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Speaker 1: From the heart of where innovation, money and power collide

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Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with

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Speaker 1: Caroline Hyde and Ed Ludlow.

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Speaker 2: Like from New York, I'm Caroline Hyde and I'm Jackie

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Speaker 2: Devalis in San Francisco.

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Speaker 3: This is Bloomberg Technology coming up.

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Speaker 4: Arm shares are down after a conservative forecast. We get

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Speaker 4: the CEO's take on the strength of smartphone and AI demand,

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Speaker 4: plus Roadblock shares slump after users and engagement slide. We

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Speaker 4: dissect the worst cell of since May, and the CEO

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Speaker 4: of Vanguard joins to discuss the company's record fee cuts

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Speaker 4: for dozens of mutual funds and ets. But first we

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Speaker 4: look at these broader markets. Right now, we're wobbling around

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Speaker 4: gains and losses.

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Speaker 3: On the NASAQ one hundred.

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Speaker 4: More broadly muted, we're up just about a tenth of

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Speaker 4: a There are some big moves when you look underneath

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Speaker 4: the hood and video on the points upside. Here on

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Speaker 4: the downside, we're a little bit anxious about TESLO. Get

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Speaker 4: into that later, but move on to see what the

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Speaker 4: individual moves are from an earnings perspective. Qui com off

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Speaker 4: by four point eight percent one of the biggest points

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Speaker 4: drags to the downside. Look, they managed to beat in

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Speaker 4: terms of earnings, they've beate in.

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Speaker 3: Terms of forecast.

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Speaker 4: But the outlook for the smartphone market is where it

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Speaker 4: does into investor anxiety. Are we flatlining only seeing flat

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Speaker 4: to single digit growth there?

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Speaker 5: That?

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Speaker 4: Of course smartphone anxiety does feed in a little bit

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Speaker 4: to armholdings as well. Key chip designer out there of

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Speaker 4: course down some four percent.

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Speaker 3: Look, they too beat the street on earnings, on.

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Speaker 4: Earnings for share basis, you look at revenue dialing up

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Speaker 4: almost twenty percent.

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Speaker 3: But again it's a world a.

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Speaker 4: Conservative forecast and what this means not only for smartphones,

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Speaker 4: but what it means for AI demand as well. We've

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Speaker 4: got to get to it with Arms CEO Rene Haas,

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Speaker 4: who joins us now. And I put it to you,

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Speaker 4: you've been out everywhere at the moment. There's deals being

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Speaker 4: done of course, a soft bank and open AI that

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Speaker 4: will dig into. But what a this forecast and what

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Speaker 4: it signals for your business? Is it just you being

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Speaker 4: conservative as a newly public company.

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Speaker 6: Thanks Kerley and appreciate you having me on this morning. Yeah,

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Speaker 6: I don't know if I agree with the dialogue. Muted forecast.

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Speaker 6: We beat our projections for Q three and we actually

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Speaker 6: raise guidance for Q four and for the year, and

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Speaker 6: we're looking at about four billion dollars of annual revenue,

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Speaker 6: which is about twenty five percent.

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Speaker 5: Increase over the last year.

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Speaker 6: So we're super happy with the trajectory of the business

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Speaker 6: and super happy.

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Speaker 5: With the performance.

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Speaker 3: Maybe just investors are too exuberant.

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Speaker 4: They're too exuberant around the fact that you've already said

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Speaker 4: your compute platform is going to help open ai and

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Speaker 4: SoftBank make good on their Advanced Enterprise AI, the optimism

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Speaker 4: around your AI future, as well as how integral you

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Speaker 4: are to smartphones. So is it that are people too

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Speaker 4: excited about the AI opportunity here.

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Speaker 6: I'm going to try to decouple what the market is

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Speaker 6: saying about it results and just talk about the results

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Speaker 6: in general, which we are again incredibly pleased by. We

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Speaker 6: are seeing extremely strong demand for our products across the board.

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Speaker 6: We had record royalties. We were up twenty three percent

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Speaker 6: year on year. Our Version nine compute subsystems, which drive

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Speaker 6: higher world tier rates. We're just growing faster than the market,

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Speaker 6: which is what we told investors when we went public

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Speaker 6: back in analyst day A year and a half ago plus,

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Speaker 6: So yeah, we're not seeing any slow down demand quite frankly, Carolin.

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Speaker 6: In fact, we're seeing an acceleration in it, particularly driven

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Speaker 6: by all things around artificial intelligence Renee.

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Speaker 2: Speaking of future growth, one of the things that ARM

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Speaker 2: is also banking on is its high profile partnership in Stargate,

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Speaker 2: and you're a big player in that. Could you kind

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Speaker 2: of tell us what investors can expect this year to

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Speaker 2: gain from that venture.

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Speaker 6: I can say, broadly speaking, the way you think about

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Speaker 6: Stargate is it's an infrastructure project unlike any other five

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Speaker 6: hundred billion dollars one hundred billion dollars will spend initially,

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Speaker 6: and these are to build out the world's largest AI

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Speaker 6: data centers for training and inference. We are the key

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Speaker 6: technology partner around CPU.

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Speaker 5: We're the only.

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Speaker 6: CPU technology partner that was named, which is terrific obviously

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Speaker 6: for us. One can imagine going forward a lot of

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Speaker 6: opportunity for technology innovation there. But in a near term

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Speaker 6: we'll be linked with the Grace Blackwell ship using the

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Speaker 6: Gray CPU which is ARM based and the Blackwell GPU,

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Speaker 6: which is video based. But these large frontier models are

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Speaker 6: going to require Jackie a huge amount of power for

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Speaker 6: training and inference, and we're just so excited about being

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Speaker 6: involved in this. It's going to be fantastic.

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Speaker 2: Well, at the same time, this project also kind of

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Speaker 2: puts you in the middle of this US China tech rivalry.

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Speaker 2: You're at the front lines of it, being the top

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Speaker 2: supplier to American AI companies. And I'm curious if you

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Speaker 2: think that perhaps tying your fortunes so closely to Opening

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Speaker 2: Eye is a risk.

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Speaker 6: I'm not sure I think about it quite that way.

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Speaker 6: Open Ai is a fantastic partner. Arguably, they're the leader

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Speaker 6: at the moment in terms of adoption of chat, GPT

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Speaker 6: and their APIs and their enterprise suite. We work with everyone,

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Speaker 6: though we work very closely with Google, we work closely

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Speaker 6: with Meta Aws, you know all the partners. But we're

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Speaker 6: very thrilled to be involved with open Ai. They have phenomenal.

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Speaker 4: Technology, Renee, We're going to lean into that China US

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Speaker 4: story deep seek extraordinary.

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Speaker 3: The push and pull it has in the narratives.

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Speaker 4: Can you explain as to whether you think we are

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Speaker 4: going to need as much compute as we all foresaw before.

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Speaker 6: Oh, I think unquestionably, Caroline, And in fact I think

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Speaker 6: even more than we probably have been thought about. So

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Speaker 6: why is that, Well, if you look at what deep

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Speaker 6: Seek has done, which is an amazing by the way

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Speaker 6: piece of work they've done what's called distillation, and distillation

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Speaker 6: is building on top of an existing frontier model, which

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Speaker 6: takes lots of power and lots of compute to generate.

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Speaker 6: If you think about GPT four which was hundreds of megawatts,

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Speaker 6: GBT five sixty seven, these are in the gigawats. So

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Speaker 6: even though you may have models that can distill or

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Speaker 6: build a con the frontier models, the frontier models still

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Speaker 6: need a lot of power. And then with that that

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Speaker 6: drives a huge demand for inference, which is really where

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Speaker 6: the larger use loads are. And more efficient inference means

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Speaker 6: you can drive AI to much smaller devices, to smartphones, earbuds,

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Speaker 6: devices that don't have a lot of capability for power.

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Speaker 6: It's great for armed because that's where we are today,

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Speaker 6: is where we exist, and now you can run those

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Speaker 6: AI workloads on the CPU. So I think actually, what

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Speaker 6: deep seat proves is that we're just going to see

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Speaker 6: an even more accelerant towards towards compute.

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Speaker 2: Well, on that front, you know you have a significant

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Speaker 2: business in China. Are you concerned at all about perhaps

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Speaker 2: how the slowing smartphone business might affect Arm's future growth.

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Speaker 5: Yeah, it's a great question.

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Speaker 6: And you know again and what we've seen in smartphones

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Speaker 6: with your single digits type of growth, we're in the

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Speaker 6: double digits growth in terms of royalties, in some cases

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Speaker 6: twenty percent growth.

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Speaker 5: And why is that?

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Speaker 6: We're putting more technology into these phones, our version nine,

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Speaker 6: our compute subsystems drive higher royalty rates, So we're just

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Speaker 6: growing faster than the market, and particularly in the premium segment,

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Speaker 6: which requires more and more compute. So while the units

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Speaker 6: have been slowed in some areas, it actually hasn't impacted

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Speaker 6: us very much.

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Speaker 5: Just look at our record royalties.

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Speaker 6: To have this kind of number in a market where

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Speaker 6: people think things are slowing down, just phenomenal record royalties.

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Speaker 3: Upside in licensing.

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Speaker 4: I would just want to get to the litigation if

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Speaker 4: I'm met here, Naam, and briefly, perhaps it hasn't gone

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Speaker 4: the way that you thought with Qualcom.

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Speaker 3: What does it mean for the future earnings?

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Speaker 6: Really, there's no impact on future earnings, Caroline. The trial

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Speaker 6: was a mistrial on one of the verdicts, so the

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Speaker 6: dispute is still open. But to your question, in terms

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Speaker 6: of the future forecast, we have no impact whatsoever.

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Speaker 2: Rene Ha, CEO of ARM, thank you for joining us.

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Speaker 2: Coming up more with tech earnings with a Yako yoshioga

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Speaker 2: from Wealth and here the speaker Caroline, let some quick.

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Speaker 4: Check on some other earnings that we've had on deck.

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Speaker 4: Peloton is one of them. No, I'm afraid revenue is down,

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Speaker 4: but profitability is better. A new management team managed to

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Speaker 4: lift the optimism around this name. We're fourteen percent higher,

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Speaker 4: but it's only trading at eight dollars sixty eight from

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Speaker 4: New York, San Francisco. This's a Bloomberg Technology.

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Speaker 2: Back to earnings with roadblocks out this morning and reporting

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Speaker 2: daily active users for the fourth quarter that fell short

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Speaker 2: of estimates. Let's bring in Bloomberg Cecilia Denastasio to break

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Speaker 2: down the numbers. Cecilia break it down for us what

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Speaker 2: went wrong here that ultimately spooped investors.

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Speaker 7: After many quarters of growth and daily active users, Roeblocks

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Speaker 7: unfortunately reported a disap winning decline in how many people

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Speaker 7: are accessing the platform in the last quarter. In an

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Speaker 7: earnings call today, Roblox's chief financial officer partially attributed that

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Speaker 7: decline to Roblox's ban in Turkey over concerns over child safety.

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Speaker 4: And what's interesting is child safety affecting Turkey? Of course

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Speaker 4: the key country here, But it wasn't long ago that

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Speaker 4: Hindenburg research acuse roadblocks have also inflating user numbers and

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Speaker 4: time played. Is there any hint that read across in

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Speaker 4: these numbers, Cecilia.

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Speaker 7: Lots of analysts have cast doubt on those allegations against

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Speaker 7: Roblox's user number inflation. Unfortunately, I don't have anything original

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Speaker 7: to report on that currently, but Roblox's growth has been

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Speaker 7: pretty consistent for a long time. People are very disappointed

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Speaker 7: by these.

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Speaker 2: Results, Cecilia. What's competition looking like in this space?

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Speaker 8: Sure so?

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Speaker 9: Right now?

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Speaker 7: Growth in the games industry broadly is very challenged. The

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Speaker 7: cost of developing Triple A games, your Spider Man's, you

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Speaker 7: Know Your overwatches is skyrocketing, and at the same time

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Speaker 7: a lot of investors are seeing potential in user generated

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Speaker 7: games like the ones that people create on roadblocks. These

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Speaker 7: games are often created by amateurs or by very small

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Speaker 7: teams using tools that the companies themselves provide. Epic Games,

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Speaker 7: which makes Fortnite, has its own platform along these lines.

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Speaker 4: As well, and some of them get sold for an

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Speaker 4: awful lot of money.

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Speaker 3: Cecilia Denastasio, it's great to have you. Thank you for

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Speaker 3: running us through roadblocks.

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Speaker 4: Let's get more earnings takeaways with Ioko Yoshioka is with

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Speaker 4: us for for any manager at the Wealth Enhancement Group.

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Speaker 4: And there's been so much to digest. One theme that

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Speaker 4: seems to be running through is AI anxiety and smartphone anxiety,

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Speaker 4: and I just want to bring up with what we're

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Speaker 4: seeing with qualcomon ARMED today and to worry about smartphones

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Speaker 4: flatlining and what.

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Speaker 3: That means for some of these chip providers.

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Speaker 4: What do you make of it, Iaco, I know you

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Speaker 4: don't hold qualcommon arm, but what would you make about

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Speaker 4: the readA.

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Speaker 3: Cross sure so high?

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Speaker 10: Caroline? You know, in terms of the overall AI environment,

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Speaker 10: I think we're focused on both the short term and

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Speaker 10: the long term. Right in the short term for companies

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Speaker 10: like Qualcom, you know, they're really impacted by the handset

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Speaker 10: slow down. However, you know, I think if you look

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Speaker 10: out longer term and where they're going to play is

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Speaker 10: really in that you know, inference side, or you know

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Speaker 10: where the chips will be able to be in smaller

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Speaker 10: devices as the ARM CEO talked about, and things like

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Speaker 10: new form factors with like metas ray band glasses. These

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Speaker 10: are going to be where you know, Qualcom might have

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Speaker 10: additional you know, exposure to which would be a positive

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Speaker 10: for Qualcom.

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Speaker 4: It's interesting the best points contributor on the day is

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Speaker 4: in video and there's a note out of JP Morgan saying, actually,

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Speaker 4: like these deep Seak moves, this less compute necessary is

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Speaker 4: actually going to win out for them from an inference perspective.

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Speaker 4: So where have you come out on this whole divide

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Speaker 4: as to whether companies should be spending a lot on

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Speaker 4: AIF structure.

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Speaker 10: So I think the arms race is on and that

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Speaker 10: most companies are going to spend in order to make

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Speaker 10: sure that they have all the primary models set, all

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Speaker 10: the frontier models that ARM talked about, and then it's

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Speaker 10: going to be how best to access you know, all

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Speaker 10: the efficiencies that Deep Seek brought are going to be

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Speaker 10: you know, explored by many companies. And so I think

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Speaker 10: there's a lot of ways to play AI. And you know,

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Speaker 10: we're still trying to figure out what the landscape is

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Speaker 10: really going to look like, and it's accelerating. It's just

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Speaker 10: moving so quickly. You know, every month there's something new on.

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Speaker 2: The cloud computing front. We've already seen some mixed numbers

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Speaker 2: coming from the hyperscalers Alphabet, Microsoft. What are you expecting

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Speaker 2: when Amazon reports later today?

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Speaker 10: Sure, so I think everybody's focused again on what the

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Speaker 10: Capex guide might be, any sort of color commentary on Capex.

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Speaker 10: You know, everybody's looking at that Capex trajectory to see,

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Speaker 10: you know, is everybody getting that return.

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Speaker 3: On that spend.

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Speaker 10: But you know, I think the demand for cloud computing

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Speaker 10: continues to increase, and so it makes sense from a

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Speaker 10: long term perspective for many of these hyperscalers to continue

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Speaker 10: to spend on increasing capacity in the cloud.

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Speaker 2: Speaking of demand, one of the things that always surprised

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Speaker 2: me about Alphabet's cloud unit is that it had a

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Speaker 2: good chunk of business coming from smaller, more nimble AI startups,

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Speaker 2: And with some of the numbers that it put out,

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Speaker 2: I'm curious if you are thinking if that kind of demand,

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Speaker 2: if that vector of growth has kind of run its course.

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Speaker 3: I don't think so.

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Speaker 10: I think AI is still so relatively new that I

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Speaker 10: think there's going to be new innovative players that are

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Speaker 10: going to want to access you know, that that AI

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Speaker 10: platform through Google, Google or through Microsoft or AWS. I think,

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Speaker 10: you know, there's going to be different companies that explore

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Speaker 10: different platforms just see what's best for them.

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Speaker 4: What's so interesting is Amazon has been making its own chips,

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Speaker 4: and so too Alphabet. Actually, even though it shares fell

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Speaker 4: on its earnings, broad Com sword because of the CAPEX

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Speaker 4: spending and what it means for chip makers for some

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Speaker 4: of these cloud computing companies. What do you make of

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Speaker 4: how the getting into the vertically AI focus.

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Speaker 10: In terms of the overall spend, I think, you know,

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Speaker 10: it's just going to continue. That spend going to a

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Speaker 10: lot of these you know, chip makers, so whether it's

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Speaker 10: Nvidia or Broadcom. Eventually it will come to Qualcomm as well.

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Speaker 10: But I think it's going to continue. You know, there's

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Speaker 10: so many ways to access AI and build it out.

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Speaker 10: I think that it's going to continue to develop over

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Speaker 10: the long term.

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Speaker 4: The thing that everyone's trying to wrestle with is the valuations.

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Speaker 4: So with all this optimism, arm trades that are undred

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Speaker 4: times future ournings. Maybe that's why it pulls back from

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Speaker 4: the day on what the market says is slightly muted forecasts.

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Speaker 4: What do you make of the valuation levels since the

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Speaker 4: sell off from deep seacone and video for example.

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Speaker 10: Well, and I think that's why Qualcomm's valuation is pretty

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Speaker 10: interesting here. You know, it's still in the you know,

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Speaker 10: mid teens, low double digits, and you know, I think

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Speaker 10: that if you look out far enough, you'll see that

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Speaker 10: there's potentially, you know, a lot more growth coming for

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Speaker 10: Qualcom in the future. However, you know, you have to

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Speaker 10: look at the valuations both in the near term. Nvidia

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Speaker 10: does trade at high valuations as well, but again, if

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Speaker 10: the buildout continues, if you're really going to need to

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Speaker 10: continue to spend so much both you know, Broadcom and Nvidia,

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Speaker 10: and probably you know, the earnings are going to grow

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Speaker 10: and catch up with a.

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Speaker 2: Multiple Ayako Yoshioka from the Wealth Enhancement Group, thank you

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Speaker 2: for joining us.

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Speaker 4: Elon Musk, who of course leads President Trump's government cost

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Speaker 4: cutting efforts, will determine himself if there are conflicts of

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Speaker 4: interest between his work reviewing federal spending and his overlapping

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Speaker 4: empire of six companies. So all, according to the White

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Speaker 4: House's bring in. Bloomberg News's reporter and co host of

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Speaker 4: the elon Ink podcast, Max Chafkins. So he's going to

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Speaker 4: be his own policeman.

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Speaker 9: He's going to be his own policeman.

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Speaker 11: And you know, while this is news because we've been

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Speaker 11: wondering all along, what is the plan here? I mean,

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Speaker 11: Musk has six companies, He is somebody who is his

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Speaker 11: empire's rife with conflicts of interest. So it was kind

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Speaker 11: of interesting to see how the White House was going

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Speaker 11: to handle this, and we're learning basically they're not going

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Speaker 11: to handle They're going to let Elon use his judgment,

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Speaker 11: which I think was the plan all along.

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Speaker 9: And I think.

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Speaker 11: Even listening to things that President Trump said when he

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Speaker 11: was on the Camp Trent pain Trail made clear that

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Speaker 11: part of the point here is the fact that Elon

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Speaker 11: Musk has these conflicts of interest. You know, Trump talked

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Speaker 11: all about Mars that that is a thing that would

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Speaker 11: necessarily involve some of Elon Musk's company. So so yeah,

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Speaker 11: we're sort of learning something that I think was pretty clear,

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Speaker 11: but we didn't know for sure.

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Speaker 9: Max.

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Speaker 2: I want to talk about the tech because Elon Musk

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Speaker 2: has said that he wants to use AI to find

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Speaker 2: cost savings, and he's already mining through medicare and medicaid

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Speaker 2: data in search of fraud and abuse. Do we know

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Speaker 2: if this is something he could use his own company

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Speaker 2: XAI to do.

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Speaker 9: We don't know what software they're using.

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Speaker 11: It would not surprise me at all if he was

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Speaker 11: using some modified version of GROC or you know, some

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Speaker 11: some software that he has developed, or is that you know,

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Speaker 11: is somehow associated with another one of his companies.

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Speaker 9: Musk has done this all the time.

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Speaker 11: We've seen you know, SpaceX engineers shuttled into Twitter.

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Speaker 9: We're seeing you know, people from his.

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Speaker 11: Business Empire now attached in various ways to this doje effort.

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Speaker 11: So yes, and of course that raises, you know, interesting questions.

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Speaker 11: Where is this data being stored? Are they taking the

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Speaker 11: proper precautions. We've definitely seen critics, including you know employees,

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Speaker 11: government employees, as well as some of their unions, raise

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Speaker 11: questions about this, you know, saying basically, is Elon Musk

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Speaker 11: taking enough care of our private data?

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Speaker 4: I wonder if investors are wondering whether they're taking enough

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Speaker 4: care of his fiduciaries responsibility to Tesla. It's currently down

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Speaker 4: almost ten percent on the beginning of the year.

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Speaker 3: We're training the lowest since December.

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Speaker 4: And meanwhile, he got byd in China announcing that it's

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Speaker 4: getting into autonomous vehicles potentially, and Tesla takes another hit.

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Speaker 9: Well.

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Speaker 11: So, if two things are definitely true, one is that

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Speaker 11: Elon Musk for sure is distracted. I mean, you know,

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Speaker 11: I understand that he has like an endless amount of

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Speaker 11: attention span. He's able to be very good at video

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Speaker 11: games while running sales companies. But if you look, he

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Speaker 11: has spent a ton of time in Washington, He's essentially

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Speaker 11: been parked there in recent weeks.

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Speaker 9: He's tweeting all day and all night about Doge.

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Speaker 11: That said, so in that sense, you might say, wow,

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Speaker 11: like these he's really distracted.

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Speaker 9: He's taking his eye off the ball.

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Speaker 11: On the other hand, there are clear ways that his

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Speaker 11: companies can benefit from this partnership, and I think most

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Speaker 11: investors understand that. And if you turn back the clock

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Speaker 11: on that stock chart to like the beginning of November,

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Speaker 11: you'll see that.

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Speaker 9: The stock is still way up.

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Speaker 11: So I think, yeah, some of the enthusiasms, some of

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Speaker 11: the sense that oh my god, this Trump trade is

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Speaker 11: like a home run, has worn off, although there are

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Speaker 11: definitely still people who see this as beneficial to Musk

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Speaker 11: and his companies.

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Speaker 3: That's Bloomberg's match. Chafkin, thanks for joining us.

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Speaker 5: Now.

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Speaker 3: Today's Tech in.

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Speaker 2: Depth newsletter takes a look at two different approaches in

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Speaker 2: Silicon Valley on defense and war in Europe. Bloomberg's Mark

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Speaker 2: Bergen has more.

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Speaker 9: Mark.

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Speaker 2: How are these conversations different in defense tech between the

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Speaker 2: US and Europe.

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Speaker 9: Yeah, I mean I was sort of jumping off.

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Speaker 12: We saw a really interesting hire this week from Andresa

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Speaker 12: in their American Dynamism Fund, which is their tech defense fund.

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Speaker 12: They hired Daniel Penny, who was Gross Perraps most famous

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Speaker 12: as he was involved in that choking incident in the subway.

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Speaker 12: He was cleared of homicide but kind of became this

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Speaker 12: cause celebrat and as far as they know, he's a

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Speaker 12: marine veteran. Didn't have it a track record as an investor,

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Speaker 12: but clearly something that vice We saw Vice President JD

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Speaker 12: Van's tweet about his excitement about this hire.

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Speaker 9: It's a signal for that firm, which.

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Speaker 12: Has been kind of really leading the vanguard of They

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Speaker 12: named the fund American Dynamism that they're leading in on

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Speaker 12: this new era of reforming the Pentagon. This proximity between

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Speaker 12: the Pentagon and Silicon Valley and in many ways this

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Speaker 12: is something that's very different than what's operated in the past,

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Speaker 12: where the Silicon valley and venture capitalists didn't really think

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Speaker 12: about global borders.

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Speaker 4: It's interesting David Ullivitch I interviewed a few weeks ago

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Speaker 4: Catherin Boyle also leading that over at A sixteen Z,

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Speaker 4: and they have been leaning into defense side Androil for example,

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Speaker 4: they're looking at nuclear security. What's interesting though, is last

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Speaker 4: time I saw it, A sixteen Z was pulling out

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Speaker 4: of London and it's office space there. So what does

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Speaker 4: that mean in terms of looking at bringing this across

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Speaker 4: the Atlantic.

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Speaker 12: Yeah, so, I mean to be clear that they shut

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Speaker 12: down their office, their first and only outside the US

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Speaker 12: that was a crypto investing arm. They still are making

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Speaker 12: some investments in Europe. They have a big position in Mistral,

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Speaker 12: the French AI company as far as I know, though,

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Speaker 12: they haven't made any investments on the defense side here,

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Speaker 12: where you've seen others like General Catalyst. Even Sequoia we've

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Speaker 12: reported has been looking. General Catalysts has been fairly aggressive

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Speaker 12: in defense in Europe. I mean, it's really interesting. Great

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Speaker 12: where Europe is in the middle of this war with Russia.

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Speaker 12: You go to these events in Europe, you hear constantly

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Speaker 12: about Russia and they need to defend itself. And then

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Speaker 12: you have events in the US and I think the

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Speaker 12: focus has been shifted to China and Taiwan.

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Speaker 4: And meanwhile Palent his own sales internationally were lower in

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Speaker 4: weakness in Europe. Matt Bergen, it's great to have you

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Speaker 4: go read his Tech in Depth newsletter. In's course from

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Speaker 4: Bloomberg's journalists around the world. You can subscribe at blomberg

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Speaker 4: dot com slash Newsletters. Welcome back to bloombag Technology. I'm

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Speaker 4: Caroline hid in New York. Now, Vanguard has slashed the

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Speaker 4: fees for dozens of its mutual funds and ETFs this week,

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Speaker 4: in a record move that sent a shockwave through the

441
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Speaker 4: asset management industry. The reduction is the largest Vanguard has

442
00:22:14,359 --> 00:22:17,200
Speaker 4: ever undertaken. For more now on the impact on black

443
00:22:17,240 --> 00:22:20,720
Speaker 4: Rock on Invesco, Bloomberg's Katie Greifeld is standing by for more.

444
00:22:20,800 --> 00:22:26,000
Speaker 8: Katie, we welcome now our TV and radio audiences worldwide,

445
00:22:26,040 --> 00:22:28,600
Speaker 8: and please to say We're joined by Vanguard CEO Salem

446
00:22:28,680 --> 00:22:32,520
Speaker 8: Ramji in an exclusive conversation Slim, great to have you

447
00:22:32,600 --> 00:22:35,360
Speaker 8: with us. So we all saw the report to be here, Katie,

448
00:22:35,480 --> 00:22:38,080
Speaker 8: thank you. We saw the ripple effects from Monday's move,

449
00:22:38,119 --> 00:22:42,600
Speaker 8: and your average female is just seven basis points across

450
00:22:42,640 --> 00:22:45,520
Speaker 8: your line of the industry average for contexts forty four

451
00:22:45,560 --> 00:22:47,600
Speaker 8: basis points set the scene for us.

452
00:22:47,640 --> 00:22:52,440
Speaker 13: Why now, well, you know, in one sense, I will

453
00:22:52,480 --> 00:22:54,880
Speaker 13: say Monday was a pretty joyous day here at Vanguard,

454
00:22:55,840 --> 00:22:59,080
Speaker 13: and it was joyous figures. It really is a reaffirmation

455
00:22:59,119 --> 00:23:03,159
Speaker 13: of our business model. We're owned by our clients, and

456
00:23:03,200 --> 00:23:07,520
Speaker 13: so as a result, as we gain scale economies here

457
00:23:07,560 --> 00:23:10,200
Speaker 13: at the company, we share those back with our clients.

458
00:23:10,640 --> 00:23:12,760
Speaker 13: And that's not just been true since Monday, It's been

459
00:23:12,760 --> 00:23:16,560
Speaker 13: true since nineteen seventy five, since when we founded the company.

460
00:23:16,560 --> 00:23:20,560
Speaker 13: And so this was continuing on a two thousand price

461
00:23:20,600 --> 00:23:23,320
Speaker 13: cuts I think by our tally as of last week

462
00:23:23,960 --> 00:23:27,840
Speaker 13: now it's twenty one hundred and sixty eight price cuts.

463
00:23:27,920 --> 00:23:31,280
Speaker 13: And that's been part of the proposition that investors have

464
00:23:31,359 --> 00:23:33,160
Speaker 13: had with Vanguard for decades.

465
00:23:33,800 --> 00:23:36,080
Speaker 8: And so Salim, I think I'm asking on part of

466
00:23:36,119 --> 00:23:39,120
Speaker 8: your competitors but also investors as well, when I ask

467
00:23:39,520 --> 00:23:42,679
Speaker 8: how low can fees go? You're at seven basis points

468
00:23:43,000 --> 00:23:44,760
Speaker 8: right now? Where is the possible floor?

469
00:23:44,800 --> 00:23:45,040
Speaker 5: Here.

470
00:23:47,080 --> 00:23:50,879
Speaker 13: Well, you know, we don't price products as loss leaders.

471
00:23:51,320 --> 00:23:54,639
Speaker 13: We're not looking to you know, price abnormally low in

472
00:23:54,720 --> 00:23:58,600
Speaker 13: order to get somebody into a higher cost other service.

473
00:23:59,280 --> 00:24:01,520
Speaker 13: And so we really look at it across the board

474
00:24:01,560 --> 00:24:04,080
Speaker 13: in terms of our scale economies. We want to deliver

475
00:24:04,280 --> 00:24:09,000
Speaker 13: great quality and great performance, and I think that the

476
00:24:09,040 --> 00:24:13,360
Speaker 13: thing that sometimes gets lost in the mix. Obviously, index

477
00:24:13,400 --> 00:24:16,560
Speaker 13: prices have been coming down for quite some time, led

478
00:24:16,600 --> 00:24:20,919
Speaker 13: by us over the past several decades. But sometimes it

479
00:24:20,920 --> 00:24:25,280
Speaker 13: gets confused that we were all about index. We're actually

480
00:24:25,320 --> 00:24:28,360
Speaker 13: about active and index. And really, if you go back

481
00:24:28,359 --> 00:24:32,040
Speaker 13: to our origins, what Bogel was against was high fees,

482
00:24:32,720 --> 00:24:37,520
Speaker 13: and so active management at a low fee can really

483
00:24:37,560 --> 00:24:41,600
Speaker 13: outperform over the long term if delivered with the right quality.

484
00:24:42,040 --> 00:24:45,520
Speaker 13: That was Bogel's hypothesis in the seventies and eighties, And

485
00:24:45,600 --> 00:24:47,439
Speaker 13: if you look at our track record, even just in

486
00:24:47,520 --> 00:24:52,000
Speaker 13: something like active fixed income, the empirical evidence backs up

487
00:24:52,000 --> 00:24:55,240
Speaker 13: that hypothesis that he had way back then. Ninety one

488
00:24:55,280 --> 00:24:58,960
Speaker 13: percent of our active fixed income outperforms its peers over

489
00:24:59,000 --> 00:25:01,879
Speaker 13: the past ten years. And one of the reasons why

490
00:25:02,440 --> 00:25:05,480
Speaker 13: is because we price it at just over ten basis points,

491
00:25:06,480 --> 00:25:08,840
Speaker 13: and so at a very low fee. And you know,

492
00:25:08,880 --> 00:25:11,600
Speaker 13: when you speak to our fixed income team, to Sarah Devereux,

493
00:25:11,640 --> 00:25:15,879
Speaker 13: our CIO, and our teams who run our active fixed income,

494
00:25:16,720 --> 00:25:20,040
Speaker 13: part of the reason they're able to outperform is they

495
00:25:20,040 --> 00:25:22,679
Speaker 13: have a much lower headwind from higher fees, and so

496
00:25:22,680 --> 00:25:25,600
Speaker 13: they're able to take risks in a much better and

497
00:25:25,640 --> 00:25:28,680
Speaker 13: more disciplined way. And so what this is really about

498
00:25:28,840 --> 00:25:33,119
Speaker 13: is not just about delivering high quality index management, but

499
00:25:33,200 --> 00:25:37,600
Speaker 13: it's really about delivering high quality investment management at a

500
00:25:37,680 --> 00:25:39,480
Speaker 13: very low fee. And I think whether you're looking at

501
00:25:39,520 --> 00:25:42,720
Speaker 13: active fixed income or whether you're looking at index fixed

502
00:25:42,760 --> 00:25:45,320
Speaker 13: income or index equities, that's really what we've been.

503
00:25:45,240 --> 00:25:47,320
Speaker 8: About, right, Well, Selma, you make the point that a

504
00:25:47,359 --> 00:25:49,680
Speaker 8: lot of people probably think of Vanguard and they don't

505
00:25:49,720 --> 00:25:53,240
Speaker 8: think of active. And you do, have, of course active

506
00:25:53,240 --> 00:25:55,879
Speaker 8: funds out there, but it's a pretty small percentage of

507
00:25:55,880 --> 00:25:58,280
Speaker 8: your overall lineup. Especially if you take a look at

508
00:25:58,320 --> 00:26:01,000
Speaker 8: the ETF side of things, we expect to see more

509
00:26:01,080 --> 00:26:02,399
Speaker 8: active fund launches from you.

510
00:26:04,440 --> 00:26:06,960
Speaker 13: Yeah, you know, our active management the first Vanguard funds

511
00:26:06,960 --> 00:26:09,879
Speaker 13: are actually active funds if you go back to the

512
00:26:09,880 --> 00:26:14,760
Speaker 13: seventies and both we manage our active fixed income within Vanguard.

513
00:26:15,200 --> 00:26:19,040
Speaker 13: We have a whole range of partners subadvisors that we

514
00:26:19,119 --> 00:26:23,800
Speaker 13: work with for our fundamental active equities, and they're unified

515
00:26:23,800 --> 00:26:26,240
Speaker 13: by the principle of being high quality at a low price.

516
00:26:27,280 --> 00:26:30,679
Speaker 13: And yeah, Katie, you already have seen us doing a

517
00:26:30,680 --> 00:26:34,080
Speaker 13: lot more in active ETFs and I think you've seen

518
00:26:34,119 --> 00:26:38,359
Speaker 13: that pick up over the past several months, and I

519
00:26:38,359 --> 00:26:41,200
Speaker 13: hope and expect that that will continue over the next

520
00:26:41,760 --> 00:26:43,320
Speaker 13: you know, this year and next.

521
00:26:43,160 --> 00:26:45,640
Speaker 8: Year, all right, so we'll keep an eye out for that.

522
00:26:45,800 --> 00:26:47,800
Speaker 8: You were talking a little bit about, of course, how

523
00:26:47,920 --> 00:26:51,760
Speaker 8: the ownership structure works at Vanguard. How basically all a

524
00:26:51,800 --> 00:26:54,080
Speaker 8: lot of the extra cash, the extra assets that you

525
00:26:54,160 --> 00:26:57,439
Speaker 8: generate are funneled towards these fee cuts. But I'm curious

526
00:26:57,480 --> 00:27:00,280
Speaker 8: from where you sit, how do you balance slow boring

527
00:27:00,359 --> 00:27:03,439
Speaker 8: fees versus investing in the business. What does that decision

528
00:27:03,480 --> 00:27:04,080
Speaker 8: tree look like.

529
00:27:06,080 --> 00:27:09,800
Speaker 13: Yeah, it's something we do very carefully here. And you know,

530
00:27:10,080 --> 00:27:13,520
Speaker 13: this week is all about our fee cuts and giving

531
00:27:13,560 --> 00:27:15,639
Speaker 13: back to our clients in the form of lower fees.

532
00:27:16,400 --> 00:27:20,120
Speaker 13: We've also stepped up our investments in things like technology.

533
00:27:20,920 --> 00:27:23,520
Speaker 13: That's something that really began about two three years ago

534
00:27:24,040 --> 00:27:27,800
Speaker 13: and is continuing this year and next year, because we're

535
00:27:27,800 --> 00:27:30,840
Speaker 13: always trying to balance making sure that we've got high

536
00:27:30,920 --> 00:27:34,960
Speaker 13: quality products at a low cost and we're delivering the

537
00:27:35,000 --> 00:27:37,600
Speaker 13: right level of service to clients. We're investing in newer

538
00:27:37,640 --> 00:27:41,240
Speaker 13: technologies to make our investing even more efficient, to make

539
00:27:41,280 --> 00:27:44,159
Speaker 13: our client interfaces even more efficient. So that's always a

540
00:27:44,160 --> 00:27:46,119
Speaker 13: balancing act here at Vanguard, just like it is at

541
00:27:46,119 --> 00:27:48,800
Speaker 13: many companies in terms of how do we think for

542
00:27:48,880 --> 00:27:51,680
Speaker 13: the near term and how do we think for the

543
00:27:51,840 --> 00:27:55,119
Speaker 13: medium to longer term. But I'd say one of the

544
00:27:55,160 --> 00:27:57,520
Speaker 13: beauties of Vanguard. I think part of the original genius

545
00:27:57,520 --> 00:28:01,600
Speaker 13: of Vanguard is that when you know we've got a surplus,

546
00:28:01,680 --> 00:28:04,159
Speaker 13: after we've looked at the important investments we need to

547
00:28:04,160 --> 00:28:08,120
Speaker 13: make back in things like technology, the way we give

548
00:28:08,240 --> 00:28:10,439
Speaker 13: back to our owners is through lower fees. And I

549
00:28:10,440 --> 00:28:12,600
Speaker 13: think that's the Vanguard effect that you've been seeing for

550
00:28:12,680 --> 00:28:14,760
Speaker 13: decades all across the company.

551
00:28:15,160 --> 00:28:18,160
Speaker 8: Yeah, that Vanguard effect obviously a good news story for

552
00:28:18,200 --> 00:28:20,879
Speaker 8: your investors, maybe not for your competitors. But I do

553
00:28:20,960 --> 00:28:22,600
Speaker 8: want to talk about the future, and I want to

554
00:28:22,640 --> 00:28:26,119
Speaker 8: talk specifically about private markets and alts. One of the

555
00:28:26,200 --> 00:28:28,520
Speaker 8: big take stories that we have on the terminal right

556
00:28:28,560 --> 00:28:31,080
Speaker 8: now is about PIMCO and fears that PIMCO might be

557
00:28:31,080 --> 00:28:33,760
Speaker 8: falling behind in alts because you take a look at

558
00:28:33,800 --> 00:28:35,800
Speaker 8: the industry right now and a lot of your peers

559
00:28:36,040 --> 00:28:40,040
Speaker 8: have invested heavily in alts in privates to scale up there.

560
00:28:40,360 --> 00:28:42,800
Speaker 8: What is your plan when it comes to those areas

561
00:28:43,040 --> 00:28:45,080
Speaker 8: and do you fear that you're a little bit behind

562
00:28:45,120 --> 00:28:45,560
Speaker 8: right now?

563
00:28:47,600 --> 00:28:50,520
Speaker 13: Well one of the again one of the great benefits

564
00:28:50,520 --> 00:28:52,720
Speaker 13: of our business model, if you go back to the

565
00:28:52,760 --> 00:28:56,840
Speaker 13: origin we had subadvisors. You know, for example, at our

566
00:28:56,840 --> 00:29:01,440
Speaker 13: beginning we are and are still subs by Wellington Management,

567
00:29:02,280 --> 00:29:06,000
Speaker 13: which is still our largest subadvisor today. And so where

568
00:29:06,040 --> 00:29:10,680
Speaker 13: we don't have capabilities within kind of vanguard, we've long

569
00:29:10,720 --> 00:29:12,560
Speaker 13: had an ability to partner.

570
00:29:12,160 --> 00:29:12,960
Speaker 5: With other firms.

571
00:29:13,520 --> 00:29:17,200
Speaker 13: To date, we've generally done that in fundamental active equities,

572
00:29:18,320 --> 00:29:21,400
Speaker 13: but we can do it in things like private markets,

573
00:29:21,440 --> 00:29:24,480
Speaker 13: and there's lots of discussions and explorations we have underway

574
00:29:25,120 --> 00:29:28,000
Speaker 13: to see what's possible. But you know, our north star

575
00:29:28,560 --> 00:29:32,920
Speaker 13: is always about what's right for our clients, and it's

576
00:29:32,960 --> 00:29:36,640
Speaker 13: making sure that whatever it is we do inactive in

577
00:29:36,640 --> 00:29:40,520
Speaker 13: index ourselves or with others, that we keep in mind

578
00:29:40,560 --> 00:29:43,360
Speaker 13: that we're about simplicity, We're about low cost and we're

579
00:29:43,360 --> 00:29:46,040
Speaker 13: about long term returns, and I think that there are

580
00:29:46,120 --> 00:29:48,840
Speaker 13: constructs that will allow private markets to fit in that.

581
00:29:49,800 --> 00:29:52,000
Speaker 13: But that's really part of the exploration that we're doing

582
00:29:52,000 --> 00:29:53,720
Speaker 13: because whatever it is we do, we want to do

583
00:29:53,760 --> 00:29:56,160
Speaker 13: it the Vanguard way, and we want to do it

584
00:29:56,160 --> 00:29:59,480
Speaker 13: in a way that's well suited to our client base,

585
00:29:59,520 --> 00:30:01,680
Speaker 13: which is really looking to us for a certain set

586
00:30:01,720 --> 00:30:04,800
Speaker 13: of things that we've consistently delivered over the years.

587
00:30:05,000 --> 00:30:06,760
Speaker 8: All right, Seleem got to leave it there. I really

588
00:30:06,840 --> 00:30:09,960
Speaker 8: appreciate you taking the time. That is Vanguard's CEO Selim

589
00:30:10,040 --> 00:30:11,360
Speaker 8: Ramj back to.

590
00:30:11,320 --> 00:30:13,560
Speaker 3: You, Katie.

591
00:30:13,640 --> 00:30:16,000
Speaker 4: We get a quick check on these markets. Great interview.

592
00:30:16,240 --> 00:30:18,800
Speaker 4: Let's dig into what's happening in technology right now because.

593
00:30:18,680 --> 00:30:19,680
Speaker 3: Nasak just clinging on too.

594
00:30:19,720 --> 00:30:21,760
Speaker 4: Gains only by about a tenth of percent on the

595
00:30:21,840 --> 00:30:24,440
Speaker 4: higher side, and video powers us up from a points perspective,

596
00:30:24,480 --> 00:30:26,720
Speaker 4: as maybe JP Morgan wais in and says, hey, maybe

597
00:30:26,760 --> 00:30:29,040
Speaker 4: these open source deep seat models on as bad as

598
00:30:29,040 --> 00:30:30,520
Speaker 4: we thought. But you move on to what's happening on

599
00:30:30,560 --> 00:30:33,520
Speaker 4: the downside, and Qualcomm a key significant draw down in

600
00:30:33,560 --> 00:30:34,280
Speaker 4: a points perspective.

601
00:30:34,280 --> 00:30:35,560
Speaker 3: We're off almost five percent.

602
00:30:35,960 --> 00:30:38,040
Speaker 4: This is the worst day that's November the twentieth for

603
00:30:38,080 --> 00:30:41,080
Speaker 4: the stock, even as they managed to beat expectations when

604
00:30:41,120 --> 00:30:43,440
Speaker 4: they come for their earnings in revenue and in earnings

605
00:30:43,440 --> 00:30:45,920
Speaker 4: for share revenue up some eighteen percent. But we're worried

606
00:30:45,920 --> 00:30:48,760
Speaker 4: about the future of the smartphone market, to which Qualcom

607
00:30:48,760 --> 00:30:51,800
Speaker 4: of course is so exposed. Skyworks also on the downside,

608
00:30:51,960 --> 00:30:55,480
Speaker 4: after we see its issues around iPhone representing eighty five

609
00:30:55,520 --> 00:30:58,080
Speaker 4: percent of its business more broadly, and they're having to

610
00:30:58,160 --> 00:31:00,600
Speaker 4: reduce the content loss that they're seeing at the moment.

611
00:31:00,680 --> 00:31:03,400
Speaker 4: iPhone content lost to Skyworks work by twenty four percent.

612
00:31:03,840 --> 00:31:07,800
Speaker 2: Jackie coming up as demand for China's deep so you

613
00:31:07,840 --> 00:31:12,480
Speaker 2: can other open eye source AI models skyrocket, National security

614
00:31:12,480 --> 00:31:16,160
Speaker 2: concerns emerge. We speak to Ben Harberg of Core Values Alpha.

615
00:31:16,440 --> 00:31:32,080
Speaker 2: This is Bloomberg. The rise of AI chatbots and what

616
00:31:32,120 --> 00:31:36,400
Speaker 2: they can bring to productivity is spurring enthusiasm across global industries.

617
00:31:36,520 --> 00:31:39,680
Speaker 2: Bloomberg spoke with riied Hoffman of Greylock Partners. Here's what

618
00:31:39,720 --> 00:31:42,320
Speaker 2: he had to say about utilizing AI in the workforce.

619
00:31:43,600 --> 00:31:47,320
Speaker 14: I actually think programming skill jobs aren't going out the door.

620
00:31:47,360 --> 00:31:49,600
Speaker 14: I think there's human application, but I think it's also

621
00:31:49,680 --> 00:31:53,200
Speaker 14: human application of like EQ as well. So the fact

622
00:31:53,240 --> 00:31:56,800
Speaker 14: that you have a for example, say a medical assistant

623
00:31:56,880 --> 00:31:58,720
Speaker 14: that can help you with something, or a coach that

624
00:31:58,800 --> 00:32:00,640
Speaker 14: might be able to talk to something, doesn't mean you

625
00:32:00,640 --> 00:32:01,640
Speaker 14: don't want a human coach.

626
00:32:01,960 --> 00:32:03,360
Speaker 9: It's more coaches, the better.

627
00:32:03,680 --> 00:32:05,560
Speaker 3: Greid Hoffman of green Up partners there.

628
00:32:05,680 --> 00:32:07,560
Speaker 4: And of course, with the rise of AI chatbots with

629
00:32:07,640 --> 00:32:10,760
Speaker 4: open source models, China based Deep Seek of course is

630
00:32:10,760 --> 00:32:13,440
Speaker 4: actually having to restrict access to its models. Is demand

631
00:32:13,480 --> 00:32:16,400
Speaker 4: overwhelmed server capacity? More in the future of AI open

632
00:32:16,440 --> 00:32:18,280
Speaker 4: source models tech competition with China.

633
00:32:18,400 --> 00:32:19,640
Speaker 3: We're joined by Ben Harveack.

634
00:32:19,800 --> 00:32:22,080
Speaker 4: He is founder at Core Values Alpha and managing partner

635
00:32:22,120 --> 00:32:24,080
Speaker 4: of Nova Capital, which has a call two billion dollars

636
00:32:24,080 --> 00:32:27,400
Speaker 4: in assets under management. We also know that you oversee

637
00:32:27,400 --> 00:32:29,960
Speaker 4: a greater China growth ETF, so we're here for all

638
00:32:29,960 --> 00:32:33,320
Speaker 4: of your expertise. And ultimately, was Deep seekersputneck moment.

639
00:32:33,240 --> 00:32:34,480
Speaker 5: I think it was. I think you know.

640
00:32:34,560 --> 00:32:39,920
Speaker 15: It challenged this hubris and this impenetrability of American AI leadership.

641
00:32:39,960 --> 00:32:40,880
Speaker 9: And the scary thing.

642
00:32:40,800 --> 00:32:42,800
Speaker 15: Was we already saw the Chinese kind of tacking global

643
00:32:42,800 --> 00:32:45,560
Speaker 15: market share when it came to all the kind of

644
00:32:45,560 --> 00:32:49,959
Speaker 15: next generation technologies being electric vehicles, drones, solar panels, and

645
00:32:50,000 --> 00:32:52,720
Speaker 15: this was really the last holdout, and so with that

646
00:32:52,800 --> 00:32:54,800
Speaker 15: bubble being pierced, I think we need to now put

647
00:32:54,800 --> 00:32:57,520
Speaker 15: our foot on the gas and re examine our own

648
00:32:57,560 --> 00:33:01,400
Speaker 15: capabilities and how do we continue to lead in that market?

649
00:33:02,760 --> 00:33:06,120
Speaker 2: Ben, what's the starting point here? What should companies be

650
00:33:06,200 --> 00:33:08,520
Speaker 2: focused on in the wake of deep Seat. We're hearing

651
00:33:08,560 --> 00:33:11,840
Speaker 2: a lot of talk about expanding infrastructure. You saw open

652
00:33:11,880 --> 00:33:14,640
Speaker 2: AI and veil new models just a couple of days

653
00:33:14,760 --> 00:33:17,280
Speaker 2: after the news hit. What should be the focus for

654
00:33:17,360 --> 00:33:18,520
Speaker 2: AI startups in the US?

655
00:33:18,920 --> 00:33:21,080
Speaker 15: I think a space race is great for a competition,

656
00:33:21,120 --> 00:33:24,040
Speaker 15: and it's great for American innovation, and so I hope

657
00:33:24,040 --> 00:33:26,320
Speaker 15: we don't take this as a slight instead use it

658
00:33:26,320 --> 00:33:29,960
Speaker 15: as a motivator. Obviously, AI is a discipline that requires

659
00:33:29,960 --> 00:33:36,280
Speaker 15: a huge interdisciplinary kind of collaboration across energy, talent, technology,

660
00:33:36,680 --> 00:33:41,400
Speaker 15: regulatory availability and all you know, and the open source

661
00:33:41,480 --> 00:33:43,600
Speaker 15: nature of models, and so my view is that this

662
00:33:43,640 --> 00:33:45,400
Speaker 15: has to be a whole country effort. We should be

663
00:33:45,480 --> 00:33:48,360
Speaker 15: looking at this more as a Manhattan Project two point zero,

664
00:33:48,400 --> 00:33:50,200
Speaker 15: where we bring all those factors to bear. And I

665
00:33:50,200 --> 00:33:53,400
Speaker 15: think that the new Trump administration is really looking hard,

666
00:33:53,400 --> 00:33:56,080
Speaker 15: particularly at the regulatory front. How do we stimulate that

667
00:33:56,240 --> 00:33:57,920
Speaker 15: and support on the energy front. You heard this one

668
00:33:57,960 --> 00:34:02,840
Speaker 15: hundred billion dollar number coming out of Open AI and others.

669
00:34:03,000 --> 00:34:05,240
Speaker 15: So I think we need to bring all those together

670
00:34:05,760 --> 00:34:07,160
Speaker 15: and to put our foot on the gas.

671
00:34:07,600 --> 00:34:10,279
Speaker 4: You were pretty heavily involved in the Trump campaign. Are

672
00:34:10,280 --> 00:34:11,360
Speaker 4: they asking you for advice?

673
00:34:12,280 --> 00:34:15,520
Speaker 15: I've done my best, So I've certainly believed that in

674
00:34:16,000 --> 00:34:17,719
Speaker 15: the current environment, we need to put our foot on

675
00:34:17,760 --> 00:34:20,560
Speaker 15: the gas when it comes to extending American technology leadership,

676
00:34:20,560 --> 00:34:23,480
Speaker 15: and that is an interdisciplinary process. Requires that we bring

677
00:34:23,520 --> 00:34:31,120
Speaker 15: together immigration, energy rethinking, education of course, permitting and regulatory reform,

678
00:34:31,160 --> 00:34:33,680
Speaker 15: and subsidies and technology, and so we have to bring

679
00:34:33,719 --> 00:34:35,319
Speaker 15: all these things to bear. And so my advice to

680
00:34:35,360 --> 00:34:37,600
Speaker 15: them has to kind of draw down these walls of

681
00:34:37,600 --> 00:34:42,320
Speaker 15: bureaucracy and siloed different departments and instead kind of get interdisciplinary,

682
00:34:42,640 --> 00:34:45,439
Speaker 15: interagency working groups together. We don't just need a ZAR

683
00:34:45,520 --> 00:34:48,400
Speaker 15: for AI and crypto, We need zars for shipbuilding, drones,

684
00:34:48,480 --> 00:34:49,960
Speaker 15: hypersonic missiles, et cetera.

685
00:34:50,440 --> 00:34:53,840
Speaker 4: What's so interesting about the Great China Growth etf The

686
00:34:53,920 --> 00:34:55,560
Speaker 4: tagline if you go on to have a look, is

687
00:34:55,560 --> 00:34:59,080
Speaker 4: it accessing China alpha without compromising American national security or

688
00:34:59,120 --> 00:34:59,960
Speaker 4: American values.

689
00:35:00,680 --> 00:35:01,799
Speaker 3: How do you.

690
00:35:01,920 --> 00:35:05,840
Speaker 4: Invest in a BYD when suddenly news of potentially BYD

691
00:35:05,920 --> 00:35:08,760
Speaker 4: having autonomous vehicles sends TESA shares down and the biggest

692
00:35:08,760 --> 00:35:09,680
Speaker 4: points drag on the day.

693
00:35:09,880 --> 00:35:10,080
Speaker 5: Yeah.

694
00:35:10,120 --> 00:35:11,960
Speaker 15: So our strapline from a year and a half ago,

695
00:35:12,000 --> 00:35:13,840
Speaker 15: which I think we preempted the market a bit, was

696
00:35:13,840 --> 00:35:16,960
Speaker 15: America First Equities investing. We know people still wanted to

697
00:35:17,000 --> 00:35:18,400
Speaker 15: access China, and we knew one of the things that

698
00:35:18,480 --> 00:35:20,120
Speaker 15: was scaring them away from China was a fear that

699
00:35:20,200 --> 00:35:22,080
Speaker 15: they would be investing in companies that might show up

700
00:35:22,080 --> 00:35:24,440
Speaker 15: on a blacklist or a gray list. We also identified

701
00:35:24,440 --> 00:35:27,399
Speaker 15: their biggest competitor, k Web was CCP owned, so it's

702
00:35:27,440 --> 00:35:31,080
Speaker 15: owned by CICC, which is an SOE asset manager of

703
00:35:31,080 --> 00:35:33,239
Speaker 15: the Chinese government. And so we first determined that we

704
00:35:33,239 --> 00:35:35,320
Speaker 15: could be American owned entity and so we wouldn't have

705
00:35:35,320 --> 00:35:38,080
Speaker 15: any influence from the Chinese government. Second, we'd filter our

706
00:35:38,160 --> 00:35:40,880
Speaker 15: equities by looking at what was coming out of Congress,

707
00:35:40,880 --> 00:35:43,640
Speaker 15: what was coming out of Treasury and Commerce in terms

708
00:35:43,680 --> 00:35:46,399
Speaker 15: of entities lists, gray lists, and then we would even

709
00:35:46,440 --> 00:35:48,800
Speaker 15: go a step further and bring in former government officials

710
00:35:48,800 --> 00:35:50,520
Speaker 15: to kind of vet these names and ensure that they

711
00:35:50,520 --> 00:35:53,560
Speaker 15: weren't compromising American national security or value. So working with

712
00:35:53,600 --> 00:35:58,160
Speaker 15: the PLA, working with organizations that were involved in slave labor,

713
00:35:58,160 --> 00:36:00,920
Speaker 15: some other form of American values.

714
00:36:01,840 --> 00:36:04,920
Speaker 2: Ben, let's stick with your point about access to China.

715
00:36:05,080 --> 00:36:08,240
Speaker 2: Do you expect this administration to take a tougher stance

716
00:36:08,719 --> 00:36:13,080
Speaker 2: on curtailing VC's ability to invest in Chinese companies?

717
00:36:13,719 --> 00:36:16,160
Speaker 15: I think it will. So they call that the Overseas

718
00:36:16,160 --> 00:36:19,960
Speaker 15: Investment Program the OIP coming out of Treasury. I think

719
00:36:19,960 --> 00:36:21,919
Speaker 15: that that program needs to be expanded and be made

720
00:36:21,920 --> 00:36:24,880
Speaker 15: more concrete. Over the Biden administration, it was more of

721
00:36:24,880 --> 00:36:27,960
Speaker 15: a reporting mechanism certain something that dissuaded a lot of capital,

722
00:36:28,000 --> 00:36:31,160
Speaker 15: but didn't specifically restrict it. I do believe that American

723
00:36:31,160 --> 00:36:34,000
Speaker 15: money should be used to develop American innovation, and so

724
00:36:34,680 --> 00:36:36,479
Speaker 15: to the extent that we can keep money at home

725
00:36:36,520 --> 00:36:39,000
Speaker 15: and use it to build the next generation of open ais,

726
00:36:39,080 --> 00:36:42,560
Speaker 15: the next generation of electric vehicles, of drone companies, of

727
00:36:42,600 --> 00:36:46,440
Speaker 15: next generation military defense, that's a critical use of that capital.

728
00:36:46,400 --> 00:36:48,480
Speaker 15: And so I hope to see that program made more

729
00:36:48,480 --> 00:36:51,399
Speaker 15: concrete and expanded. At the same time, I think China

730
00:36:51,440 --> 00:36:53,080
Speaker 15: and the United States are going to be in better

731
00:36:53,160 --> 00:36:55,440
Speaker 15: kind of collaboration when it comes to just day to

732
00:36:55,520 --> 00:36:58,759
Speaker 15: day business dynamics, because there's a lot of the intractable

733
00:36:58,800 --> 00:37:01,360
Speaker 15: issues and fears that were kind of getting in the

734
00:37:01,400 --> 00:37:05,040
Speaker 15: way and wedging during the last administration are no longer there,

735
00:37:05,040 --> 00:37:07,200
Speaker 15: and this is much more of a dollars and cents conversation.

736
00:37:08,440 --> 00:37:12,840
Speaker 2: Well, sticking with policy here, immigration and H ONEB visas

737
00:37:12,840 --> 00:37:14,680
Speaker 2: are also a bit up in the air as it

738
00:37:14,719 --> 00:37:17,799
Speaker 2: relates to AI. AI depends a lot on those two

739
00:37:17,920 --> 00:37:20,680
Speaker 2: things to be able to fuel its pipeline of talent.

740
00:37:20,880 --> 00:37:22,280
Speaker 3: A lot of this talent is coming from.

741
00:37:22,160 --> 00:37:25,200
Speaker 2: Outside the US. Do you think that the administration's position

742
00:37:25,640 --> 00:37:28,439
Speaker 2: could actually undercut our efforts to stain the lead in AI.

743
00:37:29,160 --> 00:37:30,759
Speaker 15: There's clearly a bit of a split here, and we

744
00:37:30,760 --> 00:37:32,640
Speaker 15: saw that battle a few weeks ago that really played

745
00:37:32,640 --> 00:37:34,920
Speaker 15: out over Twitter, and the President i think reaffirmed his

746
00:37:35,000 --> 00:37:37,239
Speaker 15: commitment to the H one B one program. I think

747
00:37:37,320 --> 00:37:38,919
Speaker 15: we need to look at that as a stop gap.

748
00:37:38,960 --> 00:37:41,560
Speaker 15: Clearly one of America's greatest advantages that we attracted the

749
00:37:41,560 --> 00:37:45,240
Speaker 15: world's best minds to our shores through our university system,

750
00:37:45,520 --> 00:37:48,160
Speaker 15: but education as a whole in America needs to be reformed.

751
00:37:48,160 --> 00:37:50,000
Speaker 15: We need to look at maybe, for instance, the German

752
00:37:50,040 --> 00:37:53,440
Speaker 15: model of trade schools, hulk Schule's gymnaseums, where we split

753
00:37:53,520 --> 00:37:56,240
Speaker 15: kids off much earlier and send them to trade schools

754
00:37:56,239 --> 00:37:58,279
Speaker 15: where they can learn a lot of those tooling and

755
00:37:58,400 --> 00:38:00,840
Speaker 15: mechanic type roles that can be brought to bear in

756
00:38:00,920 --> 00:38:04,320
Speaker 15: these next generation technologies, be it defense, American kind of

757
00:38:04,320 --> 00:38:06,839
Speaker 15: smart manufacturing, et cetera. And so I think we need

758
00:38:06,880 --> 00:38:08,880
Speaker 15: to look deeply at education as a whole and not

759
00:38:09,000 --> 00:38:11,440
Speaker 15: just rely on foreign talent as a stopgap, but think

760
00:38:11,440 --> 00:38:14,600
Speaker 15: about how we start training American born citizens for next

761
00:38:14,640 --> 00:38:16,320
Speaker 15: generation technology enabled roles.

762
00:38:16,840 --> 00:38:20,640
Speaker 4: What's interesting is when you were saying you foresaw almost

763
00:38:20,680 --> 00:38:24,000
Speaker 4: this America first idea of investing in China, you understood

764
00:38:24,080 --> 00:38:25,759
Speaker 4: what was potentially going to end up on a gray

765
00:38:25,760 --> 00:38:28,279
Speaker 4: list or a blacklist, but you love and Tencent was

766
00:38:28,280 --> 00:38:30,640
Speaker 4: put on a blacklist. Do sometimes we throw babies out

767
00:38:30,640 --> 00:38:33,719
Speaker 4: with bathwater when we're looking at what is really a

768
00:38:33,840 --> 00:38:36,720
Speaker 4: Chinese military challenge to the United States.

769
00:38:36,880 --> 00:38:39,560
Speaker 15: There are certainly companies that have dual use technologies and

770
00:38:39,560 --> 00:38:43,560
Speaker 15: that have very broad array of different discipline. So, for instance, Alibaba,

771
00:38:43,719 --> 00:38:45,600
Speaker 15: well it's known as an e commerce player, also has

772
00:38:45,640 --> 00:38:47,600
Speaker 15: their own cloud business that bumps up against the likes

773
00:38:47,640 --> 00:38:51,000
Speaker 15: of Amazon, Tencent has cloud, some of them have geospatial

774
00:38:51,040 --> 00:38:53,040
Speaker 15: and other kind of forms of engineering, and so this

775
00:38:53,160 --> 00:38:55,360
Speaker 15: is a constantly evolving process. And that's exactly why we

776
00:38:55,360 --> 00:38:57,719
Speaker 15: think you need an active management because you can't sit

777
00:38:57,760 --> 00:38:59,640
Speaker 15: on an index and just trade these equities. So we've

778
00:38:59,640 --> 00:39:00,880
Speaker 15: got to be able to move in and out of

779
00:39:00,920 --> 00:39:04,320
Speaker 15: them as we think see things coming out of DoD Congress,

780
00:39:04,400 --> 00:39:04,840
Speaker 15: et cetera.

781
00:39:05,160 --> 00:39:08,480
Speaker 4: Natest you might have been exposed if Dominimus was something

782
00:39:08,520 --> 00:39:11,040
Speaker 4: you'd been depending on for some of these e commerce

783
00:39:11,080 --> 00:39:14,600
Speaker 4: players in China. Are we likely to see barriers put

784
00:39:14,680 --> 00:39:18,080
Speaker 4: up to Chinese trade ever more? But even just me

785
00:39:18,120 --> 00:39:20,239
Speaker 4: as a consumer trying to access cheaper goods.

786
00:39:20,040 --> 00:39:22,360
Speaker 15: Well, I think the dominimous kind of tax loophole was

787
00:39:22,360 --> 00:39:25,600
Speaker 15: something that needed to be closed. She and obviously tim

788
00:39:25,640 --> 00:39:28,040
Speaker 15: Wu and others are really putting a lot of American

789
00:39:28,040 --> 00:39:29,960
Speaker 15: companies out of business or eating their market share, be

790
00:39:30,000 --> 00:39:31,000
Speaker 15: it Amazon.

791
00:39:30,920 --> 00:39:33,279
Speaker 9: Or the likes. I think that was doing okay, right,

792
00:39:33,480 --> 00:39:34,160
Speaker 9: they're doing fine.

793
00:39:34,160 --> 00:39:36,040
Speaker 15: But even some of these smaller offline stores I think

794
00:39:36,040 --> 00:39:37,680
Speaker 15: are having some of that market share now eaten by

795
00:39:37,680 --> 00:39:39,880
Speaker 15: the likes of Timu, and they're building their own fulfilled

796
00:39:39,880 --> 00:39:42,560
Speaker 15: by Amazon models. So definitely we want to favor or

797
00:39:42,600 --> 00:39:44,719
Speaker 15: have a level playing field, and so that you know,

798
00:39:44,760 --> 00:39:47,560
Speaker 15: this affects Amazon as well. I think a lot of

799
00:39:47,400 --> 00:39:50,000
Speaker 15: the impact of that that was already baked in the

800
00:39:50,120 --> 00:39:53,240
Speaker 15: actual numbers coming out of tim WU aren't necessarily included

801
00:39:53,280 --> 00:39:55,960
Speaker 15: in PDDs kind of projections, I think, And so our

802
00:39:56,000 --> 00:39:57,879
Speaker 15: view is that PDD is still a strong name even

803
00:39:57,920 --> 00:40:00,640
Speaker 15: in spite of these these new Dominimus regulations.

804
00:40:01,760 --> 00:40:05,239
Speaker 2: That's Ben Harberg of Core Values Alpha. Thanks for joining us.

805
00:40:06,520 --> 00:40:09,480
Speaker 2: Looking ahead to after the closing bell today, Amazon is

806
00:40:09,520 --> 00:40:12,120
Speaker 2: slated to report its earnings and is expected to report

807
00:40:12,120 --> 00:40:15,560
Speaker 2: that revenue grow ten percent in the fourth quarter. Bloomberg's

808
00:40:15,600 --> 00:40:17,080
Speaker 2: Ryan Westellica joins us.

809
00:40:17,120 --> 00:40:18,880
Speaker 3: Now for more, Ryan.

810
00:40:18,800 --> 00:40:22,960
Speaker 2: Aws is the cloud computing titan. What are investors expecting

811
00:40:23,000 --> 00:40:24,120
Speaker 2: to see from that unit today?

812
00:40:25,320 --> 00:40:26,360
Speaker 9: Hey, thanks for having me.

813
00:40:26,520 --> 00:40:28,719
Speaker 16: I think people are expecting a pretty strong quarter, but

814
00:40:28,760 --> 00:40:30,919
Speaker 16: it does come in the wake of disappointments from both

815
00:40:30,960 --> 00:40:33,960
Speaker 16: Microsoft and Alphabet, which are number two and three in

816
00:40:34,040 --> 00:40:36,359
Speaker 16: the sector. So sorting a little bit of a more

817
00:40:36,400 --> 00:40:39,279
Speaker 16: cautious uh, you know, you know lead up going into

818
00:40:39,280 --> 00:40:39,960
Speaker 16: these results.

819
00:40:40,600 --> 00:40:43,239
Speaker 4: It's interesting that that likely to have committed more than

820
00:40:43,280 --> 00:40:45,800
Speaker 4: seventy billion in CAPEX for this year and even more

821
00:40:46,160 --> 00:40:46,719
Speaker 4: going forward.

822
00:40:46,719 --> 00:40:47,560
Speaker 3: To be comfortable with the.

823
00:40:47,520 --> 00:40:49,200
Speaker 4: Amount of spending on AI build out.

824
00:40:50,360 --> 00:40:52,520
Speaker 16: Well, we've seen so many other companies come out and

825
00:40:52,560 --> 00:40:55,359
Speaker 16: really lift their targets. Alphabet earlier in the week, Meta

826
00:40:55,440 --> 00:40:58,080
Speaker 16: not too long ago, Microsoft, These are all the major

827
00:40:58,160 --> 00:41:01,320
Speaker 16: cloud hyperscalers, and it wouldn't be surprising to see Amazon

828
00:41:01,360 --> 00:41:03,719
Speaker 16: do a similar kind of boost. Although you know, some

829
00:41:03,760 --> 00:41:06,040
Speaker 16: of these were like, you know, fifty percent more than

830
00:41:06,040 --> 00:41:07,880
Speaker 16: people were expecting. Whether we see something like that I

831
00:41:07,880 --> 00:41:09,840
Speaker 16: think would be pretty shocking, but it wouldn't be surprising

832
00:41:09,840 --> 00:41:11,960
Speaker 16: to see them bring up their caffects at least somewhat.

833
00:41:12,200 --> 00:41:14,719
Speaker 4: We were just talking to Ben Harberg about Deminimus and

834
00:41:14,760 --> 00:41:17,360
Speaker 4: the impact on Chinese competition for Amazon from an e

835
00:41:17,360 --> 00:41:20,120
Speaker 4: commerce perspective. Briefly, Ryan, what we hear about how it

836
00:41:20,160 --> 00:41:22,680
Speaker 4: will impact the business, the duties on Chinese rivals.

837
00:41:23,960 --> 00:41:25,400
Speaker 9: I'm very curious to see that.

838
00:41:25,480 --> 00:41:27,319
Speaker 16: So far, we haven't seen too much reaction in the

839
00:41:27,360 --> 00:41:29,440
Speaker 16: stock to the idea of you know, a trade war

840
00:41:29,520 --> 00:41:31,680
Speaker 16: or tariffs against China or something like that, but certainly

841
00:41:31,680 --> 00:41:34,440
Speaker 16: to the extent that we see less competition from these

842
00:41:34,480 --> 00:41:37,840
Speaker 16: lower price rivals. That's certainly a good thing for Amazon

843
00:41:37,880 --> 00:41:39,839
Speaker 16: and its e commerce market share where it is, of course,

844
00:41:39,880 --> 00:41:41,680
Speaker 16: you know, still major player here in the States.

845
00:41:42,000 --> 00:41:44,400
Speaker 4: Bloomberg's ran place. Selka, It's great to have you on.

846
00:41:44,680 --> 00:41:45,480
Speaker 4: Thank you, thank you.

847
00:41:45,719 --> 00:41:45,879
Speaker 5: Now.

848
00:41:45,920 --> 00:41:48,000
Speaker 4: That does it for this edition of Bloomberg Technology. You

849
00:41:48,040 --> 00:41:50,440
Speaker 4: do not want to forget to check out our podcast.

850
00:41:50,480 --> 00:41:52,040
Speaker 4: You can find it on the terminal as well as

851
00:41:52,080 --> 00:41:55,000
Speaker 4: online on Apple, Spotify, and iHeart and tune into the

852
00:41:55,040 --> 00:41:57,040
Speaker 4: Earnings after the bell Amazon across the deck.

853
00:41:57,320 --> 00:42:02,759
Speaker 3: This is Bloomberg Technology, who took them