:55.000 You know, to be honest, you know, there's not much 0:12:55.400 --> 0:12:58.000 that the staffers could do. And now at the board 0:12:58.080 --> 0:13:01.839 level and the involuntate level often you know, the board 0:13:02.400 --> 0:13:06.040 is you know, very influential, but there's still eleven other uh, 0:13:06.640 --> 0:13:08.319 twelve other banks sort. 0:13:08.120 --> 0:13:08.720 Of in the room. 0:13:09.360 --> 0:13:12.080 And and so you know, I think the last thing 0:13:12.080 --> 0:13:13.520 I'll say on this top, you know, because I worked 0:13:13.559 --> 0:13:15.720 there ten more than ten years ago, and I was 0:13:15.720 --> 0:13:20.600 there during the transition from burning into the yelling and 0:13:20.600 --> 0:13:24.240 and and at that point you realize, whoever was you know, 0:13:24.240 --> 0:13:27.080 if you were driving the bus, shouldn't impact MONITOR policy 0:13:27.160 --> 0:13:30.599 that much because ultimately MONITOR policy is made on a 0:13:30.679 --> 0:13:34.319 set of rules tailored the tailor rule you know, markets 0:13:34.320 --> 0:13:38.080 and the GDP and inflation so so so. So that's 0:13:38.120 --> 0:13:40.640 why as a result, as a staffer, you don't you 0:13:40.640 --> 0:13:43.680 don't really pay that much attention to the politics. Now 0:13:44.080 --> 0:13:46.800 on the private market side, I pay a little bit 0:13:46.800 --> 0:13:51.640 more attention to the chair because that will impact sort 0:13:51.679 --> 0:13:53.880 of the path of interest rates. But again it just 0:13:54.040 --> 0:13:56.520 is not it's not significant to what we do. 0:13:58.000 --> 0:14:01.240 We've been using the phrase private markets, but you're also 0:14:01.360 --> 0:14:04.400 almost all intensive purposes a venture capital investor, right. And 0:14:04.600 --> 0:14:06.360 the way that it's always explained to me is when 0:14:06.400 --> 0:14:08.680 you think about the makeup of the LPs. They might 0:14:08.720 --> 0:14:12.040 be high network individuals or family offices. They have a 0:14:12.160 --> 0:14:16.839 choice go with various assets where rates and the current 0:14:16.920 --> 0:14:19.520 yield on any given treasury is one factor. But they 0:14:19.600 --> 0:14:22.240 might also say, well, over a ten year horizon, I 0:14:22.280 --> 0:14:24.680 want to get one hundred X on my investment or 0:14:24.680 --> 0:14:27.120 something like that. Just explain the mechanics of how that 0:14:27.160 --> 0:14:27.720 factor is in. 0:14:28.840 --> 0:14:31.520 Yeah, well, look, as a matter of principle, as an investor, 0:14:31.760 --> 0:14:34.800 you know there's sort of average returns you sort of expect, 0:14:34.880 --> 0:14:37.840 like if you can always get two to five percent 0:14:38.040 --> 0:14:40.480 in money markets on average, because Fetch finds is two 0:14:40.480 --> 0:14:42.520 percent on average, and you can go up to five 0:14:42.560 --> 0:14:44.280 percent like in the last couple of years, and then 0:14:44.440 --> 0:14:46.480 in terms of and then you can sort of go 0:14:46.560 --> 0:14:49.840 into the higher risk assets like private credit, public credit, 0:14:49.880 --> 0:14:52.120 getting in real estate getting eight twelve percent. 0:14:52.360 --> 0:14:53.360 But then you often go. 0:14:53.400 --> 0:14:56.280 Get the risk current and work for text acts and 0:14:56.400 --> 0:15:00.400 venture capital seeking twenty percent returns a year now because 0:15:00.960 --> 0:15:04.520 because the risk free rate is sort of the alternative, 0:15:04.840 --> 0:15:08.560 the lower the rate, the more risk seeking the average 0:15:08.560 --> 0:15:12.280 allocator becomes, and vice versas. So as rays are coming down, 0:15:12.920 --> 0:15:15.800 you would expect this, all things equal, sort of allocators 0:15:15.800 --> 0:15:18.720 should be allocating more into risk assets. This is sort 0:15:18.760 --> 0:15:21.360 of the opposite of what happened during Q either. The 0:15:21.360 --> 0:15:24.240 point of QUE was to suppress eels, to kind of 0:15:24.320 --> 0:15:26.840 you know, enforcing investors to go into risk assets, and 0:15:27.160 --> 0:15:29.640 so the last couple of years that kind of winning 0:15:29.680 --> 0:15:30.680 reverse and now we're kind. 0:15:30.560 --> 0:15:35.880 Of getting back again. Joe, we're showing your portfolio earlier. 0:15:35.920 --> 0:15:38.280 One of the names you're in Scale AI or were 0:15:38.360 --> 0:15:41.800 in I think your reaction and your summary of that 0:15:42.200 --> 0:15:46.120 Meta superintelligence team and the Aquaharer Scale. 0:15:47.160 --> 0:15:51.280 Yeah, we're still a significant you know, investor in the company, 0:15:51.360 --> 0:15:53.240 so as a as a as a a to take 0:15:53.280 --> 0:15:56.160 step back. You know, in the last eighteen months, we've 0:15:56.160 --> 0:16:00.360 deployed over nine figures of capital into the air foundational companies, 0:16:00.360 --> 0:16:02.000 and some of them are listed. There's others we didn't 0:16:02.040 --> 0:16:06.200 list on our website for for ada reasons, and Scale 0:16:06.240 --> 0:16:09.680 is one of those investments. And so I sort of, 0:16:09.720 --> 0:16:11.680 you know, I've read a lot about what's covered in 0:16:11.680 --> 0:16:15.200 the present. My take is I still believe in the 0:16:15.280 --> 0:16:18.720 long term potential of that business for a few reasons. 0:16:18.800 --> 0:16:22.720 One is like it's business model is more of assass 0:16:22.720 --> 0:16:25.720 and consulting, a business model where who's at the helm 0:16:25.840 --> 0:16:28.920 impacts the company's future a bit less than if this 0:16:29.040 --> 0:16:32.440 were at a large language model company where the leadership 0:16:32.440 --> 0:16:35.040 team and the family and team and the engineers were 0:16:35.080 --> 0:16:39.120 probably would account for this majority of the value. So 0:16:39.400 --> 0:16:44.720 you know, Scale has many large, large contracts from the government, 0:16:44.760 --> 0:16:48.320 from corporations, and these are recurring businesses. So after the 0:16:48.480 --> 0:16:50.520 sort of the transaction by Wally, you know, we receive 0:16:51.480 --> 0:16:52.000 some stream. 0:16:52.320 --> 0:16:54.840 Sorry real quick, we're short on time, but I really 0:16:54.880 --> 0:16:56.920 wanted to ask you about this. We reported that JP 0:16:57.120 --> 0:17:00.600 Morgan is moving into research a private company starting with 0:17:00.720 --> 0:17:03.840 open AI. Do you have exposure to just thirty seconds, 0:17:04.119 --> 0:17:06.120 but you're going to read that research. 0:17:07.600 --> 0:17:08.080 Honestly. 0:17:08.760 --> 0:17:13.439 Pubably market investors tend to less understand private markets a 0:17:13.480 --> 0:17:15.840 bit more. I heard the show a little earlier. In 0:17:15.920 --> 0:17:18.960 private markets, companies are supposed to be burning cash. They're 0:17:19.040 --> 0:17:21.879 kind of like students in undergrad or in college. You 0:17:22.000 --> 0:17:25.000 want to be burning cash in maximized growth. So to 0:17:25.040 --> 0:17:27.720 whether the company becomes proper twenty twenty seven twenty twenty 0:17:27.760 --> 0:17:30.440 nine is probably not as important as the public markets 0:17:30.680 --> 0:17:33.040 invest research animals make it make the scene. 0:17:34.800 --> 0:17:38.399 Joe's out managing partner Millennia Capital on all of the 0:17:38.440 --> 0:17:39.400 news of the week in the day. 0:17:39.440 --> 0:17:41.720 We really appreciate it. Thank you very much for coming up. 0:17:41.920 --> 0:17:45.440 We're going to hear from the CFO of TSMC about 0:17:45.480 --> 0:17:48.560 the chip makers efforts to expand into the United States. 0:17:48.600 --> 0:17:51.200 That's coming up next. This is Bloomberg Tech. 0:18:04.119 --> 0:18:08.159 Taiwan Semiconductor Manufacturing says it plans to remain prudent about 0:18:08.200 --> 0:18:10.960 spending this year even as the chip maker works to 0:18:10.960 --> 0:18:14.320 build out production capacity in the US. TSMC CFO ween 0:18:14.359 --> 0:18:17.840 to one set down exclusively with Bloomberg discuss some of 0:18:17.880 --> 0:18:21.360 the risks for the Taiwanese company setting up in the US. 0:18:23.440 --> 0:18:27.679 The same problems that we faced before. You have a 0:18:27.720 --> 0:18:34.600 culture difference, the generally more expensive here, all these things 0:18:34.760 --> 0:18:35.399 they are facing. 0:18:35.440 --> 0:18:39.040 The same thing for suppliers that are considering from Taiwan 0:18:39.280 --> 0:18:43.080 moving some operations to the US. What sort of assistance 0:18:43.400 --> 0:18:46.800 can TSMC provide. 0:18:47.000 --> 0:18:52.280 We understand the challenges for these suppliers because we've been 0:18:52.320 --> 0:18:59.159 through it. So we brought us these challenges to the 0:18:59.240 --> 0:19:07.760 attention of the government about permit application and things like that, 0:19:07.800 --> 0:19:13.639 the humor resources availability. That's what we can do to 0:19:13.920 --> 0:19:19.280 urge the government try to solve this issue for these suppliers. 0:19:19.560 --> 0:19:22.400 That was TSMC CFO wend L Juan, who can check 0:19:22.440 --> 0:19:26.119 out the entire interview on bloomberg dot com. Bloomberg's Annabelle 0:19:26.359 --> 0:19:29.480 Drewlers joins us now after conducting that interview late night 0:19:29.520 --> 0:19:31.760 in Taipei. There was so much more in it. What 0:19:31.800 --> 0:19:32.880 were the other key themes? 0:19:35.280 --> 0:19:37.800 Yeah, I think if you were to sort of take 0:19:37.840 --> 0:19:40.600 a step back and think, what was the key message 0:19:40.800 --> 0:19:43.160 out of these earnings, and I think in one word, 0:19:43.160 --> 0:19:47.080 it was conservative Because tsmcs we know, had a very 0:19:47.080 --> 0:19:50.600 strong quarter. They managed to lift their full year growth forecast. 0:19:50.640 --> 0:19:52.720 For instance, the thirty percent. That was up from around 0:19:52.720 --> 0:19:54.959 twenty five percent, and even when you think about how 0:19:55.000 --> 0:19:56.840 they performed in the first half of the year, their 0:19:56.880 --> 0:19:59.640 guidance for the third quarter, it's very strong and it's 0:19:59.640 --> 0:20:02.280 well that so the key question was sort of what 0:20:02.400 --> 0:20:04.399 exactly is going to be happening in your fourth quarter 0:20:04.440 --> 0:20:07.040 and just how bad could it get as well. But essentially, 0:20:07.080 --> 0:20:09.800 Wendelwang he told me that they are just very concerned 0:20:09.840 --> 0:20:13.200 about the macar uncertainties. That really relates to tariffs, of course, 0:20:13.440 --> 0:20:15.600 and that also played into the Kapex story, which was 0:20:15.640 --> 0:20:18.280 another big talking point in the interview, because they've kept 0:20:18.320 --> 0:20:20.000 that at thirty eight to forty. 0:20:19.680 --> 0:20:20.639 Two billion dollars. 0:20:21.200 --> 0:20:22.639 He said that they're going to be sticking with that 0:20:22.760 --> 0:20:25.280 again given those uncertainties. Even though he sat for a 0:20:25.280 --> 0:20:27.919 company of that size, you don't expect it to have 0:20:27.960 --> 0:20:30.159 any sort of big fluctuations year to year. So he 0:20:30.240 --> 0:20:31.639 still does say it's sustainable. 0:20:32.800 --> 0:20:36.000 And I'm alsothing really key to understand about TSMC, Like 0:20:36.080 --> 0:20:39.919 it's the crown jewel of Taiwan, right, but it operates 0:20:39.960 --> 0:20:44.080 in Taiwanese dollars while booking its revenue in US dollars, 0:20:44.320 --> 0:20:47.159 hence the FX impact. How did they explain that to 0:20:47.240 --> 0:20:51.280 you and how it will manifest I guess throughout the 0:20:51.320 --> 0:20:52.000 rest of the year. 0:20:54.680 --> 0:20:58.160 Yeah, that's it. I mean Taiwan or TSMC. As you said, 0:20:58.200 --> 0:21:01.960 it is the major company in Taiwan. It's by far 0:21:02.000 --> 0:21:04.880 the heaviest waiting on the local benchmark here. But as 0:21:04.880 --> 0:21:07.160 you said, it's got basically one hundred percent of its 0:21:07.160 --> 0:21:10.040 revenue and US dollars around seventy five percent of its costs, 0:21:10.080 --> 0:21:12.920 its outgoings or in Taiwanese dollars, and in the past 0:21:12.920 --> 0:21:15.760 few months there's been a rapid appreciation in the taiwan 0:21:15.800 --> 0:21:19.320 dollars that's having a really big impact on the company 0:21:19.320 --> 0:21:21.720 earnings because actually, if you had looked at them just 0:21:21.800 --> 0:21:25.200 in usd figures, the numbers would have been even stronger, 0:21:25.200 --> 0:21:26.920 but it was around a four and a half five 0:21:26.960 --> 0:21:29.560 percent hit for the period. But in terms of how 0:21:29.560 --> 0:21:32.159 they're managing this, we'll asked about sort of the different 0:21:32.200 --> 0:21:34.720 hedging tools that are available to them. They said that 0:21:34.760 --> 0:21:37.440 they do prefer vanilla strategies, but some of the things 0:21:37.480 --> 0:21:41.840 they're doing that he spoke about included selling Taiwanese dollars 0:21:41.920 --> 0:21:45.040 or US dollars rather in the spot market they're injecting money. 0:21:45.040 --> 0:21:47.840 We've seen them injecting ten billion dollars for instance, recently 0:21:47.840 --> 0:21:51.399 into TSMC Globals that's a subsidiary. Then they also use 0:21:51.480 --> 0:21:54.240 forward contracts as well, so essentially just trying to manage 0:21:54.280 --> 0:21:54.919 those risks. 0:21:55.720 --> 0:21:57.120 But were actually do un to stand. 0:21:57.119 --> 0:21:59.399 They're a very big Bloomberg customer as well, because they 0:21:59.440 --> 0:22:02.200 are trying to manage these basically on a daily basis. 0:22:03.400 --> 0:22:05.879 Anabel's super quick summarize their AI demand. 0:22:08.760 --> 0:22:10.240 AI demand is super robust. 0:22:10.320 --> 0:22:12.479 I mean that was really really clear out of these 0:22:12.480 --> 0:22:15.960 figures as well, and they're basically guiding for very strong 0:22:15.960 --> 0:22:18.080 demand from some of their key customers. Of course, we 0:22:18.119 --> 0:22:20.560 know that's in Video, we know that's Apple, and we 0:22:20.600 --> 0:22:23.880 don't really see so much optimism from them generally. But 0:22:24.000 --> 0:22:26.280 when they're saying things like robust demand, I mean, the 0:22:26.320 --> 0:22:28.159 market really needs to be paying attention to that. 0:22:28.880 --> 0:22:32.040 Bloomberg's, Anabel Rulers and Taipei thank you very much. Now 0:22:32.080 --> 0:22:34.280 coming up, we're going to continue the tech earnings discussion 0:22:34.560 --> 0:22:37.959 with Martin Norton from Empower, a conversation that you do 0:22:38.080 --> 0:22:40.360 want not want to miss because looking at that calendar, 0:22:40.800 --> 0:23:00.280 my goodness, there's a lot to come. This is Bloomberg Tech. 0:23:03.480 --> 0:23:06.560 Welcome back to Bloomberg Tech. Netflix is worth recapping right. 0:23:06.640 --> 0:23:09.399 The stocks down almost five percent. That puts it on 0:23:09.440 --> 0:23:11.560 track for its biggest drop since the first week of April. 0:23:11.560 --> 0:23:13.639 But it is a stock there was up more than. 0:23:13.480 --> 0:23:16.080 Forty percent so far this year in excess of five 0:23:16.160 --> 0:23:17.680 hundred billion dollars market cap. 0:23:17.840 --> 0:23:18.800 Beat across the board. 0:23:18.880 --> 0:23:21.479 Strong forecast, but a very high bar and that's kind 0:23:21.480 --> 0:23:24.000 of a big factor and the only real stock story 0:23:24.000 --> 0:23:26.040 that's out there in the market right now, though for 0:23:26.080 --> 0:23:29.399 a couple of more to come. Now, what happens next? 0:23:29.640 --> 0:23:33.400 Big tech earnings on the docket Next week you have Tesla, 0:23:33.600 --> 0:23:36.080 and then you have Alphabet, and then it just comes 0:23:36.080 --> 0:23:39.480 thick and fast the week after with Apple, Amazon, and 0:23:39.560 --> 0:23:43.520 then much later in August Nvidia. Earnings in the tech 0:23:43.560 --> 0:23:46.960 space is back in focus. Thank goodness, what are we expecting? 0:23:47.320 --> 0:23:51.000 Martin Norton, chief investment strategist at Enpower is with us. 0:23:51.400 --> 0:23:53.639 It's my happy time, right, this is what we're so 0:23:53.680 --> 0:23:57.920 excited about. We get that granular detail on capital expenditures, 0:23:58.280 --> 0:24:00.520 on the big picture of what's happen happening with the 0:24:00.520 --> 0:24:03.440 customer base, what is it that you're most focused in 0:24:03.720 --> 0:24:05.520 on and zero in on this earnings period. 0:24:05.880 --> 0:24:08.280 Well, you know what's interesting when I reflect back on 0:24:08.640 --> 0:24:11.560 it's been such a busy year, so much news. But 0:24:11.680 --> 0:24:13.920 one of the things that I think has been maybe 0:24:13.920 --> 0:24:17.320 appreciated by the market but not appreciated as much by 0:24:17.359 --> 0:24:21.800 the commentators is what a reinforcing narrative we've seen around AI. 0:24:22.200 --> 0:24:24.480 So of course we're focused on tariffs, We're focused on 0:24:24.880 --> 0:24:27.200 everything that's happening at the FED. But if we roll 0:24:27.200 --> 0:24:29.000 the clock back to the start of the year and 0:24:29.119 --> 0:24:32.080 all the questions that we're surfacing around deep seek, let 0:24:32.119 --> 0:24:35.600 alone concerns about where AI demand is, what we've really 0:24:35.720 --> 0:24:36.879 seen as. 0:24:36.760 --> 0:24:38.360 The year has progressed, is. 0:24:38.320 --> 0:24:42.320 That capex, you know, continuing and then also these nascent 0:24:42.440 --> 0:24:47.480 signs of AI demand in AI implementation, which has been 0:24:47.680 --> 0:24:51.159 such a boon for the hyperscalers in particular. So I 0:24:51.200 --> 0:24:54.760 think watching that AI narrative continue is especially important in 0:24:54.840 --> 0:24:56.400 this in this earning season. 0:24:57.200 --> 0:24:59.240 A team in New York, let's bring back the calendar. 0:24:59.240 --> 0:25:00.680 I just want to make one point on in video 0:25:00.760 --> 0:25:03.600 because in VideA comes so late in the season. But 0:25:03.760 --> 0:25:05.920 what I reflect on is that when in Nvidia hit 0:25:05.960 --> 0:25:09.040 four trillion dollars of market cap. All of the research 0:25:09.119 --> 0:25:11.760 I was reading was about how the data in the 0:25:11.880 --> 0:25:16.440 ninety days prior to that had basically shown that Nvidia's 0:25:16.480 --> 0:25:19.720 most important customers had that commitment that you just outlined 0:25:19.760 --> 0:25:23.440 on capital expenditures. Take that forward into this next period 0:25:23.480 --> 0:25:25.880 and bear with me. You know, is it just as 0:25:25.880 --> 0:25:29.120 simple as you need to see Alphabet, Microsoft Meta continue 0:25:29.160 --> 0:25:31.840 to say we're committed to this for in Nvidia, then 0:25:31.880 --> 0:25:33.600 to have a great print when it comes around. 0:25:33.920 --> 0:25:36.000 Well, I think that's that's the first derivative if you 0:25:36.040 --> 0:25:39.400 do want to see the customers showing that commitment kind 0:25:39.400 --> 0:25:42.680 of reinforcing what they've suggested in terms of capex estimates, 0:25:42.680 --> 0:25:46.080 which are very tremendous as we've seen. But then also 0:25:46.119 --> 0:25:48.239 that second derivative, which is what I think of as 0:25:48.280 --> 0:25:51.960 that AI implementation both within the tech sector but then 0:25:52.000 --> 0:25:54.120 for the economy overall. And I think as you start 0:25:54.160 --> 0:25:57.200 to see that that second derivative that demand come through, 0:25:57.320 --> 0:26:00.640 I think that is reinforcement for the pick and shovels, 0:26:00.680 --> 0:26:01.680 for the NVIDIAs of the. 0:26:01.640 --> 0:26:04.760 World, the world cord is tariffs. 0:26:04.880 --> 0:26:08.400 Well, how are the analysts on your desks kind of 0:26:08.600 --> 0:26:10.960 thinking about that and modeling for that right now. 0:26:11.119 --> 0:26:13.480 Well, you know, it's so interesting because if we're taking 0:26:13.560 --> 0:26:16.399 a look just at price performance since that bottom on 0:26:16.440 --> 0:26:19.000 April eighth, if you're looking at it, you know, in particular, 0:26:19.080 --> 0:26:20.560 it's a forty five percent run. 0:26:20.800 --> 0:26:22.680 There has been this massive. 0:26:22.400 --> 0:26:26.200 Enthusiasm where the market is beginning to appreciate what's happening 0:26:26.200 --> 0:26:29.159 with AI and maybe sigh of relief in terms of 0:26:29.200 --> 0:26:31.640 the resilience of the economy. But I think when we're 0:26:31.680 --> 0:26:34.399 taking a look at terrifs, we haven't really seen the 0:26:35.160 --> 0:26:38.119 full force of those costs come into effect, and so 0:26:38.200 --> 0:26:40.320 of course we want to see what happens with corporate 0:26:40.359 --> 0:26:43.119 earnings in Q two. But as I think about longer 0:26:43.200 --> 0:26:46.600 term and kind of this rollback of globalization, I guess 0:26:46.640 --> 0:26:48.879 my thought is, you know, longer term, what does. 0:26:48.720 --> 0:26:50.440 This mean for corporate profitability? 0:26:50.480 --> 0:26:52.800 And you know, there's a revenue that the government is 0:26:52.800 --> 0:26:56.520 collecting that's coming from corporations, and so what that looks 0:26:56.560 --> 0:26:59.120 like That is kind of the wild card in terms 0:26:59.160 --> 0:27:01.200 of how that weighs on you too, But longer term 0:27:01.400 --> 0:27:03.800 what that means for earnings Marty. 0:27:04.119 --> 0:27:06.359 I really appreciated you you going back to reference that 0:27:06.520 --> 0:27:09.440 kind of deep Seak moment in April where long story 0:27:09.440 --> 0:27:12.240 short markets were roiled by the performance of deep Seats 0:27:12.280 --> 0:27:14.959 model and the cost of it getting there. But one 0:27:15.000 --> 0:27:16.600 of the things was happened was there was a kind 0:27:16.600 --> 0:27:20.440 of a valuation reset on the MAG seven. Have they 0:27:20.520 --> 0:27:23.480 climbed back to a level where you're still like or 0:27:23.600 --> 0:27:25.760 is there some some interest to look at the MAG 0:27:25.840 --> 0:27:27.360 seven in a portfolio right now? 0:27:27.480 --> 0:27:28.720 Well, that's what jumps out to me. 0:27:28.800 --> 0:27:30.840 So when we're taking a look at valuations, what we 0:27:30.920 --> 0:27:35.320 really want to focus on is the extremes. So for example, technology, 0:27:35.359 --> 0:27:38.119 if we're looking at its valuations, price to forward earnings 0:27:38.160 --> 0:27:41.280 over kind of a history for that particular sector, it 0:27:41.359 --> 0:27:42.400 is in those extremes. 0:27:42.440 --> 0:27:44.080 It's in those ninth tenth defiles. 0:27:44.320 --> 0:27:46.400 But when we're looking at the MAG seven, we don't 0:27:46.520 --> 0:27:50.560 see that same I guess extreme valuation picture. So I 0:27:50.560 --> 0:27:53.439 think it's really that once you punch that we saw 0:27:53.920 --> 0:27:56.160 for the MAG seven, first getting hit by the deep 0:27:56.240 --> 0:27:59.000 seat questions, then getting hit on the tariff that have 0:27:59.119 --> 0:28:02.320 made those those companies a little bit more approachable in valuation. 0:28:02.520 --> 0:28:04.840 And when you think about the health of these companies, 0:28:05.040 --> 0:28:08.000 kind of their their ties to AI and their general 0:28:08.280 --> 0:28:11.000 kind of strength within the overall economy. It's hard not 0:28:11.080 --> 0:28:14.080 to consider the MAG seven a bit of an opportunity, 0:28:14.119 --> 0:28:16.840 at least offering a bit more margin of safety than 0:28:16.840 --> 0:28:18.480 some of the other tech related names. 0:28:19.160 --> 0:28:20.800 Marta, I'm going to go to a question I've not 0:28:20.840 --> 0:28:23.359 had the opportunity to ask for many months now, how 0:28:23.400 --> 0:28:27.160 good which is how are you you using AI in 0:28:27.200 --> 0:28:29.320 each of your sort of daily tasks? 0:28:29.320 --> 0:28:32.560 It works seriously? And which tools do you rely on? 0:28:32.920 --> 0:28:34.320 Well, you know, it's a good question. 0:28:34.440 --> 0:28:38.120 I am a slow adapter, so you know, I'm definitely 0:28:38.160 --> 0:28:40.840 representing more of the tail or more the average of 0:28:40.880 --> 0:28:43.400 the investment community. And I do you know, I'll use 0:28:43.480 --> 0:28:46.240 chat GPT on the regular just to get a quick 0:28:46.560 --> 0:28:48.960 summary view of what things look like. Hey, give me 0:28:49.000 --> 0:28:50.320 the lay of the land in this, give me the 0:28:50.360 --> 0:28:52.880 lay of the land in that. And more increasingly beginning 0:28:52.880 --> 0:28:56.440 to think about what we can do to automate tasks, 0:28:56.600 --> 0:29:01.040 especially that spreadsheet build those deeper analytical fis. What can 0:29:01.080 --> 0:29:02.920 we do to make that faster so that we can 0:29:02.920 --> 0:29:05.640 get the heart of the questions sooner and spend more 0:29:05.640 --> 0:29:08.800 time on the analysis. So I'm really thrilled about it, 0:29:09.160 --> 0:29:11.719 despite the fact that I'm a late adapter in most things. 0:29:11.800 --> 0:29:13.720 I think this is something that is really opening up 0:29:13.760 --> 0:29:17.480 the bandwidth to explore the more interesting stuff of my job. 0:29:18.280 --> 0:29:19.680 I really appreciate the answer. 0:29:19.720 --> 0:29:21.440 It's like a lot of our audience are facing the 0:29:21.480 --> 0:29:24.680 same questions with themselves. Something we reported earlier in the 0:29:24.720 --> 0:29:28.520 program is that JP Morgan, basically the biggest research shop 0:29:28.600 --> 0:29:31.600 right on the street, is expanding its research coverage to 0:29:31.640 --> 0:29:34.560 private companies, and they're starting with open AI. 0:29:35.040 --> 0:29:36.600 What I wanted to ask you about that. 0:29:36.600 --> 0:29:40.200 Was like almost as like a private proxy when you 0:29:40.200 --> 0:29:44.240 think about your own portfolio management, would you read research 0:29:44.280 --> 0:29:46.680 of those private companies to kind of think about the 0:29:46.720 --> 0:29:51.240 exposure your public companies have to that name open AI, 0:29:51.520 --> 0:29:54.560 or just to inform like future investment opportunity, you know. 0:29:54.600 --> 0:29:58.360 I think that convergence of public private is really important 0:29:58.400 --> 0:30:01.080 for the investment community. I think it's really tempting to say, 0:30:01.440 --> 0:30:03.560 you know, on the private equity side, are we looking 0:30:03.600 --> 0:30:05.400 at a market peak or you know. 0:30:05.640 --> 0:30:06.960 Begetting tactical with it. 0:30:07.000 --> 0:30:09.920 But the reality is that so much of the US 0:30:10.040 --> 0:30:13.360 market is actually private at this point, and so for 0:30:13.480 --> 0:30:15.840 us to really understand the dynamics of the public market, 0:30:15.880 --> 0:30:18.480 we have to have better understanding of the private market 0:30:18.720 --> 0:30:20.880 and getting those you know, those bits of information. It's 0:30:20.920 --> 0:30:23.640 it's kind of an inefficient market at this point. So 0:30:24.000 --> 0:30:26.640 the more that we can dig in, the more systems 0:30:26.640 --> 0:30:30.080 that we can build, the more landscape that we can view, 0:30:30.840 --> 0:30:32.720 combining the public and the private, I think that will 0:30:32.720 --> 0:30:34.160 inform our analysis all the better. 0:30:35.120 --> 0:30:37.840 Martin Norton Empower Chief Investment Strategy, is great to have 0:30:37.880 --> 0:30:38.560 you back on the show. 0:30:38.640 --> 0:30:39.680 Thank you very much. 0:30:40.080 --> 0:30:44.480 Now, coming up, manufacturing company Hadrian announces expansion plans to 0:30:44.560 --> 0:30:47.640 help build out AI powered factories here in America. This 0:30:47.760 --> 0:30:49.880 is the defense use case. We're going to speak to 0:30:49.920 --> 0:31:08.160 CEO Chris Power. Next, this is Bloomberg Tech. Defense manufacturing 0:31:08.200 --> 0:31:10.640 company Hadrian has announced it's raised the two hundred and 0:31:10.680 --> 0:31:13.280 sixty million dollar Series C that will be used to 0:31:13.320 --> 0:31:17.640 expand its footprint in California and Arizona. The company's building 0:31:17.680 --> 0:31:22.320 AI and robot automated factories across the US, utilized heavily 0:31:22.360 --> 0:31:25.680 in the aerospace and defense industries. Chris Powers, Hadrian, CEO, 0:31:26.200 --> 0:31:29.320 joins US now and Chris, welcome to Bloomberg Tech. It's 0:31:29.360 --> 0:31:31.160 really great to have you on. One of your investors 0:31:31.640 --> 0:31:37.600 says that the product is the factory. Just explain that. 0:31:38.200 --> 0:31:41.160 So we view our job as to reindustrialize the country 0:31:41.320 --> 0:31:43.560 and from the seventies to the twenty twenties, we really 0:31:43.640 --> 0:31:46.640 like offshot everything we possibly could. And it's this whole 0:31:46.720 --> 0:31:50.239 system of both our software powered by Opus as well 0:31:50.280 --> 0:31:53.120 as this new American workforce that creates this factory system, 0:31:53.200 --> 0:31:55.240 and that that is the real output to our customers. 0:31:55.240 --> 0:31:57.000 It's like, what are we producing, how accurate it is, 0:31:57.040 --> 0:31:59.720 how on time it is, and this full stack factory 0:31:59.720 --> 0:32:03.120 of time and the new American workforce we're enabling with 0:32:03.200 --> 0:32:05.400 that alongside is the most important thing we're building. And 0:32:05.400 --> 0:32:07.880 that's why we think the factory system that we're building 0:32:07.920 --> 0:32:12.680 with people and technology combined is the product sizeable round. 0:32:13.360 --> 0:32:17.480 Interesting group of investors, founders, fund in rees and Luxe capital. 0:32:18.320 --> 0:32:20.840 Why the size of the round, the difficulty or not 0:32:20.920 --> 0:32:24.400 in raising it, and what you plan to do with it, Chris. 0:32:24.920 --> 0:32:28.600 We're very lucky that we're open and shut within a 0:32:28.640 --> 0:32:31.440 small handful of weeks, less than a month. Really, that's 0:32:31.520 --> 0:32:34.320 just a credit to a fundraising ability of the market. 0:32:34.320 --> 0:32:36.200 It's just the team's hard work over the last year. 0:32:36.720 --> 0:32:39.600 What we will do with this capital is expand into 0:32:39.640 --> 0:32:42.520 Arizona with a new factory for our customers that's four 0:32:42.520 --> 0:32:45.120 times a size, as well as use that capital to 0:32:45.600 --> 0:32:48.480 hire more people so we can ship more manufacturing capabilities 0:32:48.520 --> 0:32:52.600 to our customers, both in aerospace and defense sectors, commercial manufacturing, 0:32:52.600 --> 0:32:55.760 and obviously you know the d D as well. 0:32:55.800 --> 0:32:58.120 In January of this year, I was with the Anderill 0:32:58.160 --> 0:33:02.480 team in Ohio when they announced and confirmed that would 0:33:02.520 --> 0:33:05.080 be the side of Arsenal one, and part of the 0:33:05.120 --> 0:33:08.800 discussion I had with Palmer Lucky was why not California. 0:33:09.040 --> 0:33:12.600 You know, Hadrian also has this big footprint in California, 0:33:12.640 --> 0:33:15.280 but you've looked to Arizona for your expansion. I think 0:33:15.280 --> 0:33:16.680 that's really worth discussing. 0:33:18.360 --> 0:33:21.040 Yeah, we all have you know, R and D in California, 0:33:21.080 --> 0:33:23.760 and we're not moving out of California. But one of 0:33:23.800 --> 0:33:26.680 the most important things is that we're creating thousands and 0:33:26.760 --> 0:33:30.520 thousands of new manufacturing jobs in every state. Arizona's been 0:33:30.520 --> 0:33:34.320 great to work with on the practical stuff like permitting workforce, 0:33:34.400 --> 0:33:37.000 getting energy connected to the building, all these basic things 0:33:37.000 --> 0:33:38.640 that are harder to do in some states. So we're 0:33:38.640 --> 0:33:41.720 really happy to expand into Arizona. But it also won't 0:33:41.720 --> 0:33:43.239 be the last. You know, our goal is to have 0:33:43.600 --> 0:33:45.920 factories in every state and creating you know, millions of 0:33:46.000 --> 0:33:47.480 new manufacturing jobs along the way. 0:33:48.520 --> 0:33:50.640 Because something that I think was kind of missed from 0:33:50.720 --> 0:33:53.760 your post and the announcement was what you're expanding into 0:33:53.960 --> 0:33:57.440 welding casting additive, is that just because that's where the 0:33:57.480 --> 0:34:00.680 demand is, particularly from the DoD and the the defense 0:34:00.680 --> 0:34:01.960 apparatus of this country. 0:34:03.080 --> 0:34:03.560 That's right. 0:34:03.720 --> 0:34:06.000 I think if you look at you know, pretty public 0:34:06.000 --> 0:34:09.040 information from the Secretary of the Navy or the Army 0:34:09.080 --> 0:34:13.759 in areas like shipbuilding, the nuclear force, munitions, there's these 0:34:14.280 --> 0:34:17.920 huge lack of skills in the country. You know, we 0:34:17.960 --> 0:34:20.080 need millions of world as, we need millions of machinists, 0:34:20.120 --> 0:34:22.920 we need millions of quality inspectors in all these manufacturing 0:34:22.960 --> 0:34:26.240 capability areas, and we just don't have the skilled workforce 0:34:26.239 --> 0:34:29.440 of that volume anymore. And this is what we're really 0:34:29.480 --> 0:34:32.799 doing with factories as the service, which is combining technology 0:34:32.840 --> 0:34:36.279 to make people ten times more efficient and enabling them. 0:34:36.800 --> 0:34:39.319 It's not about replacing workforce and manufacturing, because we just 0:34:39.320 --> 0:34:42.120 don't have a manufacturing workforce anymore in this country. So 0:34:42.120 --> 0:34:44.280 we really need to combine the two things that America 0:34:44.320 --> 0:34:46.760 is best at, you know, American software, in the American spirit, 0:34:46.840 --> 0:34:49.279 to get this ten times advantage over our global competitors. 0:34:49.280 --> 0:34:52.200 And yeah, we're working on those categories primarily because they're 0:34:52.239 --> 0:34:53.920 so important for areas like shipbuilding. 0:34:55.000 --> 0:34:58.560 Chris, when your peers come on this program, you know Castellian, 0:34:58.680 --> 0:35:03.160 Saronic vanavar Land or the Aerill team, they frame it 0:35:03.239 --> 0:35:07.880 in the context of China, China's manufacturing prowess, its competence 0:35:07.920 --> 0:35:12.160 in areas like software and hardware. How do you think 0:35:12.239 --> 0:35:14.680 about China and what is the sort of Hadrian mission 0:35:14.719 --> 0:35:17.680 statement with regards to China, if indeed you take it 0:35:17.760 --> 0:35:18.560 into consideration. 0:35:20.040 --> 0:35:24.280 Yeah, we think that the arsenal of inventory is not deterrence. 0:35:24.280 --> 0:35:27.680 It's the ability to produce fast and onshore, not just 0:35:27.760 --> 0:35:29.880 in areas of defense, but in pharmaceuticals. And that's why 0:35:29.960 --> 0:35:31.360 you have to reindustrialize the country. 0:35:31.480 --> 0:35:32.640 And I agree. 0:35:32.680 --> 0:35:35.920 You know, we've given the farm away to the CCP 0:35:36.120 --> 0:35:38.600 by letting them have all our manufacturing capability of the 0:35:38.680 --> 0:35:40.719 last three decades, and now we're in a position where 0:35:41.120 --> 0:35:43.440 that really degraded the skill set of the trades in 0:35:43.480 --> 0:35:46.080 the US. And this is why, you know, building ships, 0:35:46.120 --> 0:35:49.600 building munitions, building machine components in this country is very 0:35:49.640 --> 0:35:52.320 difficult because we kind of offshore that talent of the Chinese. 0:35:52.880 --> 0:35:55.560 I certainly think that, you know, the US needs to 0:35:55.600 --> 0:35:58.520 be the strongest industrial power, like we werest World War 0:35:58.600 --> 0:36:02.200 two again in order to to prevent or meet that threat. 0:36:04.120 --> 0:36:07.120 Chris, is your ceiling limited just by the idea that 0:36:07.239 --> 0:36:10.280 your core customer is the DoD or in the future, 0:36:10.320 --> 0:36:12.560 do you do business with these other primes and other 0:36:12.600 --> 0:36:13.440 startups as well? 0:36:13.880 --> 0:36:14.319 Very quick? 0:36:14.760 --> 0:36:18.480 So all of our customers are you know, a defense 0:36:18.600 --> 0:36:20.680 startup or a stage startup from day one up to 0:36:20.760 --> 0:36:23.560 all the mega primes through that whole chain. The deity 0:36:23.600 --> 0:36:25.560 is I think we've been recently a part of our business, 0:36:25.960 --> 0:36:29.560 but we are working with the vast majority of hardware 0:36:29.560 --> 0:36:32.239 startups all the way through to the megacap, public prime 0:36:32.280 --> 0:36:33.120 and everything in the middle. 0:36:34.320 --> 0:36:36.680 Chris Power, Adrian CEO, really grateful for your time on 0:36:36.719 --> 0:36:39.200 Bloomberg Tech. Thank you very much. Now I want to 0:36:39.200 --> 0:36:40.560 get to a story out of China. 0:36:40.680 --> 0:36:43.560 China's top venture capital firms are back in the market, 0:36:44.000 --> 0:36:47.520 raising over two billion dollars in new dollars denominated funds. 0:36:47.880 --> 0:36:51.080 Light Speed China is targeting four hundred million dollars for 0:36:51.239 --> 0:36:51.839 deep Tech. 0:36:52.280 --> 0:36:53.640 Monolith, which backs. 0:36:53.440 --> 0:36:56.920 Moonshot AI, plans a second fund worth at least two 0:36:56.960 --> 0:37:00.520 hundred and sixty five million dollars at least six major firms, 0:37:00.560 --> 0:37:05.760 according overseas investors, signaling renewed global interests in China's startup 0:37:05.800 --> 0:37:10.160 ecosystem from AI to consumer tech. Okay, coming up, President 0:37:10.239 --> 0:37:13.239 Trump is set to release new AI guardelines. We're gonna 0:37:13.239 --> 0:37:15.960 have all the details on that. Next, this is Bloomberg Tech. 0:37:30.680 --> 0:37:34.520 President Trump is expected to announce you AI policy guidelines 0:37:34.560 --> 0:37:37.279 calling for an easing of regulation and an expansion to 0:37:37.560 --> 0:37:40.080 energy sources for its data centers. For more, I want 0:37:40.080 --> 0:37:42.520 to get out to bloombergs Mike Shephard in Washington, DC. 0:37:42.880 --> 0:37:45.320 What's the need to know here, Mike, Well. 0:37:45.280 --> 0:37:46.920 The thing we need to know is that this will 0:37:47.000 --> 0:37:51.480 be the administration's most significant policy statement to date on 0:37:51.760 --> 0:37:55.160 artificial intelligence. It's been in the works for about six months. 0:37:55.440 --> 0:37:57.600 This is one of the first things the presidents set 0:37:57.640 --> 0:38:01.440 out to do upon taking office. We tap David Sachs, 0:38:01.760 --> 0:38:04.479 the venture capitalist, somebody who's been on this program even 0:38:04.680 --> 0:38:08.000 just this week to talk about artificial intelligence, to lead 0:38:08.080 --> 0:38:11.880 this effort along with Michael Kratzios, another regular guest on 0:38:12.960 --> 0:38:16.799 these airwaves, and together they have been trying to turn 0:38:17.040 --> 0:38:19.600 away from what have been seen as a rules heavy 0:38:19.760 --> 0:38:23.120 approach under the prior administration. They want to do something 0:38:23.200 --> 0:38:26.279 that will do more to ensure and speed adoption of 0:38:26.360 --> 0:38:29.560 this technology while also still trying to set a few 0:38:29.760 --> 0:38:32.680 rules of the road. We're expecting the President to deliver 0:38:32.840 --> 0:38:35.640 remarks on AI at an event at the White House 0:38:35.719 --> 0:38:39.279 on Wednesday, July twenty third. David Sachs will be here. 0:38:39.560 --> 0:38:42.360 It's an event that's being put together with the folks 0:38:42.440 --> 0:38:45.400 from the All In podcasts, where David Sachs is one 0:38:45.440 --> 0:38:47.840 of the co hosts. And we're also expecting the President 0:38:47.920 --> 0:38:50.879 to be signing a few executive orders connected with all 0:38:51.000 --> 0:38:53.040 of that. It's not going to be as far reaching 0:38:53.160 --> 0:38:56.520 a statement on the technology itselfless to be focused more 0:38:56.560 --> 0:38:59.640 on executive branch actions, yet it still will carry some weight. 0:39:00.040 --> 0:39:01.799 We'll be watching it very closely here. 0:39:03.640 --> 0:39:05.600 All eyes on Washington next week. I think that's fair 0:39:05.640 --> 0:39:05.879 to say. 0:39:05.920 --> 0:39:07.920 I see some breaking news this morning, which is that 0:39:08.040 --> 0:39:13.160 the House Select Committee on China essentially criticizing or reprimanding 0:39:13.200 --> 0:39:17.680 the president allowing chip makers and Vidia the focus in 0:39:17.840 --> 0:39:21.200 being able to resume some limited chip sales back into China. 0:39:21.239 --> 0:39:24.279 What do we know, Well, we're hearing from the top 0:39:24.400 --> 0:39:28.240 Republican on the committee, one of the toughest China hawks 0:39:28.360 --> 0:39:32.280 in town, really raising questions about this decision to allow 0:39:32.440 --> 0:39:35.799 Nvidia to resume sales of the H twenty AI chip 0:39:36.239 --> 0:39:40.120 in China. Remember, the Trump administration have barred sales and 0:39:40.160 --> 0:39:43.920 shipments of that chip to China over national security concerns 0:39:44.400 --> 0:39:47.320 just back in April. But in the past week or so, 0:39:47.480 --> 0:39:50.480 we have seen that restriction lifted, and that was a 0:39:50.600 --> 0:39:55.280 huge win for Nvidia, but it prompted questions from John Molnar, 0:39:55.360 --> 0:39:59.239 the Michigan Republican who heads this committee, focused on the 0:39:59.360 --> 0:40:03.000 competition and with China and the challenge that the world's 0:40:03.040 --> 0:40:07.160 second largest economy poses to the US. Now Mullinara is 0:40:07.320 --> 0:40:10.279 raising the concern that look, if we allow these age 0:40:10.320 --> 0:40:13.680 twenty chips to be sold once again in China, this 0:40:13.800 --> 0:40:19.239 will simply allow Beijing to acquire more capabilities and artificial intelligence, 0:40:19.719 --> 0:40:23.320 including some that could go to fuel its military and 0:40:23.719 --> 0:40:24.840 intelligence complex. 0:40:24.880 --> 0:40:28.720 In Bloomberg's Mike Shepard, thank you very much. Staying in Washington, 0:40:28.760 --> 0:40:32.400 the US Commerce Department is set to impose preliminary anti 0:40:32.520 --> 0:40:36.080 dumping duties of ninety three point five percent on imports 0:40:36.160 --> 0:40:40.160 of Chinese graphite that's a key component of battery manufacturing. 0:40:40.320 --> 0:40:42.560 I want to get out to Evelyna Stoikeu of Bloomberg 0:40:42.960 --> 0:40:45.800 ne ef Evelina. You kind of lead our analysis and 0:40:45.880 --> 0:40:49.520 in house research of the battery supply chain as a start, 0:40:49.640 --> 0:40:52.080 Why would this penalty on graphite have impact? 0:40:52.160 --> 0:40:53.320 Why do we need to know about this? 0:40:55.239 --> 0:40:58.080 Well, as you mentioned that graphite is a key component 0:40:58.160 --> 0:41:02.480 for batteries and these terrorists would basically increase the cost 0:41:02.640 --> 0:41:05.880 of making battery cells in the US now. Batteries are 0:41:05.920 --> 0:41:09.440 important for a variety of sectors, including evs and stationary storage, 0:41:09.719 --> 0:41:12.520 and as the US is pushing for more domestic production 0:41:12.880 --> 0:41:19.040 for battery cells is a key component around energy, we're 0:41:19.080 --> 0:41:22.560 going to see likely increased cost. Most of graphite is 0:41:22.600 --> 0:41:26.399 coming from China, and in the US around seventy five 0:41:26.440 --> 0:41:29.440 percent of synthetic graphite imports, which is the type of 0:41:29.560 --> 0:41:33.520 graphite that is mostly used for batteries, is coming from China. 0:41:33.600 --> 0:41:36.240 So we expect a big impact for the battery industry. 0:41:37.200 --> 0:41:41.080 When the news broke I saw that Tesla shares fell significantly. 0:41:41.120 --> 0:41:42.760 They're now up higher in this session. 0:41:43.200 --> 0:41:44.600 But one of the things I was thinking about is 0:41:44.640 --> 0:41:47.800 for those US domestic battery manufacturers. I was at Panasonic 0:41:47.920 --> 0:41:51.239 in Kansas earlier this week. There are some US based 0:41:51.320 --> 0:41:52.760 producers of graphite. 0:41:52.360 --> 0:41:57.720 On there, Yeah, there are, and the domestic graphite production 0:41:58.200 --> 0:42:03.279 is increasing. Among many other companies were lobbying against these 0:42:03.360 --> 0:42:08.600 tariffs in the early stages, claiming that the graphic quality 0:42:08.680 --> 0:42:10.800 or the graphic quantity was not at the stage that 0:42:10.880 --> 0:42:14.640 they wanted at least at that stage. However, eventually these 0:42:14.719 --> 0:42:18.759 GRAPHI terriffs are going to incentivize local production. But we 0:42:18.920 --> 0:42:21.360 do remain to see whether this graphite is going to 0:42:21.400 --> 0:42:27.600 be enough to meet demand and of low cost in 0:42:27.760 --> 0:42:31.279 order to meet many cost targets that battery manufacturers and 0:42:31.320 --> 0:42:32.759 automakers have in the US. 0:42:33.920 --> 0:42:34.440 Evelina. 0:42:35.040 --> 0:42:38.160 Right now, what is the biggest headwind or factor for 0:42:38.280 --> 0:42:42.239 the EV battery supply chain? We focused on graphite, but 0:42:42.280 --> 0:42:44.359 there are many other things happening around the world right now. 0:42:46.320 --> 0:42:46.520 Yeah. 0:42:46.520 --> 0:42:49.719 Absolutely, It's definitely a time where a lot of things 0:42:49.760 --> 0:42:52.520 are changing when it comes to policy that is impacting 0:42:52.560 --> 0:42:55.360 both EV's and batteries in the US. Right now, I 0:42:55.440 --> 0:42:58.719 think the challenge is going to be figuring out the 0:42:59.000 --> 0:43:02.320 supply chain and using suppliers in order to comply and 0:43:02.400 --> 0:43:04.920 try to qualify for many of the important task credits. 0:43:06.160 --> 0:43:08.600 As now there are new restrictions around where many of 0:43:08.680 --> 0:43:11.080 these components can be can be sourced. So I think 0:43:11.760 --> 0:43:13.120 this is going to be top of mind for a 0:43:13.200 --> 0:43:16.520 lot of the players in the US because this push 0:43:16.680 --> 0:43:20.839 to source everything domestically and to manufacture everything domestically might 0:43:20.920 --> 0:43:23.360 come for with a cost to consumers. 0:43:25.719 --> 0:43:29.520 Evelina Stoiku, Bloomberg New Energy Finance, Bloomberg n EF. Great 0:43:29.520 --> 0:43:31.759 to have you on the program. Thank you very much. 0:43:31.880 --> 0:43:34.799 So that does it for this edition of Bloomberg Tech. 0:43:35.040 --> 0:43:38.720 What a week it's been, from policy to politics, AI 0:43:39.160 --> 0:43:41.480 to everything else in between. Don't forget to recap the 0:43:41.520 --> 0:43:43.200 show on the podcast. You know where to find it. 0:43:43.440 --> 0:43:46.320 It's on all the Bloomberg platforms as well as online 0:43:46.480 --> 0:43:50.000 on Apple, Spotify, and iHeart chep said it just a 0:43:50.080 --> 0:43:53.000 minute ago, But next week it's all eyes in Washington, DC. 0:43:53.880 --> 0:43:58.160 Pay close attention and always do it here on Bloomberg Tech.