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Speaker 1: Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio, YouTube and
Speaker 1: Bloomberg Originals.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets. Each
Speaker 2: and every week we provide in depth research and date
Speaker 2: on some of the two thousand companies and one hundred
Speaker 2: and thirty industries our animals cover worldwide. Today we'll look
Speaker 2: at Oracle signing a cloud deal with thirty billion dollars
Speaker 2: a year. Plus later on a big take story on
Speaker 2: the Treasury Department's cybersecurity vulnerabilities. But first we begin with
Speaker 2: an outlook into travel and leisure for the second half
Speaker 2: of twenty twenty five. According to a bi US travel survey, tariffs, inflation,
Speaker 2: and geopolitics could deter consumers from spending money on hotels
Speaker 2: and flights. Jody Lourie, Bloomberg Intelligence Analysts breaks it down.
Speaker 4: For a large part, the companies have been doing pretty well,
Speaker 4: and from a credit perspective, we've seen pretty decent total
Speaker 4: returns for the indices, and that's compared to high yield
Speaker 4: and investment grade as a total. You know, we've seen
Speaker 4: that for discretionary that these leisure related companies have actually
Speaker 4: been doing better than most of discretionary and it makes
Speaker 4: sense because other parts of discretionaries, such as retail, are
Speaker 4: much more sensitive to know these tariffs and trade talks
Speaker 4: that are really affecting a lot of our outlook.
Speaker 5: Jody, I'm looking through your note where you talk about
Speaker 5: the fact that there's a lot of uncertainties right now
Speaker 5: that are a lot of these consumers are grappling with
Speaker 5: as pertains to leisure traveling, with tariffs, inflation, China economy,
Speaker 5: and geopolitics. Can you just give us a little bit
Speaker 5: more of the backdrop right now? What is the consumer
Speaker 5: thinking as it relates to travel right now during the summer.
Speaker 4: So I think that consumers are still going along with
Speaker 4: their plans for the most part, but maybe slightly tweaking it.
Speaker 4: What we saw in our second half leisure survey that
Speaker 4: we ran We run this every half a year, is
Speaker 4: that consumers are not pulling back on experiences. They're not
Speaker 4: pulling back on accommodations. What they might be pulling back
Speaker 4: on is destination to do a cheaper destination if they
Speaker 4: need to cut costs. But by and large, most consumers
Speaker 4: are looking at spending on travel, spending on experiences as
Speaker 4: a way to escape what's going on and sort of
Speaker 4: the last party before maybe the chair gets pulled out
Speaker 4: from under them.
Speaker 2: How about my favorite, UH secrament, which is the casino business.
Speaker 2: How does Zach perform in a time of maybe some
Speaker 2: uncertainty out there?
Speaker 4: So I think it's a question of what region we're
Speaker 4: talking about. And so for Las Vegas, you're dealing with
Speaker 4: the fact that we had really strong comps because we
Speaker 4: had a couple of one time events such as the
Speaker 4: Super Bowl, such as the first Step one that really
Speaker 4: drove a lot of last year and the year before
Speaker 4: it's performance. This year, we're not seeing that same momentum there,
Speaker 4: So it's a little less exciting when you talk about regionals.
Speaker 4: I mean, that's really my question. So a lot of
Speaker 4: the companies like to talk about how regional casinos are
Speaker 4: counter cyclical, meaning people will still go to regional casinos
Speaker 4: to gamble even during a recession. But I think the
Speaker 4: question I have is the last sort of data points
Speaker 4: we have on that is before we had online gaming. Right.
Speaker 4: Online gaming is definitely a game changer to the whole industry,
Speaker 4: and my colleague Brian Egger, who covers on the equity side,
Speaker 4: can talk at nauseum about online gaming, as you know.
Speaker 4: But I think really the question is from more of
Speaker 4: a macro standpoint, how that's going to affect these companies
Speaker 4: as it really lates to their regional casinos. Now, when
Speaker 4: we talk about Macau, there's a lot of sort of
Speaker 4: questions about China and China's economy and how that might
Speaker 4: trickle into the effects of a Macau. Never mind the
Speaker 4: fact that we're now going to have competition in the
Speaker 4: UAE with the Wind casino that's opening up in a
Speaker 4: few years. You know, we're seeing Thailand has been not
Speaker 4: so not so quick to get on the casino game,
Speaker 4: but we've seen japan As starting to open up with MGM,
Speaker 4: so there's a lot of competition globally that might change
Speaker 4: the dynamics of casinos at large.
Speaker 5: Judy, when you think of travel, I immediately think of airlines.
Speaker 5: You know, how I'm I going to get from where
Speaker 5: I need to go point A to point B. Able
Speaker 5: we look at airlines, I'm looking at an index it's
Speaker 5: not about eighteen percent. But then hotels you have to
Speaker 5: need somewhere to stay. We're seeing them popping up about
Speaker 5: nine percent so far this year. What's going on in
Speaker 5: the hotel space right now?
Speaker 4: So in the hotel space, they're still commanding these good
Speaker 4: prices for the rooms, right and I think that's a
Speaker 4: function of the fact that you're seeing business and conference
Speaker 4: travel tick up. Now, the question is how are people traveling?
Speaker 4: And are people doing more domestic travel? Are they driving
Speaker 4: to places, are they taking the train, are they opting
Speaker 4: out of airlines because it's just so uncomfortable, and are
Speaker 4: they not doing international travel as much? And I think
Speaker 4: that's really what's sort of playing out is is that
Speaker 4: question of it is how are people getting to their destination?
Speaker 4: What destination are they going to? You know, there's definitely
Speaker 4: data points out there. I was just reading a report
Speaker 4: this morning. I was talking about how July fourth is
Speaker 4: going to be the busiest in terms of travel. But really,
Speaker 4: I mean for July fourth, are we flying places? Are
Speaker 4: we driving to barbecues? That's really the question. And I
Speaker 4: think you know, with the sort of airline component, is
Speaker 4: that rental car component, right? And so when you look
Speaker 4: at what you know, the CPI, the Consumer Price Index
Speaker 4: is for airlines what it is for rental cars. You know,
Speaker 4: rental cars has shown a weakness of late, and I
Speaker 4: think that's a function of the fact that you're seeing
Speaker 4: consumers sort of not necessarily opting to rent a car,
Speaker 4: especially when so many rental cars are tied to airlines.
Speaker 2: I know you cover six Flags as in six Flags
Speaker 2: Great Adventure in New Jersey. Haven't been since my junior
Speaker 2: year in high school.
Speaker 5: I went three years ago.
Speaker 2: You did, great time, great time. It's awesome. How about
Speaker 2: the theme park business, because a lot of listeners and
Speaker 2: viewers are Disney shareholders, and that's the biggest part of
Speaker 2: Disney's business. Are people still going to the high price
Speaker 2: theme parks?
Speaker 4: People are still going to theme parks, But I think
Speaker 4: there's sort of a question of destination versus regional. Now
Speaker 4: we've been sort of, you know, less constructive. I guess
Speaker 4: on regional theme parks of late then say cruise lines,
Speaker 4: And that's a function of the fact that I think
Speaker 4: people were looking outside their general area. You know, somebody
Speaker 4: in New Jersey isn't necessarily seeing six fives Great Adventure
Speaker 4: as their big vacation. They're seeing, you know, the cruise
Speaker 4: to the Hamas as their big vacation. But I think,
Speaker 4: as you know, consumers, if and one consumers start really
Speaker 4: feeling the straight on their wallet, we might see some
Speaker 4: of them come back to theme parks. And we're still
Speaker 4: trying to figure that out what that's going to look
Speaker 4: like and what percentage. But for someone like United Parks,
Speaker 4: which is formerly SeaWorld, you know, they're benefiting from the
Speaker 4: fact that Universal is opening up a theme park in Florida.
Speaker 4: You know, they have the large portion of their properties
Speaker 4: are in Florida. You know, of course, they have the
Speaker 4: bush gardens, they have the Sesame place, they have stuff
Speaker 4: in San Diego. But a large percentage of their parks
Speaker 4: and their revenue comes from Florida. And so when you
Speaker 4: think about someone like a SeaWorld or United Parks, as
Speaker 4: they go by. Now they are much more sensitive to
Speaker 4: what's going on with Disney and Universal and if they're
Speaker 4: building new parks, if they're getting people to come, they
Speaker 4: might then accidentally also go to SeaWorld.
Speaker 2: Oh thanks to Jody Lorie Bloomberg Intelligence Credit analysts, if
Speaker 2: you choose to stay close to home this summer, no worries.
Speaker 2: There are still plenty to do, like watching a movie
Speaker 2: starring Brad Pitt on a Formula one racing track. That's
Speaker 2: exactly what Apple wants you to do. Apple Original Film
Speaker 2: f one. The movie is quickly becoming a some blockbuster
Speaker 2: and could be the catalyst to supercharge bidding prospects for
Speaker 2: Formula ones US TV rights. For more Onette Emli Grafeo
Speaker 2: and I turned to geth It rang Anathan Bloomberg Intelligence
Speaker 2: Senior US Media Analyst.
Speaker 6: So this was obviously a big success story for Apple.
Speaker 6: They've been dabbling in these theatrical films for quite a
Speaker 6: bit now, but none of you know, none of their
Speaker 6: movies have had this much of a success. So this
Speaker 6: is really good news and I think it kind of
Speaker 6: really emboldens them with respect to their strategy. So definitely,
Speaker 6: movie theaters are happy. And the other point that I'd
Speaker 6: like to make is, you know, more than twenty to
Speaker 6: twenty five percent of the total box office actually came
Speaker 6: in from Imax. So this is really good news for
Speaker 6: the exhibiters because the premium large format, that whole thing
Speaker 6: about going to the theater to experience the movie is
Speaker 6: really working.
Speaker 7: Okay, so your latest note is about how this F
Speaker 7: one movie here from Apple is going to jolt you say,
Speaker 7: lackluster lackluster bidding for the Formula one rights in the US.
Speaker 7: Give us a little bit of context here the landscape
Speaker 7: of rights for Formula one, Who currently has the rights,
Speaker 7: when does that expire? And just put into context kind
Speaker 7: of the current bidding right now?
Speaker 6: Sure, Emily, so right now. So Formula one is, you know,
Speaker 6: as a global sports, global media property in the US,
Speaker 6: the rights to distribute Formula one content is owned by
Speaker 6: Disney's ESPN, So they have rights that go through the
Speaker 6: end of this year through the end of twenty twenty five.
Speaker 6: They're currently paying about eighty five million dollars a year.
Speaker 6: That's up from their last negotiation negotiation cycle when they
Speaker 6: were paying only about five million dollars. So it's up
Speaker 6: to eighty five million. But what F one is saying
Speaker 6: is that this is such an interesting property, this is,
Speaker 6: you know, a hot property, you should be paying up
Speaker 6: for it. And they are really looking for something upwards
Speaker 6: of about one hundred and fifty two hundred and sixty million,
Speaker 6: and I'm not so sure ESPN wants to pay that
Speaker 6: that much money. So it's really price is really a
Speaker 6: sticking point here, and it looks like we've hit a
Speaker 6: little bit of a stalemate. By the way, this problem,
Speaker 6: you know, F one really kind of shot into the
Speaker 6: limelight in the US with the Netflix drive to survive series. Now,
Speaker 6: Netflix has been hugely actually instrumental in kind of driving
Speaker 6: this Surgeon popularity. So everybody was kind of wondering whether
Speaker 6: Netflix or you know, maybe another streamer like an Amazon
Speaker 6: would kind of come in and bid for the rights.
Speaker 6: But I think what we're seeing with a lot of
Speaker 6: these streaming platforms is that they want global rights. These
Speaker 6: are all global streaming platforms. They want rights to distribute
Speaker 6: this content and all markets, and they're not going to
Speaker 6: be able to get that right.
Speaker 2: Now because Formula one, who's their European over is that
Speaker 2: Warner Brothers Discovery, who distributes.
Speaker 6: Ski Ski actually distributes them in most markets, so you know, Ireland, UK, Germany,
Speaker 6: Italy again, France, Spain, they all have a little bit
Speaker 6: different you know, distributors, but ski is a is a
Speaker 6: very big one across most of Europe.
Speaker 7: Wouldn't Apple be the obvious choice to partner up and
Speaker 7: you know, get the rights to Formula one because they
Speaker 7: just made this a blockbuster hit about Formula one.
Speaker 6: You would think so, you know, but it's been a
Speaker 6: little bit of you know, again, it's hard to actually
Speaker 6: figure out what Apple is thinking here. One thing that
Speaker 6: Apple doesn't have, which both Amazon and Netflix have, is scale.
Speaker 6: So Netflix has well over three hundred million global subscribers.
Speaker 6: Amazon probably has closed about three hundred million as well
Speaker 6: on their video streaming service. Apple, on the other hand,
Speaker 6: has probably less than fifteen million, so they don't necessarily
Speaker 6: have the scale to support it. And remember there are
Speaker 6: a few other things with the Formula one property. You
Speaker 6: don't have a lot of advertising inventory necessarily, So again
Speaker 6: that's something that doesn't necessarily appeal to streamers, especially because
Speaker 6: all of these different streaming platforms are really trying to
Speaker 6: build out their ad business. A Formula one doesn't necessarily
Speaker 6: lend itself to that, but you're absolutely right. Apple could
Speaker 6: be a very interested party down the road.
Speaker 2: And for those who care, one can actually invest directly in.
Speaker 2: Formula one is a public traded company FWNK. I like
Speaker 2: Formula one K, it's owned by John Malone and Liberty Media.
Speaker 2: There's a million different share classes out there, but Formula one, Keith,
Speaker 2: I mean, under John Malone's leadership, they've done a good
Speaker 2: job of increasing rights, sporting rights and sponsorships and all
Speaker 2: that kind of stuff, making it actually profitable.
Speaker 6: Very profitable, Paul, And they've they've done a fantastic job
Speaker 6: with the media rights. Again, they've really capitalized on this
Speaker 6: huge surgeon popularity because remember F one was really more
Speaker 6: of a European really not so big in America, but
Speaker 6: they've really kind of capitalized on this huge momentum in
Speaker 6: the United States. And you're absolutely right. They've added a
Speaker 6: whole lot of races, made it a year round calendar,
Speaker 6: lots of sponsorship money. So they've done a very good
Speaker 6: job with this new Liberty Media management team.
Speaker 2: Oh thanks to the Keith ron Ganathan Bloomberg Intelligence senior
Speaker 2: US media analyst, coming up a tech breakdown as we
Speaker 2: talk Tesla sales, Oracle and Apple outsourcing some AI assistants.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via bi
Speaker 2: go on the terminal. I'm Paul Sweeney. This is Bloomberg.
Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio.
Speaker 2: This is the Bloomberg Intelligence Show. I'm Paul Sweeney. Tesla
Speaker 2: this past week reported second quarter deliveries on its vehicles
Speaker 2: and it was not good. Tesla now finds itself in
Speaker 2: a deep hole to dig out of to avoid consecutive
Speaker 2: annual declines. To help break down the numbers normally, Linda
Speaker 2: Nice Book to Pierre Ferubu, head of Global Technology Infrastructure
Speaker 2: at New Street Research.
Speaker 3: There is a bit of a positive surprise, like people
Speaker 3: tracking very precisely deliveries in various markets by expecting slightly
Speaker 3: lower numbers. The surprise comes from the US. The US
Speaker 3: did is a place where it's the most difficult to
Speaker 3: track the number of Tesla being delivered, and the US
Speaker 3: beat beat expectations that model while coming in doing actree
Speaker 3: quite well, that's good. But then the at the end
Speaker 3: of the day, you have to remember the big picture.
Speaker 3: We are down thirteen persons here on air. So we
Speaker 3: are facing a situation where Tesla is struggling to sell cars.
Speaker 3: A gross margin is in the latins. To me, Tesla
Speaker 3: facing good demons should be able to defend like mid
Speaker 3: mid twenties gross margin. So we have like we are
Speaker 3: facing like a core business and not a business that
Speaker 3: is really at a very low point that is struggling.
Speaker 3: And so that's the difficulty. You have, like one structural
Speaker 3: difficulty that is relatively that we understand relatively well. It's
Speaker 3: that with their current product, Tesla has kind of saturated
Speaker 3: its opportunity. Tesla needs lower high points to keep growing
Speaker 3: and that's in the plan they're working on it. And
Speaker 3: then you have a number of other issues. You know,
Speaker 3: electric cars are less fashionable than they were a couple
Speaker 3: of years ago. The Tesla brand has suffered, particularly in
Speaker 3: New Rope where numbers are down like almost forty percent
Speaker 3: on air, and so it is definitely it's difficult to quantify,
Speaker 3: but it is a significant headwind as well. And overall,
Speaker 3: you know, the economy is not right, the best you
Speaker 3: can imagine for auto dim Yeah.
Speaker 5: I mean when we look at the mag seven stocks,
Speaker 5: we see Tesla as the primary laggard this year, down
Speaker 5: about twenty three percent. And of course we know that
Speaker 5: investors have really been vying for Musk's attention as he's
Speaker 5: been really politically involved. So as we're seeing these numbers
Speaker 5: come through, what do things like moving forward? Are these
Speaker 5: numbers a massive impact or are the Tesla loyalists still
Speaker 5: out there and is there some further positivity to come.
Speaker 3: Yes, you the Tesla stock has been on a royal cost.
Speaker 3: It's like a very low performer this year, but it
Speaker 3: was like a clear out performer last year last year.
Speaker 3: And as you said, you know, it's following, it's following,
Speaker 3: you know, the political carrier, if I may say, of
Speaker 3: the sea in a Musk and like this has created
Speaker 3: this situation. Now if you look at the stock, you know,
Speaker 3: since you know, like April first, what you see that
Speaker 3: what tends to really move the stock is actually the
Speaker 3: news flow around how the company is now focused on
Speaker 3: deploying fleets of robot taxes. They've just started that in
Speaker 3: a couple of weeks ago, like late late last months
Speaker 3: and I think that's going to be the primary driver
Speaker 3: of the stock going forward. Of course, there is a
Speaker 3: lot of uncertainty on you know, how fast THETA is
Speaker 3: going to be able to deploy robotaxy or even make
Speaker 3: a profits, like generate the profits out of the robot
Speaker 3: taxi fleet. But the size of the price is so
Speaker 3: gigantic and so much more than the ATOL business that
Speaker 3: this is probably what drives the stock going forward.
Speaker 2: Are thanks to Pierre Fair ahead of Global Technology Infrastructure
Speaker 2: at New Street Research with tech Oracle this past week
Speaker 2: said it had signed a single cloud deal worth thirty
Speaker 2: billion dollars in annual revenue. It's more than the current
Speaker 2: size of its entire cloud infrastructure business. For more on
Speaker 2: this deal and what this means for the computer software company,
Speaker 2: we turned to Anorak Rana, Bloomberg Intelligence technology analyst.
Speaker 8: We think this is part of the Stargate contract. This
Speaker 8: is something that's going to flow from open aie, you know,
Speaker 8: the combination between soft Bank, Uticle and open AI. So
Speaker 8: if you remember there was a big deal, you know,
Speaker 8: just I think a day or two after the president
Speaker 8: took office, where Laddie Allison and you know got on
Speaker 8: TV and talked about it. I you know, we think
Speaker 8: this is a byproduct of that.
Speaker 5: How is Oracle matching up with its competitors? I mean,
Speaker 5: I know it's gained traction for renting out computing power
Speaker 5: over the Internet, and of course it's been targeting a
Speaker 5: lot of its clients that are focused on AI there.
Speaker 5: But how does it look in comparison to peers?
Speaker 8: Yeah, I think you know, it was really I go
Speaker 8: back a few years. It was, you know, to be honest,
Speaker 8: non existent about three years ago. So the revenue was
Speaker 8: you know, just a handful of billion dollars or so,
Speaker 8: compared to you know, somebody like an AWS which is
Speaker 8: now running at a rundred of over one hundred billion dollars. So,
Speaker 8: but this, if you look at it, in last year alone,
Speaker 8: oracles infrastructure as a service business, which is what we
Speaker 8: look as the proxy for their cloud infrastructure business, had
Speaker 8: revenues of about ten billion dollars. So and then here
Speaker 8: comes a contract that in three years and you know,
Speaker 8: they will have thirty billion dollars annually from one just
Speaker 8: one customer. So you could see just the overall what's
Speaker 8: happening with AI? What is really need so much of
Speaker 8: computing power to run these models, and this is you
Speaker 8: know again they are going everywhere, but Oracle is you know,
Speaker 8: one of the bigger beneficiaries over here.
Speaker 2: Rich go rich, the world's richest people. Larry Ellison of
Speaker 2: Oracle clocks in at number four, two hundred and twenty
Speaker 2: nine billion dollars, up thirty seven billion dollars year to date.
Speaker 2: The stock is up fifty two week high on a
Speaker 2: rockets at an all time high. What's the bookcase for Oracle?
Speaker 2: Here's just just another way to play cloud slash AI.
Speaker 8: Yeah, so that's the bookcase. Definitely on that end, you
Speaker 8: could see their growth rates are going to pick up
Speaker 8: so much more than any of the other cloud providers,
Speaker 8: and partially because they're you know, the numbers are too small.
Speaker 8: As I said, They're only at about ten billion run
Speaker 8: rate or so in this case at this point. So
Speaker 8: that's one. But on the other side, you know, they
Speaker 8: will have to spend a lot on capex right now,
Speaker 8: so that capex number is going to go up. Margins
Speaker 8: are going to most likely take a hit. But frankly speaking,
Speaker 8: in this market right now, it's all about market share
Speaker 8: gains and which of the companies can actually benefit from
Speaker 8: all these large language model training or inference basically, you know,
Speaker 8: they are you know, they're going everywhere. I mean look
Speaker 8: at for example, code WEEP their growth rate. The SAME's
Speaker 8: the case with Microsoft, Azure or EWS. I mean, everybody
Speaker 8: in this particular ecosystem is going to make lots of money.
Speaker 5: We know, expectations remain high for a lot of these
Speaker 5: tech firms, especially as we think about the AI push.
Speaker 5: What do investors want to see right now? What's the
Speaker 5: next step for Oracle?
Speaker 8: I think a lot of this would become to execution
Speaker 8: in this case, because you know, this is we are
Speaker 8: assuming flawless execution in terms of data centered expansion. But
Speaker 8: what if they are not able to get enough power
Speaker 8: in there out there? I mean, what if we get
Speaker 8: into a shortage in that area. So there's going to
Speaker 8: be a lot to you know, I would say ups
Speaker 8: and downs, not just for article, but everybody in the
Speaker 8: equation where maybe the project gets delayed some funding issues.
Speaker 8: Right now, everything is fine when it comes to funding
Speaker 8: for these particular projects, but you know, those are the
Speaker 8: things that we would watch for. But other than that,
Speaker 8: I think the the you know, future is really bright
Speaker 8: for all the cloud providers because of the workloads that
Speaker 8: are coming.
Speaker 2: In our thanks to anaag Rana Bloomberg Intelligence technology analysts.
Speaker 2: Closing out our tech segment is a story this week
Speaker 2: from Apple. The tech giant shocked investors when our Mark
Speaker 2: German announced that the company was considering using artificial intelligence
Speaker 2: technology from Anthropic or open AI to power a new
Speaker 2: version of Siri, potentially sidelining its own in house models.
Speaker 2: Man Deep Seeing, Bloomberg Intelligence senior tech oust breaks it down.
Speaker 9: Yeah, I mean, if you remember at WWDC, all they
Speaker 9: showcase was that new liquid glass interface. There was no
Speaker 9: mention of AI, so it was pretty obvious that they
Speaker 9: had nothing new to showcase from an LLM perspective. And look,
Speaker 9: given the astronomical rise of chat GPT and how it's
Speaker 9: taken the user and engagement share, I mean everyone is
Speaker 9: looking to use that kind of functionality on the apps
Speaker 9: that live within the Apple ecosystem, whether it's your email,
Speaker 9: your calendar, your contacts, like the photos that are stored
Speaker 9: on iCloud. You have to ask to yourself, why can't
Speaker 9: Apple will deploy AI in a similar fashion where I
Speaker 9: can engage in a chatchipt type format. And so that's
Speaker 9: the use case here. Obviously, Apple's own LM efforts have
Speaker 9: gone nowhere because they have, frankly speaking, underinvested. I mean,
Speaker 9: look at their capex versus all the other hyperskillers. They're
Speaker 9: spending eighty billion dollars. Apple is spending ten billion dollars.
Speaker 9: So it's just not the same level of investment, and
Speaker 9: they underappreciated how transformational this generative AI LLLM wave is
Speaker 9: going to be. And now they are partnering with an
Speaker 9: Entropic or open Ai. I think Entropic makes more sense
Speaker 9: to me because OpenAI has clearly said they have their
Speaker 9: own hardware ambitions, and to my mind, Entropic is an
Speaker 9: enterprise focused player. They have already partnered with Amazon and
Speaker 9: in this case they probably will partner with Apple as well.
Speaker 7: As Paul mentioned the stock market, it wasn't disappointed in
Speaker 7: this snooze. The stock was up yesterday when Bloomberg's Markerman
Speaker 7: you know wrote the story, which I do think it
Speaker 7: came out he breaks yes, he does break everything. I
Speaker 7: think the story came after the close, but still the
Speaker 7: stock is hired today, so this is good. I mean,
Speaker 7: talk a little bit more about the partnerships, because if
Speaker 7: Anthropic is partnering with Amazon as well, Like, this isn't
Speaker 7: really an exclusive deal that they're doing. Apple is just
Speaker 7: going to have the same AI as all the other times.
Speaker 9: Yeah, but Apple controls the distribution across their iOS devices,
Speaker 9: and whether it's your tablet or your smartphone or macpcs,
Speaker 9: it's the Apple iOS ecosystem. So if Ententropics LLM is
Speaker 9: natively integrated, I mean, look at how much Microsoft has
Speaker 9: benefited from open AI's partnership. Microsoft doesn't have their own LLLM.
Speaker 9: The fact that they have risen so much is because
Speaker 9: of the open Ai partnership. So partnership isn't a bad
Speaker 9: thing for Apple, and in this case, clearly Entropic has
Speaker 9: a very good LLM. On the tech side, maybe you
Speaker 9: could argue in terms of multi modality open Ai and
Speaker 9: Google are ahead, But for a text LLM, Entropics performance
Speaker 9: is comparable at part with the frontier models. And that's
Speaker 9: where it makes a ton of sense that they use Anthropic.
Speaker 2: Thirty seconds, Can I think about this potent This announcement
Speaker 2: similar to Apple saying we're going to use Google for search.
Speaker 9: Yeah, And part of the reason why there is no
Speaker 9: mention of Google here is because of that anti trust
Speaker 9: case that's pending. So clearly what Apple wants to signal
Speaker 9: is they don't want to do anything with Google right now,
Speaker 9: given that monopoly lawsuit and the twenty plus billion dollar
Speaker 9: of payment from Google to Apple, and right now they
Speaker 9: are really diversifying their exposure to these LLM players. They
Speaker 9: could have very well used in LLLM, and I wouldn't
Speaker 9: be surprised down the line once this ad BODA cases
Speaker 9: resolved and if it's if it works out fine, they
Speaker 9: may end up using Google's LM as well. Apple's main
Speaker 9: goal here is to have as many LLLM partners and
Speaker 9: really not depend on just one, whether it's opening oranthropic.
Speaker 9: They want five players, and I think they would be
Speaker 9: willing to use anyone.
Speaker 2: Our Thanks to Man Deep saying, Bloomberg Intelligence senior tech
Speaker 2: industry analyst coming up on the program A Trio Big
Speaker 2: Takes stories from this week you do not want to miss.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies in one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: Bigo on the terminal. I'm Paul Sweeney, and this is Bloomberg.
Speaker 10: Now.
Speaker 1: You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio.
Speaker 2: We wrap up the show with a trio big takes
Speaker 2: stories from this past week worth highlighting. First up as
Speaker 2: a story on why the US Treasury keeps getting hacked.
Speaker 2: For more, Emily Grafe and I spoke to Jordan robertson
Speaker 2: Bloomberg News cybersecurity reporter.
Speaker 10: So yeah, our Big Take, our Bloomberg Big Take investigation
Speaker 10: is about a series of really impactful cybersecurity attacks at
Speaker 10: the US Treasury Department. There was a major attack in
Speaker 10: twenty twenty, major attack in December, a major attack that
Speaker 10: was disclosed earlier this year, which news that was broken
Speaker 10: by our some of our Bloomberg colleagues. And the question
Speaker 10: we set out to answer was why does the US
Speaker 10: Treasury Department keep getting hacked? And why does it keep
Speaker 10: getting hacked so badly? Every organization faces attempted hacking attacks.
Speaker 10: Many organizations experience successful hacking attacks. It's always about the
Speaker 10: depth though, of the intrusion. How far did the hackers
Speaker 10: get and what did they get where they wanted to go?
Speaker 10: And in each of these three attacks, the hackers got
Speaker 10: about as far deep into the organization as you could imagine,
Speaker 10: and what we set out to answer was how is
Speaker 10: that happening? And one of the answers we came up
Speaker 10: with is that, you know, the Treasury Department is one agency,
Speaker 10: but with the cybersecurity, the cybersecurity of it is run
Speaker 10: effectively as a series of like a half dozen different countries.
Speaker 10: Almost these are subdivisions of the Treasury Department that have
Speaker 10: their own cybersecurity budget allocated by Congress, they have their
Speaker 10: own cybersecurity management, they have essentially of their own IT infrastructure.
Speaker 10: And so what that means is some of these divisions
Speaker 10: have really good security. Some of these divisions don't have
Speaker 10: such good security. And you know, this is an organization
Speaker 10: that I think a lot of people focus on because
Speaker 10: of the financial aspect of what Treasury does. But it
Speaker 10: does so much more than that. Investigates sanctions, it investigates
Speaker 10: terrorists financing. It does so much more than just kind
Speaker 10: of collect tax revenue, you know, and issue treasury bonds.
Speaker 7: What is the reporting show about who's actually committing these
Speaker 7: hacks and what exactly are the hacks on the Treasury.
Speaker 10: So these are primarily nation state attack. So these are
Speaker 10: foreign governments attacking the US Treasury Department. Again, there are
Speaker 10: so many different types of cyber attacks that organizations face.
Speaker 10: A lot of them are very low level and kind
Speaker 10: of easily deflected. Increasingly nowadays we're seeing criminal groups, ransomware
Speaker 10: groups affecting, hijacking networks, and disrupting networks that way. That's
Speaker 10: not what we're talking about here with Treasury. We're talking
Speaker 10: about espionage. We're talking about kind of large, long range
Speaker 10: cyber espionage where these are foreign government backed actors whose
Speaker 10: purpose is spying on data. So in the latest breach,
Speaker 10: the Office of the Comptroller of the Currency that's the
Speaker 10: regulator of America's national banks, had its email system hacked
Speaker 10: for almost two years. So for almost two years, a
Speaker 10: cyber attack group which hasn't been identified yet, you know,
Speaker 10: it was conducting very advanced cyber espionage on the emails
Speaker 10: and the communications of America's national bank regulator. That's not
Speaker 10: supposed to happen. It led to this really extraordinary series
Speaker 10: of events where several of the biggest US banks JP, Morgan,
Speaker 10: bny ME and others severed there temporarily paused their electronic
Speaker 10: sharing of communicate of data with their regulator as a
Speaker 10: result of this breach. That's really extraordinary to have a
Speaker 10: regulated entity tell their regulator your network is not safe
Speaker 10: enough for me to transmit data to That was the
Speaker 10: incident that really compelled us to take a deeper look
Speaker 10: at this and try to figure out what's going on
Speaker 10: at Treasury. And I might add as well, this is
Speaker 10: at a time that you know, Congress has allocated hundreds
Speaker 10: of millions of additional dollars to Treasury to enhance their cybersecurity,
Speaker 10: and they've spent that money. They have done things, but
Speaker 10: they have still not been effective fully in preventing these attacks.
Speaker 2: I noticing your reporting, Jordan, there's been a lot of
Speaker 2: I guess turnover or departures by cybersecurity people within the
Speaker 2: Treasury Department. Did that have any role in this?
Speaker 11: Do?
Speaker 10: We think that's right? So another interesting aspect of the
Speaker 10: reporting is that you know, Treasury senior most cybersecurity officials,
Speaker 10: from the Chief Technology Officer and the Chief Information Officer
Speaker 10: and all their deputies, there have been you know, more
Speaker 10: than a half dozen of these individuals who have left
Speaker 10: Treasury since the Trump administration took office. A lot of
Speaker 10: the attention with Elon Musk and the Doge group has
Speaker 10: been focused you know, understandably on the layoffs. This is
Speaker 10: not a case of layoffs. This is primarily a case
Speaker 10: of buyouts. So when the Doge group, you know, has
Speaker 10: offered buyouts to large numbers of government employees, what's happened
Speaker 10: at Treasury is almost all of the senior most cybersecurity
Speaker 10: officials have taken the buyout. And what we've been told
Speaker 10: is that, in fact, some of those individuals may have
Speaker 10: even supported the Doge effort and the idea that you know,
Speaker 10: consolidating Treasury's IT infrastructure would help improve security. But all
Speaker 10: of those folks are gone. So the cybersecurity leadership at
Speaker 10: Treasury is almost entirely gone, you know, at a time
Speaker 10: where it's facing kind of unprecedented levels of cyber attacks
Speaker 10: and successful cyber attacks.
Speaker 2: Our thanks to Jordan robertson Bloomberg News cybersecurity reporter. The
Speaker 2: next Big Takes stories entitled Electronic Warfare Crashes Global Shipping's
Speaker 2: navigation systems. It highlights how the Iran Israel war exposed
Speaker 2: a critical flaw in the satellite based systems that makes
Speaker 2: the industry hauling eighty percent of global trade vulnerable the
Speaker 2: mass gymming. Jack Whittles is Bloomberg News Oil and Shipping reporter.
Speaker 11: So we looked at shipping data around the Persian Gulf,
Speaker 11: so obviously relevant to the israel around war, but also
Speaker 11: the Red Sea, the Baltic and the Black Sea, and
Speaker 11: we basically saw a big spike in the number of
Speaker 11: strange signals from ships. And what I mean by strange
Speaker 11: signals from ships is ships showing that they are in
Speaker 11: impossible positions. So, for instance, we had a ship in
Speaker 11: the Persian Gulf saying that it was on the edge
Speaker 11: of a camel racetrack. In the UAE, we had a
Speaker 11: ship jumping from off the coast of Saudi Arabia, which
Speaker 11: is on the western side of the Persian Gulf, all
Speaker 11: the way to Iran and then back again in one day,
Speaker 11: which is obviously impossible, especially as the j to Iran
Speaker 11: was on land in Iran.
Speaker 5: Jack. Have we seen this type of signal interferences within
Speaker 5: any other sort of geopolitical crises.
Speaker 11: We have seen it before, but the number when we've
Speaker 11: done our analysis, the number that we've done is massively
Speaker 11: increased for ships appearing on land. In June, there was
Speaker 11: a really huge spike for ships appearing on land in
Speaker 11: the areas that we looked at. So that was again
Speaker 11: the Red Sea, Black Sea, Baltic and push it off.
Speaker 2: So Jack, is this just the standard performance of this
Speaker 2: satellite technology, i e. It's not great? Or is it
Speaker 2: in fact the subject of some type of electronic warfare maybe?
Speaker 2: Do we know?
Speaker 11: Yeah? So's there's two ways that this equipment can be
Speaker 11: interfered with. There's what's called jamming, where the signals are
Speaker 11: essentially overwhelmed, and there's what's called spoofing, where ships are
Speaker 11: fed a false signal, so they're specifically told that there's
Speaker 11: somewhere that they're not. So went on to about these
Speaker 11: satellite navigation systems. They're using GPS, so you know, the
Speaker 11: same sort of thing that's on your Google Maps. So
Speaker 11: it'd be like if the blue dot on your Google
Speaker 11: Maps that tells you where you are just suddenly told
Speaker 11: you that you were somewhere you weren't. So that's obviously
Speaker 11: quite a big problem when you consider that if you're
Speaker 11: in charge of an oil tanker and there are lots
Speaker 11: of oil tankers around you, and it can take you
Speaker 11: kilometers to stop, and you're not sure where all the
Speaker 11: other ships are. That can be a massive, massive problem.
Speaker 5: I see in your story that alarm bells are also
Speaker 5: starting to ring in the insurance industry.
Speaker 11: Yes, you know, it's a real big problem. If it
Speaker 11: wouldn't necessarily invalidate your insurance is my understanding. If you
Speaker 11: know your ship, you know, god forbid, had to crash
Speaker 11: as a result of jamming. But if the crew, if
Speaker 11: their navigation system was jammed and they didn't do anything
Speaker 11: about it, and then something happened, then I think that
Speaker 11: that could cause problems from an insurance point of view.
Speaker 2: Thanks to Jack Those, Bloomberg News Oil and Shipping reporter,
Speaker 2: our final Big Takes story talks about America's hot garbage
Speaker 2: problem and how overheating landfills across the country are spewing
Speaker 2: toxic gases and geysers or trash juice. Yeah. Lar Bliss
Speaker 2: is an editor for Bloomberg Business Week.
Speaker 12: Maybe I'll just start with a little bit of background
Speaker 12: about how I came across this story. I found some
Speaker 12: data on LinkedIn sometime last year that suggested fires at
Speaker 12: recycling facilities. We're skyrocketing, and we've probably all heard about
Speaker 12: this as we all throw bait pens and electric toothbrushes
Speaker 12: and even smartphones, you know, some of us into our
Speaker 12: recycling bins or trash cans, and that can cause real
Speaker 12: problems because of the lithium batteries. And that really made
Speaker 12: me wonder what was happening in kind of the final
Speaker 12: resting place for so much of our trash, which are landfills.
Speaker 12: And it turns out a lot and as you mentioned,
Speaker 12: my colleague Rachel and I really took a deep dive
Speaker 12: into some of the problems that can arise as we
Speaker 12: pile up our waist higher and deeper burb and this
Speaker 12: landfill in Los Angeles County is called Chiquita Canyon, and
Speaker 12: since twenty twenty two, temperatures have been climbing to above
Speaker 12: two hundred degrees in pockets of waste. That's like forty
Speaker 12: percent above the EPA safety standard. And this is a
Speaker 12: big problem because what that's doing is the trash breaks
Speaker 12: down deep below the surface at these really scorching temperatures.
Speaker 12: It's releasing toxic gases, it's releasing geysers of trash juice
Speaker 12: and these really noxious fumes, and it's making people sick
Speaker 12: in the nearby community.
Speaker 8: And what I.
Speaker 12: Discovered is that there's debate about what is actually going
Speaker 12: on and even kind of how to describe what I
Speaker 12: just shared with you, the kind of basic facts. Regulators
Speaker 12: in California suspect that the landfill is smoldering due to
Speaker 12: the operator letting too much oxygen in, and this is
Speaker 12: a problem that's known to start fires, which goes against
Speaker 12: federal regulations. And the operator disputes that and says nothing
Speaker 12: is on fire and says that this is an example
Speaker 12: of a phenomenon the industry has seen a lot of
Speaker 12: in the last twenty years, these elevated temperature landfills.
Speaker 5: Or a really interesting story, what when you were doing
Speaker 5: your reporting, what did you find out about what residents
Speaker 5: are doing to rectify this issue? Who's to blame in
Speaker 5: this situation?
Speaker 12: Yeah, I mean, I think that is where a lot
Speaker 12: of the debate comes down. You know, the waste industry
Speaker 12: will say that, you know, these landfills that have overheated,
Speaker 12: in some cases, they've been tied to you know, specific
Speaker 12: reactive waste streams, right like aluminum dross, which is a
Speaker 12: byproduct of smelting, you know, twenty years later or years
Speaker 12: later reacting under the surface. You know, in other cases
Speaker 12: like in Chikida Canyon. The regulators at the at the
Speaker 12: state are saying, no, this is or they suspect I
Speaker 12: should say that this is because of you know, the
Speaker 12: operator basically mismanaging the gas collection system and their landfill.
Speaker 12: And so this back and forth I think actually makes
Speaker 12: you know, accountability somewhat challenging. But I will say in California,
Speaker 12: you know, the state is is uh, you know, issuing
Speaker 12: violations uh, you know, on a regular basis to this operator.
Speaker 12: But for residents, you know, they're really kind of stuck
Speaker 12: in their homes, you know, breathing in these these toxic
Speaker 12: fumes and and these noxious odors, and they feel like
Speaker 12: they can't sell their homes because of the financial barriers
Speaker 12: and and you know even ethical kind of questions about
Speaker 12: putting another family in the same situation, and so they
Speaker 12: feel kind of stuck and and at a loss for
Speaker 12: for kind of how to move forward.
Speaker 2: Laura, who owns landfills across the US. Are these all
Speaker 2: privately owned?
Speaker 12: Not all of them are, but but many are. The
Speaker 12: landfill I focused on in Los Angeles County is is
Speaker 12: owned and managed by Waste Connections. There's certainly other you know,
Speaker 12: large players in the industry Republic Services waste management, but
Speaker 12: some of the affected landfalls I looked at were municipally
Speaker 12: owned to Bristol Landfill in Virginia has been problematic in
Speaker 12: the last several years, a lot of the same kind
Speaker 12: of symptoms I've been describing affecting communities out there.
Speaker 2: Our thanks to Laura Bliss, Bloomberg BusinessWeek editor, you can
Speaker 2: check out all of the Big Takes stories by going
Speaker 2: to Bloomberg dot com slash Big Take. That's this week's
Speaker 2: edition of Bloomberg Intelligence on Bloomberg Radio, providing in depth
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries. And remember you can access Bloomberg Intelligence
Speaker 2: via Big on the terminal. I'm Paul Sweeney. Stay with us.
Speaker 2: Today's top stories and global business headlines are coming up
Speaker 2: right now.