Speaker 1: From the heart of where innovation, money and power collide
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Caroline Hyde and Ed Ludlow.
Speaker 2: Live from San Francisco. This is Bloomberg Technology coming up
Speaker 2: more tariffs. President Trump initiates trade probes into semiconductors and
Speaker 2: pharmaceutical imports. Plus Trump pledges expedited permits for Nvidia and
Speaker 2: other companies investing in the US. And Estranis has big
Speaker 2: satellite plans for Taiwan. How the nation could have full
Speaker 2: bandwidth as early as next year. Let's get straight to markets.
Speaker 2: Our focus today is the chip industry, with the administration
Speaker 2: pressing forward with a plan to impose the civic tarifs
Speaker 2: on semis. Actually, in the last thirty minutes or so,
Speaker 2: equity markets have pulled back, but there is some outperformance
Speaker 2: in the Philadelphia Semiconductor Index. The logic that I'm hearing
Speaker 2: from people is certainty, we kind of now know more
Speaker 2: about what's happening in terms of the specific movers. Nvidia
Speaker 2: continues to be in the headlines right They pledge to
Speaker 2: produce five hundred billion dollars worth of AI infrastructure in
Speaker 2: the United States within the next four years, but there
Speaker 2: are questions about capital expenditures, generally on the hyperscalers. Amazon
Speaker 2: is one of the big movers to the downside, particularly
Speaker 2: on the Nasdaq one hundred as a point drag. HPE
Speaker 2: Enterprise reporting from Bloomberg citing sources that Elliott's taken a
Speaker 2: one point five billion dollar state. Later in the program,
Speaker 2: we'll get full details of that. It's an important story
Speaker 2: this morning. Let's get back to our top story. The
Speaker 2: Trump administration has initiated trade probes into semiconductor imports. It's
Speaker 2: a precursor to broader levies on chips. Bluebog. Tyler Kendall
Speaker 2: has the details from the White House. Good morning, Tyler, Yeah,
Speaker 2: Good morning, ed.
Speaker 3: While the White House has formally announced its Section two
Speaker 3: thirty two investigation, which is widely seen as a precursor
Speaker 3: for the administration to implement tariffs on the basis of
Speaker 3: national security concerns, and we learned that the investigation actually
Speaker 3: started back on April first. That means that the Commerce Secretary,
Speaker 3: Howard Lutnik now has two hundred and seventy days from then,
Speaker 3: so roughly nine months, to release his finding report, which
Speaker 3: would then spur the tariffs into place. But we know
Speaker 3: that this White House is really looking at more of
Speaker 3: an expedited timeline here. Howard Lutnik himself has said that
Speaker 3: we could see these tariffs ultimately implemented in the next
Speaker 3: one to two months. We have to keep in mind
Speaker 3: this investigation really is wide ranging. It includes chips, but
Speaker 3: it also includes the equipment used to make the chips
Speaker 3: as well as those downstream consumer electronics that contain them.
Speaker 3: The Commerce Department says that they are looking at legacy
Speaker 3: chips as well as cutting edge chips that are used
Speaker 3: in artificial intelligence applications.
Speaker 2: Now, this White House really.
Speaker 3: Has taken more of a stick versus cart approach when
Speaker 3: it comes to chip makers. President Trump long criticizing the
Speaker 3: Chips and Science Act with its subsidies and funding, instead
Speaker 3: safeing that his tariff plan will spur production in the US,
Speaker 3: and actually, yesterday from the Oval Office, president Trump saying
Speaker 3: that a recent Invidia manufacturing announcement was a result of
Speaker 3: his tariffs, but ed, as you well know and have
Speaker 3: mentioned and reported on, President Trump implied that in video
Speaker 3: was investing five hundred billion dollars in the US, when
Speaker 3: rather the announcement was that they are pledging to produce
Speaker 3: five hundred billion dollars worth of goods in the US the.
Speaker 2: Books Tyler Kenda at the White House, thank you very much.
Speaker 2: The President also pledged to make it easier for Nvidia
Speaker 2: and other companies that are committed to the United States.
Speaker 2: By Brady Ford in New York has the details of that.
Speaker 2: But also I think we need to recap some of
Speaker 2: the numbers from the Nvidia announcement yesterday. Good morning, Brady,
Speaker 2: Good morning. Five hundred billion of goods. That is the
Speaker 2: amount that in video said that is the kind of
Speaker 2: upper limit of what it's targeting as it invests more
Speaker 2: in building in the US.
Speaker 4: It said that it's going to be making chips out
Speaker 4: of Phoenix with TSMC, making servers out of Texas with
Speaker 4: Fox Con. And I mean this is in line with
Speaker 4: the announcements we've been hearing from companies like Apple or
Speaker 4: open Ai or Eli Lilly that as tariffs are hitting,
Speaker 4: as Trump is putting on pressure, companies feel this urge,
Speaker 4: this kind of need to show that, look, we have
Speaker 4: an ability to produce in America, and I imagine it
Speaker 4: helps them a lot. With the administration as well. We
Speaker 4: saw that in Trump's tweet today that look, if you
Speaker 4: are being part of what he calls the you know,
Speaker 4: Golden age of America and investing here, we're going to
Speaker 4: try to help you out. He said that we're going
Speaker 4: to expedite permits.
Speaker 5: Those are done at the local level.
Speaker 4: But of course, if someone at the top of the
Speaker 4: food chain is telling you, as a local government official,
Speaker 4: that hey, let's let's get these on the road. You know,
Speaker 4: I write a lot about data centers, and yes, waiting
Speaker 4: for utilities, waiting for permits, these things can slow down projects.
Speaker 2: Brady Ford's going to be that later in the hour
Speaker 2: with that Hpe Elliott News as well, Brady Ford, Bloomberg News,
Speaker 2: thank you. What does the tariff news this morning mean
Speaker 2: free technology investors? And what's the outlook in particular for
Speaker 2: AI CAPEX JP Morgan Asset Management Global market strategist Stephanie
Speaker 2: Aliaga joins us now, and I think we start there right,
Speaker 2: which is the news and certainty. I look at the
Speaker 2: Philadelphia Semiconductor Index, it's slightly higher versus other benchmarks this morning.
Speaker 2: Section two three to two is an interesting strategy, but
Speaker 2: maybe the market knows more now than it did, say
Speaker 2: forty eight hours ago.
Speaker 5: Thank you, Ed. It's been remarkable.
Speaker 6: You know, at the beginning of this year, we saw
Speaker 6: a real rerating of a lot of those leading tech
Speaker 6: companies and a lot of scrutiny around the AI CAPEC cycle.
Speaker 6: A lot of that was due to concerns around deep
Speaker 6: seek and also the fact that those leading tech companies
Speaker 6: were over owned and overloved perhaps. But now in the
Speaker 6: last couple weeks, what we've seen is market shift to
Speaker 6: really begin to appreciate how these companies are the poster
Speaker 6: children of globalization and they are highly exposed to the
Speaker 6: trade war that is going on right now, all of
Speaker 6: these different tariff headlines, and you can see these companies
Speaker 6: are quite actively trying to figure out ways to show
Speaker 6: that they can reshore some production or expedite some of
Speaker 6: that processes. But at the end of the day, not
Speaker 6: only are the mag seven let's take, highly globally exposed
Speaker 6: in their suppliers and their revenue, but they're also cyclically exposed.
Speaker 6: And you mentioned the capex cycle and what the outlook
Speaker 6: is there. A lot of those assumptions will to become
Speaker 6: under a greater scrutiny if we have a slower moving economy.
Speaker 2: Does the outlook for AI CAPEX hold, get cut or
Speaker 2: grow based on what's happening.
Speaker 6: First, we need to consider just how significant the rates
Speaker 6: of growth that we saw in capex were over the
Speaker 6: last two years. The hyperscalers grew more than fifty percent
Speaker 6: in their cap BAX expenditures from twenty twenty reader twenty
Speaker 6: twenty four. Is that rate of growth sustainable, particularly in
Speaker 6: an environment where we're looking at a likely cooler economy,
Speaker 6: a lot of uncertainty. So I think some of that
Speaker 6: frauth comes down longer term.
Speaker 5: There's still a lot.
Speaker 6: Of CAPEX that needs to be spent on AI, but
Speaker 6: in this environment of uncertainty, management teams are going to
Speaker 6: be really focused on defending margins and ways that they
Speaker 6: can indeed the bottom line.
Speaker 2: Okay, defending Martin. There's some calculus that the cell side
Speaker 2: is doing that the CEOs of all of these companies
Speaker 2: are doing. Which is and bear with me on it.
Speaker 2: If you on shore you're manufacturing or the assembling of
Speaker 2: your electronics component to America, it's probably more expensive. The
Speaker 2: cost of doing business is greater by let's say twenty
Speaker 2: five percent. But you face a choice because if your
Speaker 2: components come for a market where there is a levee
Speaker 2: of tariff or tariff of twenty five percent net, you've
Speaker 2: got a decision to make right, what's the most cost
Speaker 2: effective and do you pass it on to the customer?
Speaker 2: How is that impacting your view of markets right now?
Speaker 6: Absolutely, tariffs do nothing to stimulate demand, and immediately what
Speaker 6: they're going to do is increase costs. And it's not
Speaker 6: as easy to just pass those costs along to your
Speaker 6: consumers because then that will tighten or shrink the amount
Speaker 6: of demand that you're facing that you're getting from those
Speaker 6: consumers as well.
Speaker 5: So I think that's the overall risk here.
Speaker 6: You know, supply chains they can adjust, they have been
Speaker 6: over the last many years, but it takes time, it
Speaker 6: costs a lot of money. And there was a reason
Speaker 6: why they were so global in nature to begin with.
Speaker 6: They were optimized that way, and it's a big reason
Speaker 6: why these tech companies have been able to defend and
Speaker 6: grow their profit margins on a secular basis over the
Speaker 6: last many years.
Speaker 2: There's a little discussion in the media about how financial
Speaker 2: institutions like the one you work for put more emphasis
Speaker 2: on geopolitical analysis than fundamental analysis. Perhaps historically that balance
Speaker 2: has been different. We had a headline from the European
Speaker 2: Union about full minutes ago that cause markets to pull back,
Speaker 2: which is the EU doesn't think there's going to be
Speaker 2: any movement on tariffs and talk so not going very well.
Speaker 2: Could you just explain to our audience, like, when you
Speaker 2: think about the technology sector from an equity markets perspective,
Speaker 2: how you factor in the politics of this, how one
Speaker 2: jurisdiction behaves with regards to another.
Speaker 6: Absolutely, there's a lot of uncertainty and headline volatility right
Speaker 6: now in the midst of all of these negotiations. I
Speaker 6: think on the medium to longer term, the reality is
Speaker 6: the chip industry, for instance, but also a lot of
Speaker 6: these other highly sophisticated tech services are very globally integrated
Speaker 6: and it is very difficult to immediately decouple. Now we're
Speaker 6: likely going to see greater efforts around that as we
Speaker 6: have been over the last few years, so that remains
Speaker 6: a risk. But I do think it's notable of all
Speaker 6: of the sectors that are at risk or exposed to
Speaker 6: these tariffs, and there are many of them, that the
Speaker 6: tech sector was the first one that was really granted.
Speaker 6: These kind of sweeping are broad based exemptions at least temporarily,
Speaker 6: and I think there is an understanding that this is
Speaker 6: very mission critical for the US and maintaining its tech leadership.
Speaker 5: And maybe at the end of all of.
Speaker 6: This, perhaps you know the too big to be faced
Speaker 6: with massive tariffs from the administration's policies.
Speaker 2: Stephanie ilg JPB Organ Asset Management. Terrific to have you
Speaker 2: on the program. Thank you very much. Now, coming up
Speaker 2: navigating the tech tariff uncertainty, We're going to go back
Speaker 2: and have more on the offs and ons of tariffs,
Speaker 2: so we step back from the brink. Do we know
Speaker 2: more that conversation? Next this is Bloomberg Technology. Back to
Speaker 2: our top story tariffs coming for the chip sector. With
Speaker 2: new tariffs reshaping global trade, technology faces rising costs and
Speaker 2: fresh uncertainty. To help us understand the broader policy implications,
Speaker 2: Joining us now, Karen Cornblue Milkin Institute, Senior Advisor for
Speaker 2: Emerging Technology, a former Principal Deputy White House Chief Technology Officer,
Speaker 2: also Ambassador to the OECD under Barack Obama. Let's start
Speaker 2: with the certainty or uncertainty piece today as it stands
Speaker 2: with the Section two thirty two probe launched into the
Speaker 2: semiconductor industry. Do we understand what this administration's tariff policy is?
Speaker 5: That is the question of the hour.
Speaker 7: I mean, I think it's quite remarkable and we should
Speaker 7: start there that this sector, which is arguably the critical
Speaker 7: sector for our economy for national security, we seem to
Speaker 7: be making policy on the fly. So what happened on Friday,
Speaker 7: Customs put out a list and it became clear that electronics,
Speaker 7: not just semiconductors, were going to be exempt from.
Speaker 5: The reciprocal tariffs.
Speaker 7: Then over the weekend, the Commerce Secretary Lutnik said, well,
Speaker 7: that's only going to be this reprieve is only temporary.
Speaker 7: Then Stephen Miller, the President's deputy chief of staff, said
Speaker 7: that they'd be subject to this national security review, and
Speaker 7: the President reiterated that, saying that the tariffs were going
Speaker 7: to be twenty five percent plus. So making policy for
Speaker 7: this incredible sector over the weekend. And what's so incredible
Speaker 7: is that this is the sector that is you know,
Speaker 7: especially the mag seven right, they're ten percent of GDP,
Speaker 7: They're a huge proportion of the S and P.
Speaker 5: And here we are making.
Speaker 2: Policies like this. Let me ask you, this is about communication.
Speaker 2: You know you've held Office in the White House in
Speaker 2: the field of technology. You've been in an ambassador to
Speaker 2: the OECD. An understand global trade, the communication from this administration,
Speaker 2: How is it received, interpreted, understood and acted on by
Speaker 2: other jurisdictions like the European Union or China for example.
Speaker 7: I mean, you know this to make policy and change
Speaker 7: it like this is so difficult for other countries to
Speaker 7: adjust to, you know, they I mean, we just saw
Speaker 7: this with Europe today.
Speaker 5: But I think they've been prepared.
Speaker 7: That's what's interesting here is that I think you see
Speaker 7: not only some companies like Apple seems to have been
Speaker 7: planning for a long time for this kind of disrupt
Speaker 7: not this level of disruption, but some disruption. China seems
Speaker 7: to be prepared and not being caught flat footed. But still,
Speaker 7: as you know, the global supply chains are involved, so
Speaker 7: much investment, involves so much time, and this kind of
Speaker 7: disruption is incredibly difficult for them. But then as you're
Speaker 7: asking about the countries, governments are not that familiar with
Speaker 7: the inner workings of these sectors, and so they're learning
Speaker 7: on the fly as well what's important, not what's not important,
Speaker 7: and what the implications of all this are and for
Speaker 7: them to do that kind of homework and then respond
Speaker 7: is incredibly difficult.
Speaker 2: What is the end goal of using tariffs as a
Speaker 2: tool policy for this administration?
Speaker 7: Karen Well, at the risk of sandwashing, which is a
Speaker 7: term that's been used here to and when people try
Speaker 7: to interpret some of the Trump administration's policies, it seems
Speaker 7: like the tariffs are gradually falling into three main buckets.
Speaker 7: One is about raising revenue the ten percent across the
Speaker 7: board tariffs, which could raise two hundred billion dollars or more.
Speaker 7: A second one, which is where we see the semiconductors,
Speaker 7: the semiconductor machinery and the electronics, as well as steel, autos,
Speaker 7: aluminum falling, maybe timber, is national security. And then there's
Speaker 7: a third one, which is the overall competitiveness and job creation,
Speaker 7: where we see these reciprocal tariffs that look like they're
Speaker 7: for negotiating down tariffs overseas.
Speaker 2: Should I ask you about that third bucket, because the
Speaker 2: big headline of the last twenty four hours is this
Speaker 2: commitment from Nvidia to build five hundred billion dollars worth
Speaker 2: of AI infrastructure. We're talking goods and sales, not a
Speaker 2: CAPEX commitment in America and the criticism of the past administration,
Speaker 2: which you participated in and served in, was that the
Speaker 2: Chips Act on paper was one thing, but unlocking the
Speaker 2: funding from it and actually getting people moving to onshore
Speaker 2: didn't really happen. Is Trump now achieving that with a different.
Speaker 7: Tool, Well, I mean it remains to be seen. You know,
Speaker 7: there are a bunch of there were announcements made under
Speaker 7: Trump one. There were announcements of a huge amount of investment,
Speaker 7: and there was actually quite a lot of investment that
Speaker 7: was made under Biden as well. So far these are
Speaker 7: these are announcements, the Apple announcement, the Nvidia announcement, the
Speaker 7: TSMC announcement. TSMC in the past has made announcements of investments,
Speaker 7: but then they haven't been able to find the.
Speaker 5: Workers that they need.
Speaker 7: And what you're going to see now for all of
Speaker 7: these companies, they may make announcements, but when it comes
Speaker 7: down to it, their prices are going to go up.
Speaker 7: There's going to be a delay in there being able
Speaker 7: to get the equipment, and then there's a worker shortage.
Speaker 7: So if we want to see any of this come,
Speaker 7: I think we're going to have to We're going to
Speaker 7: have to lock down the certainty we can't be driving
Speaker 7: prices up and there needs to be serious workforce training.
Speaker 2: Current to end. Are we stepping back from the brink here?
Speaker 2: Or is this just a pause while the administration kind
Speaker 2: of works out the most effective method.
Speaker 7: So the two thirty two, the section two thirty two investigation,
Speaker 7: this is the national security invest stigation that's going to
Speaker 7: happen for the electronics that they put a deadline on
Speaker 7: comments for a month from now, and they're going to
Speaker 7: move really quickly. I think the President has really stuck
Speaker 7: his neck out. He personally has said that the tariffs
Speaker 7: are going to be twenty five percent plus, So I
Speaker 7: think we can expect to see those And when you
Speaker 7: think about that plus perhaps the fentanyl terror or certainly
Speaker 7: this fentanyl tariffs of twenty percent from China, I think
Speaker 7: you're going to still see very high tariffs.
Speaker 5: I think you're going to see uncertainty. I think you're
Speaker 5: going to see raising costs.
Speaker 7: So I hope you know, as they're making policy on
Speaker 7: the fly, they're going to realize how critical this sector
Speaker 7: is and they're going to address a bunch of those
Speaker 7: vulnerabilities in this policy where they can't reach the results
Speaker 7: they want to reach.
Speaker 2: Karen Cornblue, former US Ambassador to the OECD. Grateful to
Speaker 2: have you on the program. Thank you. Metas Mark Zuckerberg
Speaker 2: took to the witness stand yesterday and an historic antitrust
Speaker 2: trial in which the FTC alleges Meta's purchase of Instagram
Speaker 2: and WhatsApp destroyed competition. Joining us now as Schweter Cojuria
Speaker 2: of Wolf Research, who currently has an outperform rating on
Speaker 2: Meta with a six hundred and forty dollars target price.
Speaker 2: I'm looking at the stock. We're basically flat. In the session,
Speaker 2: we'll get to the details of this trial, but simply
Speaker 2: is there or is there not antitrust risk in this name?
Speaker 5: I think there is. Yes.
Speaker 8: It would be difficult to say no, given that there
Speaker 8: is an ongoing case, which I think that will be
Speaker 8: stretched for several weeks now. And the bigger question also
Speaker 8: is if there is a likelihood of a settlement. If
Speaker 8: the probability of settlement increases, then maybe the overhand is gone.
Speaker 8: But otherwise, yes, I think there's a real risk.
Speaker 2: Let me ask you this, This isn't data, but when
Speaker 2: Mark Zuckerberg appears on day one of the trial, what
Speaker 2: does that tell you.
Speaker 8: That it is very very important for the company and
Speaker 8: for him personally, and the fact that he has spoken
Speaker 8: with President Trump multiple times since his inauguration it tells
Speaker 8: us a little bit about how important this is for him.
Speaker 2: The argument the FTC makes was largely based on email
Speaker 2: documentary evidence that showed Zuckerberg having concerns prior to the
Speaker 2: acquisition of Instagram that they would be a threat to
Speaker 2: Facebook in the domain of photo images. That's very interesting argument.
Speaker 2: Is it a strong one?
Speaker 5: I don't think so.
Speaker 8: I think FTC has a weak case on hand for
Speaker 8: a variety of reasons. First of all, they are saying
Speaker 8: that Meta is a monopoly. This is a backward looking
Speaker 8: case from twenty twenty, and Instagram was not that big
Speaker 8: of a platform with one million users at the time.
Speaker 8: Success was not guaranteed, and they didn't even make revenue. Second,
Speaker 8: they approved this case over a decade ago already, and
Speaker 8: they're revisiting the same case. And the third thing is
Speaker 8: that they're only looking at Snapchat and me. They are
Speaker 8: not inc the FP is and the competition has evolved meaningfully.
Speaker 2: So the counter argument that Meta is giving is that
Speaker 2: they focus on TikTok and YouTube. Now, if you forget
Speaker 2: the context of a trial. If you were analyzing this
Speaker 2: stock in this marketplace, how do you assess the competition
Speaker 2: from TikTok and YouTube that comes Metas way.
Speaker 8: Absolutely, TikTok and YouTube are competitive, and it's more than
Speaker 8: TikTok and YouTube. It's TikTok, YouTube, Snapchat, Reddit, anywhere that
Speaker 8: a user is spending their time. And what I think
Speaker 8: is missed in this case is that the Metas platform
Speaker 8: has evolved from connecting friends and family to how people
Speaker 8: actually spend time for broader entertainment and over fifty percent
Speaker 8: of time spend of users today is video, which is
Speaker 8: competing with all these their platforms sweter.
Speaker 2: Many people were confused Metas an AI.
Speaker 5: Company, isn't it It is?
Speaker 2: So why is that not taken into account in this case?
Speaker 8: Absolutely, It's just that the monetization of the platform today
Speaker 8: is predominantly ad based monetization and that's their bread and
Speaker 8: butter that they're competing on.
Speaker 2: So we just have thirty seconds. But with earning season
Speaker 2: around the corner, what do you expect methods to tell
Speaker 2: us that.
Speaker 8: They are cautious around the macro that they are reiterating
Speaker 8: their gapex for full year, and they'll probably give a
Speaker 8: conservative guy for the second quarter without much visibility into
Speaker 8: what's coming in the back half.
Speaker 2: Oh thanks to Schweeder Cajuria of Wolf Research joining us
Speaker 2: here in the San Francisco studio. Welcome back to Bloomberg Technology.
Speaker 2: Amed Ludlow in San Francisco. This is what financial markets
Speaker 2: look right now. Earlier in the session, the story was
Speaker 2: outperformance from semiconductors, the socks for the healthier semiconductor index.
Speaker 2: It's still there, but it's much more muted. One of
Speaker 2: the big factors of the last hour was a headline
Speaker 2: from the European Union explaining that the EU expects tariffs
Speaker 2: to remain in place, but the talks between the EU
Speaker 2: and the United States have made very little progress. Then
Speaker 2: we think about the individual movers. Still in the headlines.
Speaker 2: Is Nvidia, for example, because of that commitment to build
Speaker 2: more AI infrastructure one hundred percent in America. Amazon is
Speaker 2: big moving to the downside. In the broad context of things,
Speaker 2: we have questions about capex around AI. Google also lower
Speaker 2: as well. I want to get to the big picture
Speaker 2: here on tech stocks and what's driving this morning session.
Speaker 2: Let's bring in Rhyme Vasellca of Bloomberg News. So what
Speaker 2: do you see out there? I think you know the
Speaker 2: mag seven's a bit bifurcated at the moment. But what
Speaker 2: are the main drivers of this market?
Speaker 9: Well, again, as always, the focuses almost entirely on trade
Speaker 9: policy on tier obviously mentioned the headline out of the
Speaker 9: European Union. There is still so much uncertainty, so much
Speaker 9: back and forth. People are really having a hard time
Speaker 9: gaming out with the ultimate teri freights are going to be,
Speaker 9: what everything is going to look like, how companies are
Speaker 9: going to react. There's still so much uncertainty in that
Speaker 9: strive and volatility in both directions that we're seeing the
Speaker 9: same today.
Speaker 2: One of the big outperformers is Netflix up more than
Speaker 2: five percent. There was a report in the journal I
Speaker 2: think about some of their financial targets long term, some
Speaker 2: of them eyewatering on market cap, target on what they
Speaker 2: want to do with the top line. What's the story there?
Speaker 9: Yeah, so, like you said, Wall Street Journal reported there
Speaker 9: are twenty thirty targets expecting the double revenue, triple operating income,
Speaker 9: have a lot more subscribers, and reach one trillion in
Speaker 9: market cab joining that very elite club. This is a
Speaker 9: stock that's been performing pretty well this year. They had
Speaker 9: very strong results in January. They report again on Thursday
Speaker 9: afternoon ahead of the holiday. There's a lot of optimism
Speaker 9: because this is not really eight stock that is at
Speaker 9: risk from tariffs. It's also a start that has seen
Speaker 9: as pretty resilient in the face of an economic contraction
Speaker 9: or a recession. If you're going to cut back onto
Speaker 9: your spending, I think your Netflix subscription is going to
Speaker 9: be one of the last things you've cut because you know,
Speaker 9: the argument goes that you get a lot of being
Speaker 9: for your buck.
Speaker 2: As far as the breath of their library versus the
Speaker 2: monthly b blombo's Ryan Blastellika with his finger on the
Speaker 2: pulse of tech stocks this morning, Thank you very much. Okay,
Speaker 2: time to diversify. That's the words of recent reflections from
Speaker 2: Gerber Kawasaki quote. One of the key themes of this
Speaker 2: year has been the value of diversification. While US stocks
Speaker 2: have recently pulled back, many of the diversified strategies we've
Speaker 2: implemented are proving providing balance. And that's all in the
Speaker 2: context of course of trade, tariffs and technology. For more,
Speaker 2: let's bring in Ross Gerber Gerber Kawazaki's CEO, and I
Speaker 2: find that point interesting because you are someone that I've
Speaker 2: enjoyed having on the program with a very sort of
Speaker 2: high conviction thesis on specific technol loogy names. In this environment,
Speaker 2: What does diversifying mean for you? Good morning US.
Speaker 10: Well, for US, it's you know, firstly, just you know,
Speaker 10: I'm traditionally just a US based investor, and we get
Speaker 10: our international exposure through like big cap tech and other
Speaker 10: consumer companies that are global, like Apple. So we've always
Speaker 10: done substantially better for our clients investing in US companies
Speaker 10: than foreign companies. But for the first time in like
Speaker 10: at least five no, it's maybe eight ten years, I'm
Speaker 10: investing in Europe and in Asia, and I think there's
Speaker 10: a lot of opportunities globally, and if you actually look
Speaker 10: at the global markets.
Speaker 5: They're all pretty much up except.
Speaker 10: For for the United States. So this has been a
Speaker 10: good way to diversify assets if you want to own stocks.
Speaker 10: But in general, stocks as an asset I think have
Speaker 10: a much higher risk level for the return that you
Speaker 10: can earn than it's had in the last five years,
Speaker 10: and so investors need to look at diversifying in other
Speaker 10: areas like gold and bitcoin from the sense of having
Speaker 10: alternative assets. Real estate and reads look interesting to me
Speaker 10: here as well as you know, private investments.
Speaker 2: Let's talk about Europe and the equity market if we can,
Speaker 2: because I think like ASML is a really interesting example, right.
Speaker 2: It is this sort of darling of Europe, but it
Speaker 2: is right at the center of what is happening with
Speaker 2: tariffs and the adjustment of global supply chains. I also
Speaker 2: ask the team to show SAP because like, right, there
Speaker 2: isn't much big, big tech out there in Europe, and
Speaker 2: I kind of have a right to say that, having
Speaker 2: spent most of my life and career in Europe.
Speaker 10: And you have Semens too, So we looked at SAP
Speaker 10: and Semens recently, which are excellent companies. And you know,
Speaker 10: the way we're playing it right now, because I'm not
Speaker 10: really an expert in European securities like US securities, is
Speaker 10: really just through the indexes, which I think give you
Speaker 10: exposure because SAP and Semens Novo, which is really cheap
Speaker 10: as well, are are, you know, all big components of
Speaker 10: the European indexes. So that's one way to play it.
Speaker 10: I own ASML in my fun GK and for clients,
Speaker 10: and we just trimmed it a little bit because I
Speaker 10: kind of feel like they're just in this crossroads of
Speaker 10: the trade board because they make the most important machines
Speaker 10: for chips. But it's also like we don't want this
Speaker 10: person to get it. We don't want that person to
Speaker 10: get it. So, you know, ASML has some challenges that
Speaker 10: are political, but their product is crucial to the development
Speaker 10: of advanced chips. You know.
Speaker 2: Bitcoin, You mentioned the moment ago. Is there a kind
Speaker 2: of Goerba Kawasaki thesis and strategy around bitcoin? Uss?
Speaker 10: Well, I've been investing in bitcoin for over a decade,
Speaker 10: so for me, bitcoin is a long term, highly volatile
Speaker 10: asset that's related to risk, and so when risk on
Speaker 10: bitcoin goes up, when risk off bitcoin goes down. But
Speaker 10: we look at it very similar to gold. But gold
Speaker 10: acts opposite of bitcoin, you know, with inflation, and it's
Speaker 10: a risk off asset.
Speaker 2: Do you like them?
Speaker 10: Kind of here in my fund, I own, you know,
Speaker 10: a much higher percentage of gold now than bitcoin because
Speaker 10: I think gold is a better that today than bitcoin.
Speaker 10: But I think having alternative assets like this in your
Speaker 10: portfolio makes a lot of sense, and we have it
Speaker 10: in my ETF GK, and we're the only ETF that
Speaker 10: actually owns gold and Bigcoin Ross.
Speaker 2: I'm going to ask you about Tesla, but first I
Speaker 2: just observed that historically, when you've come on the program,
Speaker 2: we've talked about Tesla, because you have been a vocal
Speaker 2: Tesla shareholder, and when I posted on social media you
Speaker 2: were coming on. There are many that point out, well,
Speaker 2: why are you getting him on? He is too emotional.
Speaker 2: I'm quoting others just hear me out, he's too emotional
Speaker 2: about Tesla. He is anti Elon. There are those that
Speaker 2: sort of think you're too combative with this sort of
Speaker 2: retail Tesla shareholder and audience. That's the context, but actually
Speaker 2: there are some specific questions in that, which is how
Speaker 2: focused are you on Elon's involvement at DOGE and the
Speaker 2: assumption that you probably want him to stop doing that
Speaker 2: and focus back on Tesla.
Speaker 10: Well, there's a couple of things to unpack there. First
Speaker 10: of all, I understand why retail investors at Tesla are
Speaker 10: frustrated with me for voicing my views as a retail
Speaker 10: Tesla investor and a cyber truck driver. I find it
Speaker 10: horrible the fact that people are worried about having their
Speaker 10: vehicles vandalized, including me, because of Elon. You know, so
Speaker 10: I don't know why I'm getting attacked when I'm the
Speaker 10: one I'm actually really getting attacked because of Elon's behavior.
Speaker 10: So I think you'd have to be a blind person
Speaker 10: not to see that Elon's behavior is, you know, highly
Speaker 10: political and highly damaging to the brand, and all the
Speaker 10: numbers are showing that. So I'm a shareholder, and if
Speaker 10: you go back to twenty twenty one, that was the
Speaker 10: high of Tesla around four hundred dollars until that brief
Speaker 10: rally during the election, So nobody's made any money in
Speaker 10: Tesla for a long time. Tesla stock is down forty
Speaker 10: percent this year. The performance is I think directly related
Speaker 10: to the CEO A not working at the company and
Speaker 10: be his outside activities. I guess you could call it.
Speaker 10: I don't like Elon's personal the way he does things.
Speaker 10: That's true, and I don't align with him morally, but
Speaker 10: that is irrelevant of my investment in Tesla, which I
Speaker 10: have a substantial amount of money, and for my clients
Speaker 10: that deserve correct representation by their CEO and the board
Speaker 10: of director's responsibility to running the company as every other company.
Speaker 5: In America is run.
Speaker 10: We all know that this is a reality, and I'm
Speaker 10: just the one willing to say it. So people can
Speaker 10: attack me all they want, But what I really care
Speaker 10: about is what's best for Tesla and Tesla's shareholders. And
Speaker 10: if these people don't get it, they don't get it,
Speaker 10: what am I going to do?
Speaker 2: Another question is, well, what happens if Tesla outperforms one user?
Speaker 2: And X gave the example of what if it ten?
Speaker 2: X is I think a more modest model, but you'll
Speaker 2: mindedness to add to the position and continue to see
Speaker 2: the long term story around AI and energy.
Speaker 10: I still own Tesla, like you know, we own a
Speaker 10: lot of Tesla at my firm, a lot less in
Speaker 10: my fund because I think the short term and the
Speaker 10: medium to look pretty bad for Tesla right now. But
Speaker 10: we still even own it in my fund, and I
Speaker 10: can't really even justify owning it. But for clients, we
Speaker 10: own Tesla because I do think something fixes itself at
Speaker 10: some point, and they have the best products. I was
Speaker 10: just in the new model. Why it's a great upgrade,
Speaker 10: it's way better than the old model. Why and why
Speaker 10: they're not advertising to consumers that they have a new
Speaker 10: product is mind blowing to me. So I've had enough
Speaker 10: of the bs that Elon knows what he's doing at Tesla.
Speaker 10: It's clear that he just doesn't care. And his next
Speaker 10: move is Xai. And by the way, I'm invested in
Speaker 10: that too, so you know I own Xai stock. And
Speaker 10: the truth of the matter is Elon's going back to Xai.
Speaker 10: So if you have any confusion that he's come back
Speaker 10: to Tesla, he's not. That's not what his passion or
Speaker 10: focus is. And there's a great article from I think
Speaker 10: the information that came out today about basically just doesn't
Speaker 10: care and I believe that. So I'm sorry. I'm going
Speaker 10: to stand up for Tesla because I care about climate.
Speaker 10: I just survived a horrible fire that was created by
Speaker 10: climate and I can tell you firsthand after seeing it
Speaker 10: fighting it myself, that if you're not concerned about what
Speaker 10: climate change is going to do to you, you're just
Speaker 10: being foolish here. And Tesla's one of the most important
Speaker 10: companies to solving climate. So I want to see Tesla succeed.
Speaker 10: And that is the whole purpose of why I say
Speaker 10: these things and get criticized.
Speaker 2: I don't mean to cut you off. Were just short
Speaker 2: on sus and I want to get to Netflix, and
Speaker 2: I want to get to that.
Speaker 10: I am emotional about it because I love Tesla.
Speaker 2: Noted you've been a holder of Disney. We talked about
Speaker 2: it a lot. But that Netflix news on their twenty
Speaker 2: thirty targets. How do you see both names?
Speaker 10: You know, it's funny because I fight about Disney all
Speaker 10: the time with my coworkers because I still think Disney
Speaker 10: is wildly undervalell you and after the Netflix announcement, you know,
Speaker 10: we own Netflix as a top holding in my fund
Speaker 10: and at my firm, and we've owned it for a
Speaker 10: long time and it's been a great investment. And the
Speaker 10: team there is incredible and their goals are I think
Speaker 10: great and accurate, and it's a great stock to own.
Speaker 2: But then you look at Disney.
Speaker 10: Trading at this like discount with Hulu really doing well.
Speaker 10: You know, Hulu has great content. ESPN is about to
Speaker 10: become a free agent from the cable companies this year
Speaker 10: where it can be a standalone service. They have these
Speaker 10: sports services coming out. They've done very well I think
Speaker 10: with movies, not as good as i'd wish, but much
Speaker 10: better than before and then theme parks, and I think
Speaker 10: there's this global uncertainty with travel, which is why we've
Speaker 10: lowered our position a little bit. And I'm not sure
Speaker 10: how this shakes out with China because Disney and China
Speaker 10: have a very close relationship. So there are some headwinds
Speaker 10: with Disney that Netflix doesn't have because they don't have physical,
Speaker 10: you know, locations. But with Disney and the cruise ships,
Speaker 10: I see this as a cash cow. So I'm really
Speaker 10: bullish on Disney. I think the evaluation, okay, is way chip,
Speaker 10: way cheap. But I'm also very bullish on netflite.
Speaker 2: Ross Gerba of Gerber Kawasaki, thank you very much. Now
Speaker 2: coming up on the show, as Taiwan braces for digital threats,
Speaker 2: one US space startup has a bold plan that starts
Speaker 2: in orbit. A Strata CEO John Gedmark joins us next.
Speaker 2: This is Bloomberg Technology. Taiwan is teaming up with US
Speaker 2: startup as Strantis to launch a satellite that could keep
Speaker 2: its Internet online no matter what. For example, a satellite
Speaker 2: link would likely be crucial for Taiwan to maintain its
Speaker 2: communications if a possible Chinese attack were to disrupt its networks.
Speaker 2: Joining US now is John Gedmark, a Straanti CEO here
Speaker 2: in the San Francisco studio. Let's start with the basics
Speaker 2: of the technology. What is a micro geo satellite, what
Speaker 2: does it do and how is it going to get
Speaker 2: up there?
Speaker 5: Yeah?
Speaker 2: Absolutely so.
Speaker 11: This is the first time that Taiwan has had a
Speaker 11: satellite dedicated just to them for broadband connectivity. And we're
Speaker 11: able to do that because we're in this special orbit
Speaker 11: called geostationary orbit.
Speaker 2: So this is a very high.
Speaker 11: Orbit, much higher than lower orbit satellite networks you might
Speaker 11: have heard about. And this special orbit allows us to
Speaker 11: park a single satellite over a country or multiple satellites
Speaker 11: and provide NonStop service with just that one.
Speaker 2: Asset and the launch provider.
Speaker 11: We'll be launching this satellite along with a number of
Speaker 11: other of our satellites, on a SpaceX rocket later this year.
Speaker 2: One of the questions I got from the audience was
Speaker 2: about the orbit, and a question was about the vulnerability.
Speaker 2: So you kind of went through the benefits of that
Speaker 2: jacing from this orbit, but what are the risks involved
Speaker 2: in that level?
Speaker 11: Well, I'm not going to go into details on techniques
Speaker 11: to counter the kinds of things I think you're talking.
Speaker 2: I think that is at the reason of that question.
Speaker 11: Yes, what I would say is that resiliency comes from
Speaker 11: strengthen numbers. So this satellite is actually just the beginning.
Speaker 11: We're gonna be launching many satellites. But this is why
Speaker 11: we're spooling up production out of our factory here in
Speaker 11: San Francisco to launch many dozens of these satellites in
Speaker 11: the years to come. And then you can relocate those satellites,
Speaker 11: you can move them around, you can bring more to
Speaker 11: bear on a particular issue, regardless of what happens. I
Speaker 11: think the other thing i'd add is space is actually
Speaker 11: a much better visime to be in than on the
Speaker 11: ground or under the seat. If you think about how
Speaker 11: difficult it is to replace, say an undersea cable that
Speaker 11: might get cut, space is a very different, very different question.
Speaker 11: Actually much easier for us to bring in one or
Speaker 11: more additional satellites if needed.
Speaker 2: This seems like a really big commercial development for you.
Speaker 2: The contract value with Taiwan is worth an excess of
Speaker 2: one hundred million dollars.
Speaker 11: How do you execute on a Yeah, so this is
Speaker 11: a contract with Chungwa Telecom, the largest tolco and Taiwan.
Speaker 11: They have about a thirty billion dollar market cap. This
Speaker 11: is a total value over the service life of the satellite.
Speaker 11: So you know, what we're finding is that a certain
Speaker 11: type of customer they really want this dedicated satellite and
Speaker 11: really it's a dedicated network. So they get the security,
Speaker 11: they get this enterprise grade connectivity, and they get insight
Speaker 11: and transparency into exactly what's happening in their network.
Speaker 2: And this is.
Speaker 11: Something that we found customers really are looking for now
Speaker 11: in sort of this age of heightened geopolitical tensions, will
Speaker 11: and they're willing to pay a premium.
Speaker 2: Well, that's why we sided the conversation, right, like the
Speaker 2: communication satellite that what happens if Taiwan is subject to
Speaker 2: aggression from China in the possible that, right, Is a
Speaker 2: Stratus a communication satellite company or is it a defense
Speaker 2: technology company?
Speaker 11: Well, certainly, I would say we're a little bit of both.
Speaker 11: We are definitely a communications service provider, and we now
Speaker 11: have a number of contracts actually with the US military
Speaker 11: as they have become interested in our technology as well.
Speaker 11: So it is a true dual use technology and that's
Speaker 11: I think to the benefit of both our commercial customers
Speaker 11: and to the US military. We get to benefit from
Speaker 11: that shared investment and shared infrastructure.
Speaker 2: I think there is a lot of interest in America's
Speaker 2: commercial space industry. Could you just explain the basics of
Speaker 2: your supply chain and your footprint where all of your
Speaker 2: center activity is here.
Speaker 11: Yeah, We're an American company with the vast, vast majority
Speaker 11: of our supply chain in the United States. We have
Speaker 11: very little international footprint on that actually, and none out
Speaker 11: of China if I suspect that's where you're going with that. So, yeah,
Speaker 11: this is something we've been thinking about for many years now.
Speaker 2: John Denmark has straying a CEO on the big deal
Speaker 2: with one of Taiwan's leading telecommunications companies, Thank you. We're
Speaker 2: about to find out how tariffs and doubts about AI
Speaker 2: demand are hitting the chip industry. TSMC, the world's biggest
Speaker 2: contract manufacturer of chips, and ASML, the leading chip making
Speaker 2: equipment maker, both report earnings in the next thirty six hours.
Speaker 2: Both have borne the brunt of the broader market selloff
Speaker 2: that's focused on trade wars and AI. Wall Street expects
Speaker 2: sales and income to rise sharply at both companies. However,
Speaker 2: it's the outlooking guidance you want to focus on as
Speaker 2: investors assess how hard trade tensions and macroeconomic concerns put
Speaker 2: off key customers. The main metric to watch. Analysts see
Speaker 2: TSMC actually withdrawing its guidance and ASML missing estimates on
Speaker 2: quarterly bookings. A right, let's take a look at shares
Speaker 2: of HPE. The stock popped after use the Elliott Investment
Speaker 2: Management built a position worth more than one point five
Speaker 2: billion dollars into the company, that's according to sources. But
Speaker 2: the best ready forward is back with more. So this
Speaker 2: is an activist play. What does Elliott want from and
Speaker 2: with Hpe?
Speaker 4: What does any activists want? They want more money? Right?
Speaker 4: I mean appears that Elliott notices that HPE has had
Speaker 4: a pretty rough year. You know, it's share prices down
Speaker 4: quite a bit, it's underperformed peers like a Dell or
Speaker 4: a super micro, and it appears that they see it's
Speaker 4: a good time to invest in agitate for changes. Now
Speaker 4: we haven't heard from Elliott, we haven't heard from HPE.
Speaker 4: But generally the playbook here is to find a company
Speaker 4: that has some pretty good kind of bones to it,
Speaker 4: but is you know, apparently being misrun or it's not
Speaker 4: you know, really living up to its potential is generally
Speaker 4: how activists see it. Often that means things as drastic
Speaker 4: as let's get a new CEO or switch up the ball,
Speaker 4: let's do some layoffs, things of that nature.
Speaker 2: That this tariff's in the equation right, Like I think
Speaker 2: HPU said last month that profit this year will be
Speaker 2: below what people hope. But I'm like one of those
Speaker 2: few people that's ripped apart a server. I know that
Speaker 2: HPE is deeply involved in the AI infrastructure build out.
Speaker 2: Why do they not get that credit from Elliott?
Speaker 4: Well, they could be I mean, part of the calculation
Speaker 4: could be that, you know, the market's really beat up
Speaker 4: this name, but they actually have a pretty good position
Speaker 4: with their networking and with their servers. I think a
Speaker 4: big question for investors right now with all the hardware
Speaker 4: names is how much will they be impacted by teriffs?
Speaker 4: And it's not totally clear. HPE has a lot of
Speaker 4: manufacturing in Mexico. I don't believe they have quite the
Speaker 4: level of Asia exposure, so that could be a benefit,
Speaker 4: But these terriffs keep changing every day, so it's hard
Speaker 4: to say.
Speaker 5: So.
Speaker 2: To Brodie's point, the stock is down like more than
Speaker 2: thirty percent year today again of four percent is kind
Speaker 2: of not really registering in the context of reccessions. Bluembogs
Speaker 2: Brady Ford, big shift on the show today. Thank you
Speaker 2: very much. That does it for this edition of Bloomberg Technology.
Speaker 2: Don't forget check out the podcast. You can find it
Speaker 2: on the terminal as well as online on Apple, Spotify,
Speaker 2: and iHeart Wow. A lot going on in the world
Speaker 2: of technology. Thanks to everyone watching. This is Bloomberg Technology.