Speaker 1: From Bahart where Innovation, Money and Power Collie in Silicon
Speaker 1: Vallet Nbon.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed.
Speaker 3: Ludlove Ourmed Ludlow in San Francisco. Caroline hides off this week.
Speaker 3: This is Bloomberg Technology coming up on the program. Full
Speaker 3: coverage from the World Economic Forum as tech heavyweights to
Speaker 3: send on Davos. We hear from Sam Altman, Satya Nadella,
Speaker 3: Marc Benioff, and many more. Plus the US Supreme Court
Speaker 3: rejects Apple's bid for an epic app store review. Details
Speaker 3: ahead on the decision that will likely affects billions of
Speaker 3: dollars in revenue for the iPhone maker, and Microsoft is
Speaker 3: announcing the next phase of its co pilot journey. We'll
Speaker 3: discuss the news with Microsoft's executive vice president Yusuf Mehdi.
Speaker 3: Welcome back after a holiday weekend here in the United States.
Speaker 3: The big story is Apple. This was the market mover
Speaker 3: and give them Apple's market cap, dragging indices to the
Speaker 3: downside softom by one point seven percent. Those declinents have
Speaker 3: been deeper. The US Supreme Court rejecting Apple's appeal of
Speaker 3: an appeals court decision earlier an anti trust suit which
Speaker 3: challenges the app store. I want to bring in Bloomberg's
Speaker 3: Mark German, our chief correspondent who leads our coverage of
Speaker 3: Apple and Mark. It's hard to understand the legal ease
Speaker 3: here because it's an appeal of an appeal. But explain
Speaker 3: this morning's news to our audience.
Speaker 2: ED, thanks for having me this morning as always. Yes,
Speaker 2: So let me explain Epic Games.
Speaker 4: Apple.
Speaker 2: They were in this major lawsuit a few years ago
Speaker 2: over the app store Apple one.
Speaker 4: Most of the lawsuit right.
Speaker 2: Apple One in the sense they were not designated of minoppoly.
Speaker 2: But there was one little car about that Apple lost
Speaker 2: on and that was known as a steering provision. The
Speaker 2: idea where the judge rule that Apple should allow developers
Speaker 2: to include a button inside of their applications to point
Speaker 2: users external to the app store to complete their transactions. Now,
Speaker 2: why is that such a big deal, Because primarily applications
Speaker 2: downloaded via the app Store.
Speaker 4: To the iPhone or the iPad have to use.
Speaker 2: Apple's INAPT billing system that takes between a fifteen percent
Speaker 2: and a thirty percent cut.
Speaker 4: In fact, the majority of Apple services.
Speaker 2: Revenue likely comes from transactions and in app purchases made
Speaker 2: through the app store, and Apple had been appealing that
Speaker 2: for the last several months, all the way up to
Speaker 2: the Supreme Court. Epic had also been appealing their losses
Speaker 2: in that initial trial in California up to the Supreme Court.
Speaker 2: Today Tuesday, the Supreme Court decided they're not going to
Speaker 2: high here either side.
Speaker 4: So that means Epic's not going to get what they want.
Speaker 4: They want Apple to open up the app store completely
Speaker 4: in the US.
Speaker 2: They want them to be designated as an antitrust violator
Speaker 2: as a monopoly.
Speaker 4: Apple is not getting what they want.
Speaker 2: Their appeal here has failed for that carve out for
Speaker 2: the external button for in app purchases. Were going to
Speaker 2: have to wait and see Apple's response here to see
Speaker 2: when they're going to implement this and exactly how. The
Speaker 2: interesting other tidbit year is March seventh is when the
Speaker 2: Digital Markets Act comes into place. The Digital Markets Act
Speaker 2: is in the European Union. This is going to require
Speaker 2: Apple to open up the app store. There allowed outside billing,
Speaker 2: so it's possible Apple's going to try to use that
Speaker 2: same technology to open up the billing in the US
Speaker 2: as well, or they may take another method.
Speaker 4: We'll have to wait and see.
Speaker 2: But either way, not great news for Apple this morning
Speaker 2: nor Epic.
Speaker 5: Yeah.
Speaker 3: We had the European Commission Executive Vice President Margareta Vestla
Speaker 3: on with me live last Friday, and her message was, well,
Speaker 3: I'm meeting with Tim Cook. That meeting happened. You know,
Speaker 3: you have to comply by March seventh. And what she
Speaker 3: told me was she was going to explain to Tim
Speaker 3: Cook and other CEOs how they could comply. Let's get
Speaker 3: back to the app store dispute. There's an iOS iPhone
Speaker 3: user consideration here, a technology consideration that if the High
Speaker 3: Court put into effect the Appeals Court's original decision, you,
Speaker 3: as a developer of an iOS app, can direct the
Speaker 3: consumer elsewhere outside of the iOS ecosystem.
Speaker 5: Right.
Speaker 3: Just explain if I'm an iPhone user what I might
Speaker 3: see going forward.
Speaker 2: Yeah, So, if you're an iPhone user right now, and
Speaker 2: let's say I'll use Fortnite as an example. Let's say
Speaker 2: Fortnite was stole the app store. You want to buy
Speaker 2: a new character, you want to buy a bundle.
Speaker 4: So you click that.
Speaker 2: Maybe it's priced at ten dollars, and traditionally what you
Speaker 2: would have to do is use your app store credentials
Speaker 2: you get to pop up through the app Store. You
Speaker 2: would approve it with touch ID, your pastor base ID.
Speaker 2: It's ten dollars. Seven dollars of that would go to
Speaker 2: the developer.
Speaker 4: Three dollars a go to Apple.
Speaker 2: Now, when this comes into effect that button, maybe you'll
Speaker 2: be able.
Speaker 4: To go to a website to finish the transaction.
Speaker 2: Maybe you'll use Stripe for example, and the vast majority
Speaker 2: in that case of the revenue will then go to
Speaker 2: the developer. Stripe charges maybe three and four percent, Maybe
Speaker 2: it goes PayPal. They take a few percentage points. So
Speaker 2: it's going to mean less revenue for Apple, more revenue
Speaker 2: for the developer. Now there is a scenario here where
Speaker 2: even if apps can point developers to collect payments outside
Speaker 2: of the app Store, Apple could still have a method
Speaker 2: to collect that caament from the developer.
Speaker 4: Maybe the developer at the end of each month needs
Speaker 4: to write Apple a check.
Speaker 2: This is something they've done with dating apps in the
Speaker 2: Netherlands that has required a similar rule.
Speaker 4: But Apple is still trying to collect that money.
Speaker 2: Instead of charging a thirty percent fee, they charge something
Speaker 2: like twenty six or twenty seven percent to taking out
Speaker 2: that processing feed from there too, So it is going
Speaker 2: to be very interesting to see how Apple implements this.
Speaker 2: I would imagine, as they should, they will implement it
Speaker 2: in the way that's the most advantageous to their bottom lie.
Speaker 3: All right, Bloomberg's Mark Gum and our chief correspondent who
Speaker 3: leads our coverage of Apple, thank you very much. A
Speaker 3: pretty complex story. All right, Let's go back to markets
Speaker 3: and our top stories, because on this Tuesday, they're inextricably linked.
Speaker 3: Joining us. Erika Klouer, portfolio manager for the Pgmen and
Speaker 3: Technology Fund Jennison Associates, a one hundred and eighty six
Speaker 3: billion dollar active asset manager that takes a bottom up, fundamental,
Speaker 3: long term investment approach. And I think, when I look
Speaker 3: at your portfolio specifically, Erica, if the story of twenty
Speaker 3: twenty three was the Magnificent seven, you're pretty closely aligned
Speaker 3: with those, one of them being Apple. You will have
Speaker 3: seen the news this morning of the Supreme Court's decision
Speaker 3: to reject Apple's appeal of the Appeals court original decision.
Speaker 3: When you hold a stock like Apple and you consider
Speaker 3: its services revenue, how do you think about the news
Speaker 3: story of this morning in terms of the attractiveness of
Speaker 3: that name.
Speaker 6: Sure well, thank you so much for having me. You know,
Speaker 6: Apple has been a long time holding of Jennison Associates,
Speaker 6: and we look at the business as one that is
Speaker 6: extraordinarily sticky. Companies who use Apple products and consumers who
Speaker 6: use Apple products tend to have a difficult time switching
Speaker 6: over to other platforms. As a result, the sustainability of
Speaker 6: the services business is incredibly attractive. Certainly, if you look
Speaker 6: on the hardware side of the part of the business,
Speaker 6: there is more competition. There also is saturation and maturity
Speaker 6: in that business. So really what drives our investment decision
Speaker 6: is the sustainability of that services business.
Speaker 3: Erica. The other big story of the morning which we
Speaker 3: have to discuss is FED speak. In fact, it will
Speaker 3: probably be the speak of the week, and FED Governor
Speaker 3: Waller is kind of front and center, basically saying the
Speaker 3: FED may need to cut rates this year, emphasis on
Speaker 3: this year, depending on inflation, but there is no need
Speaker 3: to go as deep or as fast as historically a
Speaker 3: FED might have done. How does that inform your view
Speaker 3: of the technology sector.
Speaker 6: Sure well, Jennison is a bottoms up research house and
Speaker 6: so we tend to look at companies over a longer
Speaker 6: period of time. Looking at the duration is the sustainability
Speaker 6: of the company's competitive advantages. But one of the critical
Speaker 6: factors that goes into our decision making at Jennison is
Speaker 6: really looking at the ability of technology companies to be
Speaker 6: deflationary over time, and we think that is going to
Speaker 6: be more important than ever over the next three to
Speaker 6: five years, as companies are able to use AI to
Speaker 6: bring down their costs to increase their productivity to an
Speaker 6: extent that we do not think is properly discounted in
Speaker 6: many of the share prices today.
Speaker 3: Two of your biggest holdings are in Nvidia and I
Speaker 3: believe also Broadcom. You know, we go back to that
Speaker 3: Magnificent seven discussion of last year. Are those solely AI
Speaker 3: stories to your mind?
Speaker 6: Great question. We at Jennison Associates have owned in Vidia
Speaker 6: since twenty sixteen and broadcome about the same time period,
Speaker 6: and the reason for the duration of those holdings is
Speaker 6: that we look to those companies as key enablers within
Speaker 6: artificial intelligence deployment. Certainly in Nvidia is more of a
Speaker 6: pure play in that arena. Broadcom is a little bit
Speaker 6: different in the sense that it not only has aiasic
Speaker 6: parts custom parts that it makes for hyperscalers such as Google,
Speaker 6: but it also has a very strong portfolio of networking
Speaker 6: products that we think are going to be essential within
Speaker 6: the AI ecosystem, and beyond that, they have very strong
Speaker 6: market share in many other semiconductor businesses that may be
Speaker 6: more mature, but the company has extraordinary pricing power that
Speaker 6: has sustained over the last decade and we think will
Speaker 6: extend for the next decade as well.
Speaker 3: Another name that you hold is AMD. The stock currently
Speaker 3: up almost eight percent, putting it on track for its
Speaker 3: biggest jump since early December. A lot of analysts have
Speaker 3: been updating their price targets on this name. I sat
Speaker 3: down with Lisa Sue when they kind of fully launched
Speaker 3: the MII three hundred X and started to really build
Speaker 3: up their AI story and boost their forecasts. It's the
Speaker 3: same quest question, do you see AMD as an AI
Speaker 3: play or something broader?
Speaker 6: Well, As you point out, AMD is one of the
Speaker 6: top holdings that Jennison Associates, and the reason for that
Speaker 6: is not only do we think that the company has
Speaker 6: a very viable and important product portfolio to address the
Speaker 6: AI opportunities, but we also look to the PC segment,
Speaker 6: which may not be getting so much attention as AI
Speaker 6: does today because it's not as exciting. It's a more
Speaker 6: mature industry. But I think that there is going to
Speaker 6: be an important multi year upgrade cycle two aipcs and
Speaker 6: their AMD is very well positioned to continue to gain
Speaker 6: market share and increase its average selling prices. So we
Speaker 6: think the combination of those two markets, along with its
Speaker 6: very strong portfolio programmable logic devices, which goes into different
Speaker 6: end markets, is going to push advanced micro devices earnings
Speaker 6: higher than expectations for the next several years.
Speaker 3: Eric I think one thing that many of this names
Speaker 3: having common other than the sort of battleground for high
Speaker 3: performance GPU, is exposure to China. And there is the
Speaker 3: policy side of this, where the US has clear export
Speaker 3: controls and restrictions of technology to China, and then there's
Speaker 3: the politics side of it. And I believe that one
Speaker 3: of China's vice premieres this morning was trying to say, like, look,
Speaker 3: we need open access to technology. Is an investor, where
Speaker 3: do you position yourself within that?
Speaker 6: This is a great question. I would say that the
Speaker 6: biggest concern that we have at Jennison at this point
Speaker 6: is the strain on relations with China visa the ability
Speaker 6: for there to be technology innovation. Undoubtedly, the world is
Speaker 6: much more globally interconnected with regards to technology deployment, innovation
Speaker 6: and supply chain. With there being so much more, frankly
Speaker 6: tension between the US and China, this is an area
Speaker 6: that gives us a lot of concern. We still believe
Speaker 6: that the pace of innovation will continue, but we are
Speaker 6: monitoring the situation very tightly. As one example, the biggest
Speaker 6: foundry in the world, the biggest maker of semiconductors in
Speaker 6: the world for other companies, is Taiwan Semiconductor. If TSMC's
Speaker 6: supply chain is disrupted, that would harm the entire technology
Speaker 6: industry and frankly, the global economy. So this is a
Speaker 6: very important issue that we are monitoring at Jennison.
Speaker 3: Erica Klaud, portfolio manager for the PGM Jennison Technology Fund.
Speaker 3: A lot of covered ground there, very wide knowledge based,
Speaker 3: great discussion. Good to have you on the program. Now
Speaker 3: coming up, we're going to get more from Davos. That's
Speaker 3: coming up next here this is Bloomberg Technology. Okay, it's
Speaker 3: time for talking tech and first stop Saudi Arabia's Sovereign
Speaker 3: Wealth Fund, the public Investment Funds plans make big investments
Speaker 3: in both the semiductor and space industries this year. That's
Speaker 3: according to its Minister of Communications. The Kingdom has been
Speaker 3: ramping up efforts to diversify its economy away from oil
Speaker 3: and speaking of semiconductors, chip design company Synopsis has agreed
Speaker 3: to buy software developer and Sis for about thirty four
Speaker 3: billion dollars in cash and stock, according to an announcement
Speaker 3: by the companies, The dealers set to expand Synopsis' customer
Speaker 3: base and its suite of products. Plus, Netflix is testing
Speaker 3: a joint plan with French retailer car four in a
Speaker 3: pilot project to win more customers to its cheapest subscription,
Speaker 3: mimicking a model used by Amazon to boost its streaming customers.
Speaker 3: If enough users sign up to the trialcar four said
Speaker 3: it will expand the offer to its customers all across France. Okay, So,
Speaker 3: the World Economic Forum is underway in Davos, and Open
Speaker 3: AI CEO Sam Outman joined Bloomberg's Brad Stone to discuss
Speaker 3: the upcoming election and the influence AI could have on jobs.
Speaker 3: Have a listen.
Speaker 7: I think there's a lot at stake at this election.
Speaker 7: I think elections are you know, huge deals. I believe
Speaker 7: that America is going to be fine no matter what
Speaker 7: happens in this election. I believe that AI is going
Speaker 7: to be fine no matter what happens in this election,
Speaker 7: and we will have to work very hard to make
Speaker 7: it so. But this is not you know, no one
Speaker 7: wants to set up here and like hear me rant
Speaker 7: about politics, I'm going to stop after this. But I
Speaker 7: think there has been a real failure to sort of
Speaker 7: learn lessons about what's kind of like working for the
Speaker 7: citizens of America and let's.
Speaker 8: Not there are political figures in the US and around
Speaker 8: the world like Donald Trump who have successfully tapped into
Speaker 8: a feeling of dislocation, anger of the working class.
Speaker 9: If the feeling of it, you know, exacerbbaiting inequality or
Speaker 9: technology leaving people behind. Is there the danger that you know,
Speaker 9: AI furthers those trends.
Speaker 4: Yes, for sure.
Speaker 7: I think that's something to think about. But one of
Speaker 7: the things that surprised us very pleasantly on the upside,
Speaker 7: because you know, when you start building a technology, you
Speaker 7: start doing research, you kind of say, well, we'll follow
Speaker 7: where the science leads us. And when you put a product.
Speaker 7: You'll say, this is going to co above with society
Speaker 7: and will follow where users lead.
Speaker 3: Us, but it's not. You get to steer it, but
Speaker 3: only somewhat.
Speaker 7: There's some which is just like, this is what the
Speaker 7: technology can do, this is how people want to use it,
Speaker 7: and this is what it's capable of. And this has
Speaker 7: been much more of a tool than I think we expected.
Speaker 7: It is not yet and again in the future it'll
Speaker 7: it'll get better, but it's not yet like replacing jobs
Speaker 7: in the way or to the degree that people thought
Speaker 7: it was going to. It is this incredible tool for
Speaker 7: productivity and you can see people magnifying what they can
Speaker 7: do by a factor of two or five or in
Speaker 7: some way that doesn't even talk to it makes sense
Speaker 7: to talk about a number, because they just couldn't do
Speaker 7: the things at all before. And that is I think
Speaker 7: quite exciting, this new vision of the future that we
Speaker 7: didn't really see when we started. We kind of didn't
Speaker 7: know how it was going to go, and very thankful
Speaker 7: the technology did go in this direction. But where this
Speaker 7: is a tool that magnifies what humans do, lets people
Speaker 7: do their jobs better, lets the AI do parts of jobs,
Speaker 7: and of course jobs will change and of course some
Speaker 7: jobs will totally go away, But the human drives are
Speaker 7: so strong in the sort of way that society works,
Speaker 7: is so strong that I think, and I can't believe
Speaker 7: I'm saying this, because it would have sounded like an
Speaker 7: ungrammatical sentence to me at some point, but I think
Speaker 7: AGI will get developed in the reasonably close ish future,
Speaker 7: and it'll change the world much less than we all think.
Speaker 7: It'll change jobs much less than we all think. And
Speaker 7: again that sounds I may be wrong again now, but
Speaker 7: that wouldn't even compiled for me as a sentence at
Speaker 7: some point, given my conception then of how EGI was
Speaker 7: going to go.
Speaker 9: As you've watched the technology develop, have you both changed
Speaker 9: your views on how significant the job dislocation and disruption
Speaker 9: will be as AGI comes into focus.
Speaker 7: You know, you hear a coder say, okay, I'm like,
Speaker 7: two times won't productive, three times won't productive whatever then
Speaker 7: they used to be, and I can never code again
Speaker 7: without this tool. You mostly hear that from the younger ones.
Speaker 7: But it turns out, and I think this will be
Speaker 7: true for a lot of industries. The world just needs
Speaker 7: a lot more code than we have people to write
Speaker 7: right now. And so it's not like we run out
Speaker 7: of demand. It's that people can.
Speaker 3: Just do more. Expectations go up, but ability goes up.
Speaker 3: To That was open Ais Sam Outman. Let's stick with Davos.
Speaker 3: Bradstone also caught up with Salesforce CEO Mark Benioff to
Speaker 3: discuss the kinds of disruptive changes we can expect with AI.
Speaker 3: Have listened.
Speaker 1: I think this idea that companies like open ai or
Speaker 1: Microsoft and others want to create digital people that can
Speaker 1: do all kinds of tasks that we do. You know,
Speaker 1: will they be taxed to, how they'll be regulated, what
Speaker 1: are the dangers involved? All of these kind of important questions.
Speaker 1: At the same time, we want to have these incredible
Speaker 1: benefits of AI that we're all experiencing better healthcare, better education,
Speaker 1: and you know, augmentation of our yep. Let me tell
Speaker 1: you an incredible story where I was just in Milan
Speaker 1: with Gucci and they brought us into work on their
Speaker 1: call center and very excited. How do we use AI?
Speaker 1: How do we create better customer service? But we don't
Speaker 1: really know what is their end goal? Is it more productivity?
Speaker 1: You know, is it just better customer relationships? Is a
Speaker 1: higher margins. Do they want to reduce staff, do they
Speaker 1: want to increase staff? But when we apply the technology
Speaker 1: that we're seeing now, what we saw was the current
Speaker 1: state of AI, which is really the ability to augment
Speaker 1: human being and human performance, revenues went up thirty percent
Speaker 1: because these individuals who were call center service agents also
Speaker 1: then simultaneously became sales agents marketing agents. They were able
Speaker 1: to do all these things that they just could not
Speaker 1: do before. And that's a tremendous theme I think that's
Speaker 1: going on. I feel that way myself, you know, when
Speaker 1: I'm with chat GPT or co Pilot or anthropict Cloud
Speaker 1: or whatever it is, mister Awl, I get that same feeling,
Speaker 1: Oh wow, I've got a little bit more capability than
Speaker 1: i had before because I'm being augmented through AI. And
Speaker 1: I'm sure it's true in a lot of disciplines. Certainly
Speaker 1: it's true in healthcare, and it's going to be true
Speaker 1: in a lot more things. But we're on an ARC
Speaker 1: and we all know that that you know there, it's
Speaker 1: going to start to be able to do things that
Speaker 1: will be fundamentally a surrogate for what we all do.
Speaker 10: Today and what will determine whether a company can be
Speaker 10: successful with AI or not.
Speaker 1: How long will it be until I come to Davos
Speaker 1: to be interviewed by the Bloomberg AI. That's what I
Speaker 1: really want to know.
Speaker 5: I replace Well, maybe you know.
Speaker 1: I mean, we've been doing this together for a long time, right,
Speaker 1: what a couple decades?
Speaker 5: A few decades?
Speaker 7: I'm not that old, but okay, but you know what
Speaker 7: I mean.
Speaker 1: Where it's like, you know, I don't know when we
Speaker 1: get to this point where there's not just all of
Speaker 1: us in the but there's an AI as well participating
Speaker 1: in this conversation and then work about to create digital people,
Speaker 1: digital salespeople, digital service people, digital marketing people.
Speaker 3: That was Salesforce CEO and chair Mark Benioff explaining that
Speaker 3: my boss, Bradstone and maybe me one day will be
Speaker 3: replaced by AI. Let's see quick check in on the markets.
Speaker 3: We're soft the three tens and one percent on the
Speaker 3: Nazak one hundred, but megacaps are doing some of the
Speaker 3: work to lift up the index, one of those names
Speaker 3: being Microsoft. It's pared some of its earlier gains in
Speaker 3: the session, but we are up three tents of one percent.
Speaker 3: Why well, City and Thedella speaking on Stage and Davos,
Speaker 3: but also some news on what Microsoft's doing with AI.
Speaker 3: Microsoft is now opening up it's AI Assistant co Pilot
Speaker 3: two consumers with access to open AI's latest chat, GPT technology,
Speaker 3: and image creation features. The company also announced it's making
Speaker 3: the corporate version available to smaller companies and SME's delighted
Speaker 3: to say we're joined by Microsoft's corporate or executive vice
Speaker 3: president use of medi for more on this use of
Speaker 3: Good morning to you. This is a substantive step, right
Speaker 3: because you think about all of the people around the
Speaker 3: world that use some form of Microsoft software in their
Speaker 3: daily life. How is Copilot now going to be integrated
Speaker 3: to that if you're an everyday technology user.
Speaker 11: Yeah, more than a yeah, this is a significant step.
Speaker 11: I mean, we've been kind of on a whirldwind with
Speaker 11: Microsoft Copilot. We've had now over five billion chats with
Speaker 11: people using AI and their daily lives. And so today
Speaker 11: we take the next step by bringing more features and expanding.
Speaker 5: More capabilities for people.
Speaker 11: First in the Copilot that we offer broadly, we're going
Speaker 11: to enable new capabilities with a premium subscription called Microsoft
Speaker 11: Copilot Pro, and that gives creators, researchers, writers, analyst programmers,
Speaker 11: the ability to have the very latest AI models, but
Speaker 11: also the ability to have AI within Microsoft apps now
Speaker 11: for the very first time, so they can use it
Speaker 11: an outlook, they can use it in Word to write
Speaker 11: documents because in PowerPoint, and we're providing premium things like
Speaker 11: the ability to build custom GPTs.
Speaker 5: We're also going to make.
Speaker 11: It available to businesses of all sides, so small businesses
Speaker 11: can now get access to Copilot and Microsoft to stepot.
Speaker 3: Yes, a really simple question that investors have had and
Speaker 3: industry andsts have always had is these tools are fantastic.
Speaker 3: How do they help you make money alongside how you
Speaker 3: traditionally sell office tools direct to the consumer or to
Speaker 3: smaller businesses away from the enterprise business.
Speaker 11: Yeah, there's really a couple of different ways ed you know,
Speaker 11: And I would say first and foremost is really early
Speaker 11: in the stages, but the biggest software market because it
Speaker 11: is the online advertising business, the search business, and we've
Speaker 11: clearly seen now with AI and with Microsoft Copilot that
Speaker 11: that is changing and we're seeing more people come to
Speaker 11: use our services, whether it's Copilot, whether it's Mircsoft, edge Mark,
Speaker 11: stoft being or Grown and Share and soil that advertising
Speaker 11: market is an opportunity. And then today with Copilot Pro,
Speaker 11: the premium subscription service, we're able to unlock enhanced AI
Speaker 11: capabilities in our Microsoft through sixty Vibe subscription, of which
Speaker 11: we have now over seventy million people, so that we
Speaker 11: have an ability to grow through a variety of different
Speaker 11: business models and most importantly help people in their laves
Speaker 11: be more creative.
Speaker 3: I always think about the education side of this usef
Speaker 3: You know, there are people that will have always used
Speaker 3: Excel or word, you know, in the course of their
Speaker 3: daily life for their their business. But we kind of
Speaker 3: make the assumption in the first instance that all of
Speaker 3: us will find a copilot tool intuitive, we'll just know
Speaker 3: how to use it. And I wondered if your experience
Speaker 3: at Microsoft is that that's actually the case. How quickly
Speaker 3: do you think it will be adopted by users and
Speaker 3: do you think that they understand how it works.
Speaker 5: It's a great question, ed.
Speaker 11: I mean, we're clearly in the early days, and so
Speaker 11: in some cases, for some people it's immediately inuitive, just
Speaker 11: like people learned to use two thumbs when they were
Speaker 11: a smartphone came out, and for other of us it
Speaker 11: takes a little bit more time to pick it up.
Speaker 11: But in general, it is quite intuitive. You know the
Speaker 11: fact that you can essentially use plain English, use you know,
Speaker 11: natural language. If you're on your phone, you can even
Speaker 11: just speak to it, and you can start to ask
Speaker 11: it questions, and very quickly you can start to find
Speaker 11: some of the magic. And once you find the magic,
Speaker 11: it really is pretty incredible.
Speaker 5: You know.
Speaker 11: I've had a bunch of examples where I've been able
Speaker 11: to take my son had to get an MRI for
Speaker 11: his shoulder.
Speaker 5: I didn't understand all of it.
Speaker 11: I put it into our copilot and it came back
Speaker 11: with plain English. I was able to help create an
Speaker 11: image of a design I wanted to do to do
Speaker 11: a part of our remodel on the house, and that
Speaker 11: just made that instantaneous. And as you find those magical scenarios,
Speaker 11: you just kind of naturally want to seek it out
Speaker 11: and use it more. Kind of like the early days
Speaker 11: of search, where people didn't know quite how of search,
Speaker 11: and now people are quite fascile with it.
Speaker 3: I am really interested in the seme or small business
Speaker 3: part this equation because we're kind of debating, well, or
Speaker 3: will we not have a recession, what is the health
Speaker 3: of the small and medium sized business, particularly in North America,
Speaker 3: but globally. You know, it can be a big decision
Speaker 3: to invest in a piece of software or a piece
Speaker 3: of infrastructure. How do you see that rollout with SMEs
Speaker 3: and what's the feedback been in the first instance?
Speaker 5: Yeah, I mean it's a great question.
Speaker 11: I mean, the history of the world is really two
Speaker 11: things to drive growth, it's population growth and productivity enhancement
Speaker 11: that'll drive GDP. You know, for the growth here, the
Speaker 11: ability to have AI within Microsoft Office Apps, which is
Speaker 11: the key tool for how businesses operate. We think there's
Speaker 11: great opportunity there, great benefits. You know, what we've seen
Speaker 11: so far in what we've launched with copile It for
Speaker 11: our enterprise customers is on average they're saving about a
Speaker 11: half an hour a week to an.
Speaker 5: Hour that's so valuable.
Speaker 11: Seventy seven percent of them say they would never go back.
Speaker 11: I believe we can do that here, and today's announcements
Speaker 11: so profound because of all businesses, ninety nine point nine
Speaker 11: percent of them are small businesses. So we really do
Speaker 11: see an opportunity here and I think it can help
Speaker 11: a lot with some of the world challenges. Like you
Speaker 11: talked about because I think this productivity will lead to
Speaker 11: more GDP growth and will be a benefit for everybody
Speaker 11: who can access the technology.
Speaker 3: If I'm looking down on my screen on the Bloomberg
Speaker 3: terminal and I've got all of the world's most valuable
Speaker 3: companies listed, and number one right now is Microsoft and
Speaker 3: number two is app Or something that happened Friday. From
Speaker 3: a marketcap perspective, it was something we were waiting for.
Speaker 3: It's been a ride over the last twelve months. The
Speaker 3: story for Microsoft really driven by AI. I just wondered
Speaker 3: if I could get your reaction to Microsoft being the
Speaker 3: most valuable company in the world and why you think
Speaker 3: that that happened.
Speaker 11: Well, look, I think the first thing everyone here at
Speaker 11: Microsoft we're very humble about the opportunity in front of us,
Speaker 11: the work we have to do to meet our customer needs,
Speaker 11: and so I would say more than anything, we're really
Speaker 11: focused on what is this magical opportunity for AI. And
Speaker 11: I think that is to your point, that's what's led
Speaker 11: to I think people seeing the opportunity that this company
Speaker 11: can do, and we're you know, we're very focused on
Speaker 11: trying to make that happen. I think AI is going
Speaker 11: to be one of the most empowering tools that any
Speaker 11: of us get to use in our lives. Bigger than
Speaker 11: the phone, bigger than the internet, bigger than even the PC.
Speaker 11: And we're quite excited about what we can do as
Speaker 11: we build on some of the announcements.
Speaker 5: We have today.
Speaker 3: Use Off Meddi, Microsoft's exective vice president. It's great to
Speaker 3: have you on the program. It's good to catch up,
Speaker 3: and happy new year to you. Into twenty twenty four.
Speaker 3: Now let's head back to Davos and well useless boss.
Speaker 3: Microsoft CEO City and Nadella joined Bloomberg's Brad Stone for
Speaker 3: a conversation about the relationship between Microsoft and Open Ai
Speaker 3: in the aftermath of what was a tumultuous November for
Speaker 3: the AI company. Have a listen to this.
Speaker 12: You're going to go into any partnership. First of all,
Speaker 12: there is independence in a partners There are two different
Speaker 12: companies answerable to two sets of different stakeholders with different interests.
Speaker 12: So therefore you have to then create a commercial partnership
Speaker 12: in it that is mutually beneficial. So that's why I
Speaker 12: think partnerships where you enter into partnerships where one side
Speaker 12: is trying to take advantage of the other is not
Speaker 12: long term stable, but if two partners can. And that's
Speaker 12: sort of why I go back to the history of
Speaker 12: enterprise value that was created with partnerships that at least
Speaker 12: have been involved in across my career at Microsoft. So yes,
Speaker 12: I think you have to sort of. I feel very
Speaker 12: very good about the construct we have. I feel at
Speaker 12: the same time very capable of controlling our own destiny.
Speaker 12: So it's not like that we are single threaded even
Speaker 12: today on Azure. And this is not about even open
Speaker 12: a eye. It's all about reflection of what our customers want.
Speaker 12: Every customer will comes to Azure for example, in fact
Speaker 12: our own products.
Speaker 3: It's not about one model.
Speaker 12: We care deeply about having the best frontier model, which
Speaker 12: happens to be for example today GPD four. But we
Speaker 12: also have mixed straw as a models. As a service
Speaker 12: inside of Azure, we use Lama in places, we have PI,
Speaker 12: which is the best SLM from Microsoft. So there is
Speaker 12: going to be diversity of capability and models that we
Speaker 12: will have that we will invest in. But we will
Speaker 12: partner very way deeply with open Ai.
Speaker 10: What is the right operating model for a company like
Speaker 10: open Ai.
Speaker 4: I mean, currently it's.
Speaker 10: A capped for profit company owned by a nonprofit, a
Speaker 10: very unorthodox arrangement probably contributed to some of the drama
Speaker 10: and instability in November.
Speaker 4: Have they figured it out yet?
Speaker 10: Are you comfortable now that you've got a partner with
Speaker 10: a stable operator model you're talking to Sam later, I.
Speaker 8: Am, and I will ask you that as well for
Speaker 8: your opinion.
Speaker 12: He needs to answer that question and his board obviously,
Speaker 12: and I'm sure they're working through it.
Speaker 3: Look, I always say this, which is we.
Speaker 12: Invest did we partnered when they were whatever they were
Speaker 12: and whatever they are today right in terms of being
Speaker 12: a cap profit, nonprofit what have you?
Speaker 5: So I'm comfortable.
Speaker 12: I have no issues with any structure. What we just
Speaker 12: want is good stability. And as I said, we don't
Speaker 12: even need like I'm not even interested in a board seat,
Speaker 12: or we don't need control.
Speaker 3: We definitely don't have control.
Speaker 12: We have no We just want to have a good
Speaker 12: commercial partnership and we want to be investors in the
Speaker 12: entity in even the way they're structured. So what I
Speaker 12: would like is good governance and real stability.
Speaker 1: That's it.
Speaker 3: I was Citia Nadella, CEO of Microsoft now coming up
Speaker 3: as the generative AI talk of the town in Davos
Speaker 3: is underway. We're gonna have more on exactly that, look
Speaker 3: at the investing side in startups and private markets. Excel
Speaker 3: partner Sarah Olison coming up next. This is blind DAK Technology.
Speaker 13: What we're doing is we're addressing some of the most
Speaker 13: profound social challenges with AI in ways that are transformative.
Speaker 13: So to give you an a couple of examples, I
Speaker 13: think that one of the extraordinary places for all of us,
Speaker 13: and we've heard a lot about it here over lunch,
Speaker 13: is healthcare. And part of the reason is it's the
Speaker 13: ability with AI to aggregate so much data that you
Speaker 13: can actually have a level of diagnosis that is better
Speaker 13: than what specialists can do.
Speaker 3: How is alphabet president CFO and CIO roof Porat there
Speaker 3: commenting on the future of AI and a conversation with
Speaker 3: David Rubinstein at Bloomberg House in Davos. Let's talk more
Speaker 3: about the impact of AI generative AI in particular. In
Speaker 3: today's VC Spotlight with Sarah Edelson, partner Excel. She focuses
Speaker 3: on early stage consumer enterprise and AI companies firm and
Speaker 3: we've kind of swat places in a way you usually hear,
Speaker 3: but you're in New York City exactly.
Speaker 14: You're hosting in your lovely studio, So thank you for
Speaker 14: having me.
Speaker 3: No, it's it's always good to have the firm on
Speaker 3: the show. Here's the thing. The questions always are we
Speaker 3: over hyping all of this? So start the show at
Speaker 3: nine am Pacific time, and by ten am Pacific time,
Speaker 3: I've said the words AI a thousand times. Your thesis
Speaker 3: seems to be based on the opposite, that we are
Speaker 3: not over hyping this at all.
Speaker 14: Yeah, I think that's right. I think from our perspective,
Speaker 14: if anything, it's under hyped, which I know is hard
Speaker 14: to imagine with how many times, even just sitting here
Speaker 14: in the studio before this segment, I've heard AI countless times.
Speaker 14: But really our perspective is it's worthy of that attention
Speaker 14: because it's just that transformational and it's going to have
Speaker 14: a really enormous impact on the economy and productivity, and
Speaker 14: that's why we're so excited to see what's possible and
Speaker 14: be investing in this category at the earliest days.
Speaker 3: You know, when an event like Davos is on, you
Speaker 3: know you have Satya Nadella, Microsoft roof parat of Alphabet
Speaker 3: Paarent of Google, Sam Altman of open Ai. There's still
Speaker 3: an argument that at least leadership in the field of
Speaker 3: artificial intelligence as it relates to the building of large
Speaker 3: language models of generative AI is dominated by the big few.
Speaker 3: And so there's a question mark about some of the
Speaker 3: names we're showing right now, right some of your portfolio
Speaker 3: companies that are a little smaller. How would you respond
Speaker 3: to that?
Speaker 14: Yeah, I think you know, access to this technology is
Speaker 14: only getting easier and easier. I think over the past
Speaker 14: year we watched as some of the building blocks were
Speaker 14: a little more rudimentary, and now the interface to engage
Speaker 14: with it is getting easier and easier, and so I
Speaker 14: think that's a really incredible time for startups to be
Speaker 14: building in this space.
Speaker 3: So I don't think it's that all.
Speaker 14: Something that only the big guys have the opportunity. I
Speaker 14: think there's a lot of opportunity for the small ones.
Speaker 14: One of those names on that board is Scale, which
Speaker 14: a company we invested in back in twenty sixteen. It's
Speaker 14: really the data engine for every large language.
Speaker 4: Model out there.
Speaker 14: And you know, that was an incredibly small team just
Speaker 14: a few years ago, and now it's an enormous business
Speaker 14: that's really fundamental to this space. So there's definitely opportunity
Speaker 14: for new businesses in this category.
Speaker 3: What I find very interesting about those leading in the
Speaker 3: space is the capital needs. You know, there is still
Speaker 3: a heavy spend on compute and talent. You know, as
Speaker 3: an investor in a scale, how much does that concern
Speaker 3: you or do you think about the capital needs of
Speaker 3: a company like that.
Speaker 14: Yeah, I think it really depends on the business model
Speaker 14: and it's about right sizing the investment for the opportunity.
Speaker 3: But I think something.
Speaker 14: That's really exciting is that a lot of the conversation
Speaker 14: over the past year was about these enormous generalized models,
Speaker 14: and I think what we're beginning to see is these
Speaker 14: more specialized applications for particular enterprise opportunities.
Speaker 3: You don't need to.
Speaker 14: Mine all the world's data, all the world's knowledge to
Speaker 14: do a particular job very well, but doing a particular
Speaker 14: job very well can mean enormous value to a business,
Speaker 14: and so I'm really excited about opportunities within the enterprise
Speaker 14: applying more specialized AI to really have a big impact
Speaker 14: on their bottom line.
Speaker 3: Sarah, I just got back from cs Las Vegas and
Speaker 3: one of the conversations I had was with Lorel CEO
Speaker 3: Nico Lamuse, and it was about the use of AI
Speaker 3: in the hardware context for analyzing your skin and the
Speaker 3: thesis that Lorel presents is that that can really boost
Speaker 3: sales because your chance of conversion is really high when
Speaker 3: you have a data set driven by AI, you can
Speaker 3: really convince the consumer. You are in New York City
Speaker 3: because of the National Retail Federation, so join those dots
Speaker 3: as well. Retail and AI.
Speaker 14: Absolutely, I mean I had a similar experience probably to
Speaker 14: you at cees where walking the halls of NRF. It
Speaker 14: is incredibly a buzz with the applications of AI within
Speaker 14: retail and commerce. I'm here supporting one of my investments,
Speaker 14: which is a company called Syrup. They're focused on inventory
Speaker 14: optimization for brand so getting the right item to the
Speaker 14: right place at the right time. This is sort of
Speaker 14: the holy grail for retail. It's what really drives margin
Speaker 14: if you can sell more while producing less.
Speaker 13: It also improves the.
Speaker 14: Sustainability and what has historically been a really wasteful category.
Speaker 14: And it's just a perfect example of what I was
Speaker 14: just describing of a very specialized AI application to solve
Speaker 14: an incredibly gnarly enterprise challenge, and they're improving forecast north
Speaker 14: of forty percent with some of their customers. That's really
Speaker 14: going to drive the bottom line. They're working with folks
Speaker 14: like Reformation, Abercrombie and Fitch.
Speaker 3: So it's just a.
Speaker 14: Perfect example of how AI is really going to transform
Speaker 14: every category in business. And I think retail is an
Speaker 14: enormous one and it's been really exciting to be here
Speaker 14: at NRF.
Speaker 3: You know, almost ten years ago, I remember being in
Speaker 3: Europe speeding to Felipe Literari of Excel. You know, you're
Speaker 3: affirm that I've known for a long time across like
Speaker 3: precede right to very late growth stage, and I want
Speaker 3: to know right now where the focus of the activity
Speaker 3: is or the opportunity in AI. If there is still
Speaker 3: you know, new companies being formed that are being opportunistic
Speaker 3: to enter the space.
Speaker 14: Oh man, there's activity at every stage. I'm biased because
Speaker 14: I do early stage investing and so I spend a
Speaker 14: majority of my time you know, at seed in Series A,
Speaker 14: but also honestly meeting sort of pre founders. You know,
Speaker 14: that's really been the ethos of Excel is we want
Speaker 14: to be the first partner and that may be when
Speaker 14: you're just dreaming up something and if it's possible. So
Speaker 14: I think there's opportunity at every stage. But this has
Speaker 14: really been such a transformational moment, having this sort of
Speaker 14: new technology that in the hands of really you know, passionate,
Speaker 14: brave technologists, they can do incredible things they couldn't before.
Speaker 14: And so that's just an amazing time to be at
Speaker 14: the earliest days of sort of seed in series A
Speaker 14: where I spend my time.
Speaker 3: Sarah ed or some partner at Excel normally inn SF
Speaker 3: today in New York City. Great to have you.
Speaker 14: It's annoying here.
Speaker 3: Thank you. One of YouTube's biggest stars has posted his
Speaker 3: first video on X. Billionaire Elon Musk celebrated the move
Speaker 3: by reposting a video created by mister Beast, who has
Speaker 3: two hundred and thirty million plus YouTube subscribers. The YouTube
Speaker 3: star posted on X quote, I'm curious how much AD
Speaker 3: revenue a video on X would make, so I'm re
Speaker 3: uploading this to test it will share ad rev next week.
Speaker 3: And I know that Linda Yakarino, the CEO of X,
Speaker 3: behind the scenes at CS was doing a lot with
Speaker 3: influences and talent agencies in that vein. Now sticking with
Speaker 3: Musk the test, the CEO leaned on the company's board
Speaker 3: to arrange another massive stock award for him, years after
Speaker 3: he had sold a significant chunk of his shares in
Speaker 3: the company to acquire Tier Dot tw there's MultiMate than that.
Speaker 3: Let's bring it, Bloomberg's great to you, Dell Craig. What
Speaker 3: Elon is saying is he can't negotiate new pay, but
Speaker 3: his rationale is he wants great to voting rights.
Speaker 15: Yeah. I think it's kind of incredible that, you know,
Speaker 15: we're just a few weeks removed from this guy talking
Speaker 15: about you know, advertising excuse me, advertisers blackmailing him at
Speaker 15: at X. I don't think it's a stretch to say
Speaker 15: that's kind of what he's doing here with with Tesla.
Speaker 15: He's saying that if he doesn't own more of the company,
Speaker 15: he will essentially take his work on AI elsewhere, which
Speaker 15: is incredible for a few reasons.
Speaker 3: The fact that he's.
Speaker 15: Already started a separate AI company called Xai, and the
Speaker 15: fact that he's been working on AI in robotics at
Speaker 15: Tesla for years now. He's you know, talked about the
Speaker 15: company being more than just a carmaker being a leader
Speaker 15: in real world AI, as he puts it. And so
Speaker 15: you know, it's really kind of of incredible what we've
Speaker 15: seen play out just in the last few days on
Speaker 15: ex of our places.
Speaker 3: All right, Bloomberg's great Drew Doll out of London, thank
Speaker 3: you so much. That does it for this edition of
Speaker 3: Bloomberg Technology Short Week. But we're not short of news.
Speaker 3: Don't forget to check out our podcast wherever you get
Speaker 3: your podcasts, Iheartspotify and on Apple, as well as the
Speaker 3: Bloomberg platforms. From a rainy SF and a snowy New
Speaker 3: York City, this is Bloomberg Technology.