Speaker 1: From Marhart where Innovation, Money and power Collie in Silicon Valley, NBN.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 2: I'm Caroline Heide of Bloemug's world headquarters in New.
Speaker 3: York, and I'm Ed Ludlow in San Francisco. This is
Speaker 3: Bloomberg Technology coming up.
Speaker 2: Apple hit with its second downgrade in a week as
Speaker 2: analysts cautional slowing iPhone demand more analysis ahead.
Speaker 3: A Mobili plunges is its four year revenue forecast, full
Speaker 3: short of all street estimates, Full coverage on the autonomous
Speaker 3: driving company's guidance.
Speaker 2: Ahead, plus new data painting a bleak picture for Silicon Valley.
Speaker 4: Will break down the state of.
Speaker 2: Venture capital as startup saw their worst year for funding.
Speaker 2: This is twenty nineteen, the first let's check in on
Speaker 2: these markets. And while the good news is bad new
Speaker 2: the resilient job market means maybe we can't anticipate a
Speaker 2: FED cut as much as the market had been already
Speaker 2: pricing in. We're just down only slightly on the NASDAC,
Speaker 2: but it is five straight days, longest losing streak since
Speaker 2: October of twenty twenty two.
Speaker 4: I'm looking at the ten year yield just.
Speaker 2: Backing up again, up seven basis points. Notably, we are
Speaker 2: seeing a lot of supply coming into the system. Corporate
Speaker 2: bond sales means supply issues ahead, and that means, of course,
Speaker 2: some of that pricing does just fade a little bit.
Speaker 4: New York crued off by one point nine.
Speaker 2: Percent, having seen tensions, of course, red sea concerns, middle
Speaker 2: least geopolitical concerns. We're actually more worried about a global
Speaker 2: slowdown at the moment, so supply seems to win out
Speaker 2: there a little bit at the moment as well. Move on,
Speaker 2: have a look at what's happening in terms of bitcoin.
Speaker 4: Because we're actually getting a little.
Speaker 2: Bit more resilience on the day after what had been
Speaker 2: some big volatility yesterday.
Speaker 4: In the price point.
Speaker 2: We're at forty nine hundred and sixty, so back up,
Speaker 2: but not quite at that forty five thousand dollars level
Speaker 2: ed that we had seen in the run up to
Speaker 2: what everyone anticipates will be the sign off of these
Speaker 2: spot bitcoin ETF What if you got it.
Speaker 3: Well, one big move to the downside, and that is
Speaker 3: mobili We're down around twenty five percent in the session.
Speaker 3: If we close at that drop. It will be the
Speaker 3: biggest drop on record. The story is actually really clear. Mobilized,
Speaker 3: maker of advanced chip or chip systems that power advanced
Speaker 3: driver assistance in cars, think about lane change or cruise control,
Speaker 3: and their customers have big inventories of these chips, so
Speaker 3: they've stopped buying. Mobil has given us an outlook for
Speaker 3: sales in twenty twenty four, which is about one point
Speaker 3: eight nine billion at the midpoint. The street looking for
Speaker 3: two point five eight billion, significantly higher than that. So
Speaker 3: something has gone wrong here in the cycle for chips
Speaker 3: as it relates to the automotive sector and advanced driver assistants.
Speaker 3: We're going to go really deep on this story later
Speaker 3: in the program. As you mentioned, all eyes on Apple,
Speaker 3: this is critically important. We're down for a four straight session,
Speaker 3: one hundred and seventy billion dollars of market cap shed
Speaker 3: during that four day period and a second downgrade. Piper
Speaker 3: Sander's a neutral, and there appear to be basically three things.
Speaker 3: They're looking at inventories going into the first half of
Speaker 3: this year, they're worried, they're looking at growth of unit
Speaker 3: sales going into this first half of the year, and
Speaker 3: they're worried, and then they're looking at China and the
Speaker 3: macro picture. I want to bring in Bloomberg Intelligence and
Speaker 3: list sanaag Rana for his take. Those were the three
Speaker 3: kind of key points of Private Sandler. There's some read
Speaker 3: through from Berkleys who had similar concerns when they downgraded
Speaker 3: earlier this week. Do you share those concerns?
Speaker 5: Yeah, this is the same exact thing we talked about
Speaker 5: when they last time reported that the big issue is
Speaker 5: China and China remains a wild guard for them. You know,
Speaker 5: in my view, there isn't any new information from these downgrades.
Speaker 5: We already knew China was going to be bad. In fact,
Speaker 5: we have been hearing about it for almost you know,
Speaker 5: two and a half months right now, and when they reported,
Speaker 5: they really missed that China number by a big amount. So,
Speaker 5: I mean, I completely agree that sales this year is
Speaker 5: going to be tepid at the best.
Speaker 6: But you know, it's not new news. On jan first.
Speaker 5: We have known this for a.
Speaker 2: While, and so why the caution now, Anna rag Is
Speaker 2: it more evaluation questioning a fundamental well a more macro perspective.
Speaker 2: We're now seeing perhaps the anticipation rates not being cut
Speaker 2: and we're just questioning valuations across all key tech companies
Speaker 2: or is there something bespoke to Apple in the here
Speaker 2: and now?
Speaker 5: No, I think you're right about valuations and the big
Speaker 5: tech names. Last year, they were really the safe heavens
Speaker 5: for people to go in when they didn't know what
Speaker 5: was happening in the economy, what was not happening, what
Speaker 5: was going to happen with eight cuts, I think it
Speaker 5: seems at this point we're not going to have a
Speaker 5: hard landing. And if the economy stays okay and rate
Speaker 5: increases are not going to happen, then you know, people
Speaker 5: do tend to go out of safe havens into more
Speaker 5: riskier stocks and a rag.
Speaker 3: Apple was the only big tech firm or one of
Speaker 3: the cy called Magnificent seven that had four straight quarters
Speaker 3: of sort of decelerating revenue growth. It has the fewest
Speaker 3: by ratings of any of those megacaps, as per the
Speaker 3: chart were showing. Now, what is it unique to Apple
Speaker 3: that it was not able to thrive in twenty twenty
Speaker 3: three and that there is such a change of set
Speaker 3: entiment now for twenty twenty four different to those other
Speaker 3: Magnificent seven.
Speaker 5: Yeah, I mean the thing that the most important part
Speaker 5: is it's an enterprise It's not an enterprise technology company.
Speaker 5: It's a consumer technology company. You know, when you look
Speaker 5: at somebody like an AWS or a Microsoft or in video,
Speaker 5: they're all going you know, they should benefit in the
Speaker 5: long run or even in the short term because of
Speaker 5: a lot of the AI investments that are going in
Speaker 5: or for that matter, a rebound in corporate tite spending.
Speaker 5: Apple doesn't work on that end. I mean, that's a
Speaker 5: consumer technology company and it's completely different from a you know,
Speaker 5: enterprise technology.
Speaker 2: We want to thank you and our ground a Bloomberg
Speaker 2: Intelligence really just dovetailing all of what feels very fresh
Speaker 2: and concerning for Apple. But in the long term, nothing
Speaker 2: has changed in January first, as you put it, well,
Speaker 2: let's get that broader macro perspective and some of the
Speaker 2: headwinds that are facing Apple and more broadly the markets.
Speaker 2: So Christina Hooper, chief Global Market Stretch is over at Invesco.
Speaker 4: And Christina, it's always a great talk with you.
Speaker 2: In fact, it's luckily enough to speak to you before
Speaker 2: the turn of the new year, and at that point
Speaker 2: you were liking emerging markets, but you had some key
Speaker 2: thoughts in China, and I am interested as to whether
Speaker 2: you think these headwinds is worry about. For example, Apple's
Speaker 2: resilience in China is something that you also rewarried about.
Speaker 7: Well, I think when we look at China, there are
Speaker 7: certainly some question marks. We just don't know what policy,
Speaker 7: what stimulus measures will come out this year.
Speaker 4: That could be supportive.
Speaker 7: We know that the Chinese economy needs to be stabilized,
Speaker 7: we need to see more growth coming from it, and
Speaker 7: I think we will get that. It's a question mark
Speaker 7: about timing and just how effective the policies are going
Speaker 7: to be coming out of the gate in twenty twenty four.
Speaker 7: And so of course it makes sense that those companies
Speaker 7: that count China as an important part of their revenue, says,
Speaker 7: an important part of their customer base are worried. But
Speaker 7: I think it's a very short term kind of concern. Obviously,
Speaker 7: it's going to impact earnings, but I don't think it's
Speaker 7: a long term problem. It's just a matter of getting
Speaker 7: the stimulus the policies right, improving confidence for consumers and
Speaker 7: businesses in China because there's a lot of potential there
Speaker 7: for that economy.
Speaker 2: And what about the geopolitics that dovetails into all of
Speaker 2: that because on the one side, Apple's worrying about the
Speaker 2: resilience of a consumer, but also a pushback against well,
Speaker 2: it's ownership of Apple by government related entities, people working
Speaker 2: within government institutions.
Speaker 4: Geopolitics, is that a risk for you? More broadly, well.
Speaker 7: Geopolitics can be a fly in the ointment, but it
Speaker 7: tends to be something that is very short term in nature,
Speaker 7: so there typically are workarounds. Smart companies can figure out
Speaker 7: workarounds to policy changes, to changes in you know, particular
Speaker 7: you know, areas of treatment for company working and selling abroad.
Speaker 4: The key though, is that it's a.
Speaker 7: Short term problem and you know, typically a workaround will
Speaker 7: be found, So I don't think it's it's a problem
Speaker 7: for the long term, but of course it can create headwinds,
Speaker 7: and investors are looking in the short term right They're
Speaker 7: reacting and concerned about what earnings are going to look
Speaker 7: like in the next quarter, the next two quarters, And
Speaker 7: of course we have seen a nice run up in tech,
Speaker 7: so it makes sense that we're seeing a bit of
Speaker 7: a pullback, especially with rates having gone higher.
Speaker 3: Christina, Caroline and I have been reflecting on a sense
Speaker 3: of deja VU this week because the conversations we're having
Speaker 3: into the new year are basically the same as we
Speaker 3: had throughout twenty twenty three. And that's so true of
Speaker 3: the FED. You know, I feel like we started twenty
Speaker 3: twenty three asking where will the FED go? We're starting
Speaker 3: twenty twenty four with confusion about the FED. And we
Speaker 3: always remind ourselves in this program, higher rates discount the
Speaker 3: present value of future cash flows in the context of
Speaker 3: the tech technology sector. Is that the case in your
Speaker 3: analysis and your outlook for this year?
Speaker 4: Ed?
Speaker 7: Absolutely, monetary policy has driven markets in general, but the
Speaker 7: reality is that tech has been particularly affected by monetary policy.
Speaker 7: It's a long duration asset class and so it's very
Speaker 7: sensitive to rates, so when they go up, it can
Speaker 7: be a problem, and that's what we're seeing. But I
Speaker 7: think we have to look at the root cause of
Speaker 7: why rates have gone up. Markets have gotten very easily
Speaker 7: persuaded by a little FED talk and a little fear
Speaker 7: and are now convinced that we're going to get a
Speaker 7: very different FED than they thought we were going to
Speaker 7: get just a few weeks ago. And I just don't
Speaker 7: buy it. I think what we are going to see
Speaker 7: is a FED that cuts rates between one hundred and
Speaker 7: one hundred and fifty basis points this year, not because
Speaker 7: the economy deteriorates a lot, but because policy is restrictive
Speaker 7: in the face of significant disen inflation. We're going to
Speaker 7: see progress on disinflation, and so the FED is going
Speaker 7: to be forced to cut rates, and I don't think
Speaker 7: that the movement higher for long rates is going to continue.
Speaker 3: We use the word technology is a blanket term and
Speaker 3: learn that not all technology companies are the same. And
Speaker 3: Ana rag Ran a our Bloomberg Intelligence and it's just
Speaker 3: made the point on Apple, right, it is not an
Speaker 3: enterprise company. It's a direct consumer to all intents and purposes.
Speaker 3: How are you distinguishing within the broad umbrella of technology
Speaker 3: this year, those you think will thrive and those you
Speaker 3: think will fall behind.
Speaker 7: Well, that's a great question, and I would say that
Speaker 7: it's not so much whether a company is a consumer
Speaker 7: based company, but more about what exactly the businesses that
Speaker 7: they're in, right, and they are going to be areas
Speaker 7: where we're likely to see significant growth even if economic
Speaker 7: headwinds are worse than we think. For example, cybersecurity, that's
Speaker 7: an area that companies are likely going to spend on
Speaker 7: no matter what, because it typically ranks among the top
Speaker 7: fears among CEOs every year, and I think it becomes
Speaker 7: a real concern in terms of branding issue. It can
Speaker 7: get very high profile. So I just want to draw
Speaker 7: that distinction. It's not about the consumer. It can be
Speaker 7: more about the regions that companies are selling in that
Speaker 7: tech companies are selling in, whether it's to businesses or consumers.
Speaker 7: But I do have to say that in general, when
Speaker 7: we look at tech, valuations are higher and there is
Speaker 7: far more sensitivity to rates.
Speaker 3: Christina Hooper of Investigo, great to have you on the program,
Speaker 3: Thank you so much. Okay, this is one of the
Speaker 3: big movies in the technology sector. Israel's most valuable company
Speaker 3: by market cap, but US listed Mobili down almost twenty
Speaker 3: five percent if it closes at that.
Speaker 6: Level, biggest drop on record.
Speaker 3: It's also impacting other names in the semi space, some
Speaker 3: of its peers, particularly those that supply chips to the
Speaker 3: automotive sector. Intel is interesting because remember that mobile I
Speaker 3: was spun out of Intel, but Intel return retains an
Speaker 3: eighty eight per cent steak.
Speaker 6: This is the story. Let's bring up the numbers.
Speaker 3: It came out with prelim financials and Mobilized telling us
Speaker 3: that in four year twenty four revenue will be between
Speaker 3: one point eight six billion and one point nine to
Speaker 3: six billion at the midpoint one point eight nine billion,
Speaker 3: but the street was looking for two point five six billion.
Speaker 3: The story is that this is a company that makes
Speaker 3: chips or systems that power advanced driver assistance tools. Right
Speaker 3: think about when you're in your car, the lane keeping technology,
Speaker 3: the camera technology, the cruise technology. But a lot of
Speaker 3: the customers that order those types of chips were panicked
Speaker 3: in twenty twenty when we had a supply crunch. So
Speaker 3: what did they do. They built up inventories. Now they've
Speaker 3: stopped ordering and they're working through those inventories. That means
Speaker 3: that in the first quarter of this year, Mobil's telling
Speaker 3: us sales will be down fifty percent carrow year on year.
Speaker 2: Great setup, great deep dive that we now need to
Speaker 2: do a little bit more as to why this then
Speaker 2: call the market so off guard. Blue Mugazine King is
Speaker 2: here to help it break all down the chip news
Speaker 2: that we've got of the day, and just starting on
Speaker 2: mobili and starting on just how hard it is to
Speaker 2: read the end demand for these sorts of chips for
Speaker 2: inventory levels.
Speaker 4: More broadly, why had we not got more direction from
Speaker 4: MOBILEI why.
Speaker 2: Were we not able to sort of see this coming
Speaker 2: a little bit clearer.
Speaker 8: I think the way to look at this is Mobile
Speaker 8: Eye is essentially at the top of the stack. Its
Speaker 8: chips go into the most expensive cars. The cars are
Speaker 8: the most functions and are probably amongst the most expensive components.
Speaker 8: They're going to cars, So from my perspective, you want
Speaker 8: to have them on hand so you can sell those cars.
Speaker 8: But all of us sudden if you think, oh, I
Speaker 8: can't sell those models, I have to cut some of
Speaker 8: those models, and you know the market is going more
Speaker 8: towards say, mid range, then you're going to crash your
Speaker 8: ordering of somebody like Mobile Eye to obviously save on
Speaker 8: the build up of inventory and the costs that are
Speaker 8: involved in that.
Speaker 6: So that's probably what's going on here.
Speaker 3: And we know all about the automakers, particularly in the
Speaker 3: EV context, telling us we're really scaling back in twenty
Speaker 3: twenty four. The way that I always look at it is
Speaker 3: that Mobilie also sells to what we call tier ones,
Speaker 3: but basically companies that make those off the shelf components
Speaker 3: and those are the ones that built up the inventores.
Speaker 3: What's also interesting is the reaction in equity markets. All
Speaker 3: kinds of chip names, particularly those that sell to the
Speaker 3: car companies, are down.
Speaker 6: What's the read across there?
Speaker 8: Yeah, I mean, if you've been looking, if you've been
Speaker 8: listening to the conference calls for like the last couple
Speaker 8: of quarters, people like TI, people like NXP have been asked, Hey,
Speaker 8: the auto markets looking a bit shaky, how can you
Speaker 8: be so bullish about this? How come your orders are
Speaker 8: so strong? And what they've been saying is, oh, more
Speaker 8: chips per car. Don't worry about it, you know, we're
Speaker 8: not too worried about the you know, the total number
Speaker 8: of cars getting sold. Now we're seeing that perhaps they
Speaker 8: have to worry about the total number of cars being
Speaker 8: built and being sold. And that's really what's happening here, and.
Speaker 2: It's interesting Qualcom getting caught up in that. We're seeing
Speaker 2: setting pressure on the day is of course put some
Speaker 2: focus on the auto industry as it diversifies out of
Speaker 2: just mobile, but it also has an announcement today on
Speaker 2: how it's really trying to be owning the VRAR space
Speaker 2: as well.
Speaker 4: What's the latest on that?
Speaker 6: I in.
Speaker 3: Yeah.
Speaker 8: I mean, this is, you know, a repeat of a
Speaker 8: story we've seen several times when Apple get involved in
Speaker 8: a category that sort of others have been dabbling in,
Speaker 8: Suddenly it becomes serious. And as we know, Apple's got
Speaker 8: a major product coming to market in this area. So
Speaker 8: Whatqualcom's trying to do here is to say, look, let's
Speaker 8: not repeat the history that we saw with the smartphone
Speaker 8: with this smart watch. Let's make sure that our Android
Speaker 8: based offerings, our Windows based offerings have a chip that
Speaker 8: really really gives the capabilities that will allow the competitors
Speaker 8: of Apple to have things out there that can fight
Speaker 8: back and stop Apple just coming waltzing in and owning
Speaker 8: the sector.
Speaker 3: Apple has its own proprietary chip inside the Vision pro
Speaker 3: and as carry points out for Qualcom, this is one
Speaker 3: of the number of areas moving away from the smartphone.
Speaker 3: Tell me about the XR two plus chip, you know,
Speaker 3: do we believe it's at the cutting edge in this
Speaker 3: use case?
Speaker 8: I mean, the explanation that we had in the story
Speaker 8: is up to twelve, maybe even more than twelve cameras,
Speaker 8: four K projection of visuals in each I sounds pretty aggressive,
Speaker 8: sounds pretty exciting, But I think, as Qualcom said themselves,
Speaker 8: everything is in the implementation. We absolutely have to see
Speaker 8: what its customers will do with it.
Speaker 6: Bloomberg's e inking.
Speaker 3: We call him mister Chip and it's a great way
Speaker 3: to kick off the new year character I Meanwhile.
Speaker 2: Coming up, we're going to talk Tencent because buying back
Speaker 2: a record number of shares last month, it seemed to
Speaker 2: make the most of what was an industry I'd.
Speaker 4: Sell off in the name.
Speaker 2: More on what triggered, of course, the move gaming moves
Speaker 2: by China more broadly, and what's the next for investors?
Speaker 4: This is remote technology.
Speaker 3: Okay, time for talking tech, and first up, Microsoft is
Speaker 3: adding a new key which will activate its AI copilot
Speaker 3: function to its Windows keyboard. Microsoft says the shortcut will
Speaker 3: help users create images, write emails, and summarize text with
Speaker 3: the help of AI. It's the first addition to the
Speaker 3: PC keyboard since the Windows Start key was introduced in
Speaker 3: nineteen ninety four, and in an effort to boost domestic
Speaker 3: output of legacy semiconductors, the US Commis Department will give
Speaker 3: Microschip Technology one hundred and sixty two million dollars. It's
Speaker 3: second the second such commitment from the twenty twenty two
Speaker 3: Chips Act, which set aside billions of dollars to bring
Speaker 3: chip making back to the United States. While legacy chips
Speaker 3: are less advanced, they're important and essential for everyday use.
Speaker 6: Plus.
Speaker 3: In the latest show of supports for US sanctioned companies,
Speaker 3: China's number two leader made an appearance at a YMTC factory,
Speaker 3: a chip maker that competes with the likes of Micron
Speaker 3: and Samsung. The trip comes as China attempts to revive
Speaker 3: its struggling economy and bolster Chinese investments in the technology sector.
Speaker 2: Caroline and also perhaps steady some nerves about the direction
Speaker 2: of travel for policy making more broadly versus tech in China,
Speaker 2: and we want to delve into that particular area because
Speaker 2: we want.
Speaker 4: To focus on ten cent.
Speaker 2: Share repurchases by the company have hit a record one
Speaker 2: point three billion dollars. That was in December, and of
Speaker 2: course that was kind of making the most of share
Speaker 2: weakness after China supprise the gaming industry with some new
Speaker 2: regulations whom most Henry Wren is in London with more and.
Speaker 4: So is it typical for a company to make the.
Speaker 2: Most of buying back when shares have been sold off.
Speaker 9: Yes, definitely typical move for companies, but for Tencent, it
Speaker 9: has really been ramping up its efforts for share repurchase.
Speaker 9: So Bloomberg compiled data showed that recently, on every single
Speaker 9: trading day, Tencent has been buying back about total worth
Speaker 9: of one billion Hong Kong dollars of its shares on
Speaker 9: Hong Kong trading market. To put that into perspective, before
Speaker 9: the Chinese gaming regulators issued a set of surprise rules
Speaker 9: aiming at curbing players playing time as well as spending
Speaker 9: on video games, Tencent was buying back at a pace
Speaker 9: of about four hundred million Hong Kong dollars per single day,
Speaker 9: So that's an increase of more than one hundred percent.
Speaker 9: So that really shows that Tencent is ramping up its
Speaker 9: efforts to restore the market confidence given the recent drops
Speaker 9: in gaming stocks as well as intents in itself recently.
Speaker 3: Exactly that it is the mechanism or the reaction from
Speaker 3: Tencent to what's happened, which is the new rules or
Speaker 3: gaming which strictions. As a wonderful line in the Bloomberg story, still,
Speaker 3: for many investors who remain traumatized by a spate of
Speaker 3: abrupt rules just remind us where we stand with the
Speaker 3: regulations that came in just before the new year.
Speaker 6: Yeah, so exactly.
Speaker 9: So many investors that we talked to have been mentioning
Speaker 9: about all those memories being involved in the twenty twenty
Speaker 9: one twenty twenty two regulatory crackdown campaigns where the Chinese
Speaker 9: government's target fintech giants such as and Financial the gaming
Speaker 9: giants including Tensent and many others, and in the latest
Speaker 9: moves in late December, the China's gaming regulators said that
Speaker 9: it would be issuing a set of drop rules, which
Speaker 9: is still soliciting opinions from the society that it would
Speaker 9: curb video game players playing time it's spending on multiple
Speaker 9: mobile games as well as video games. Of course, that's
Speaker 9: been badly received by the market. We've been seeing severe
Speaker 9: drops in shit, but there have been some signs of
Speaker 9: easing from regulators recently. For example, they've approved one hundred
Speaker 9: and five video games domestically, including those being run by
Speaker 9: Tencent as well as NAT's. Also, two media reports recently
Speaker 9: signaled that a senior official overseeing the gaming regulators have
Speaker 9: been called to step step down.
Speaker 2: What I mean, we've got thirty seconds Henry, But what
Speaker 2: is it that investors need to track their eyes on
Speaker 2: to ensure that they are reading these tea leaves?
Speaker 6: Right?
Speaker 9: Yeah, so more signs of easing, for sure, is comforting,
Speaker 9: but I think investors at this time do need to
Speaker 9: see the concrete signs that the government is supporting the sector,
Speaker 9: not just saying that it's supporting its stands on the newspaper,
Speaker 9: on the state media at this point.
Speaker 3: All right, Bloomberg's Henry ran all across the China tech bait. Great,
Speaker 3: have you on the program. Welcome back to Bloomberg Technology.
Speaker 3: I'd love low here in San Francisco and.
Speaker 4: I'm Karen Hider, New York.
Speaker 2: Let's get a quick check on these markets and the
Speaker 2: names that are on the move. I start with the
Speaker 2: micro just to keep you on your toes. What's happening
Speaker 2: in terms of mobile I of course Key Faller on
Speaker 2: the day this after they guide that their revenue is
Speaker 2: gonna be down some fifty percent, clearly an inventory back up.
Speaker 2: And one of course is these chips that are focused
Speaker 2: particularly on the auto sector.
Speaker 4: So ed we dived into that story a little bit.
Speaker 2: Earlier with Ian King, but it's still a clear market mover.
Speaker 4: To the downside.
Speaker 2: Interestingly, Apple is managing to be on the downside too.
Speaker 2: It's got its second straight downgrade this week. Now, of
Speaker 2: course this is not to a sell as we've seen previously.
Speaker 2: Barklays this is at least going neutral over at Pipersanna,
Speaker 2: and they're once again worrying about China about consumer resilience.
Speaker 4: So Apple under pressure.
Speaker 2: It's key because it's of course biggest points move are
Speaker 2: off and on some of these benchmarks. One to the upside,
Speaker 2: and we're going to dig into this in a moment.
Speaker 2: Peloton to the higher about nine percent as it strikes
Speaker 2: up a partnership with TikTok, gonna be able to consuming
Speaker 2: some of their live fitness applications and indeed some of
Speaker 2: their classes.
Speaker 4: On your TikTok device if you have the app there.
Speaker 2: Meanwhile, let's have a look at what's happening not only
Speaker 2: in the world of sports, but more broadly in the
Speaker 2: world of macro. I want to focus in on what's
Speaker 2: happening with NASDAG is in under pressure only slightly, but
Speaker 2: it is what fifth straight day of losses for the
Speaker 2: NASDAQ one hundred and longest losing streets It is December twenty
Speaker 2: twenty two.
Speaker 4: That is, as we see question.
Speaker 2: Marks of where the Federal Reserve goes, and also into
Speaker 2: the mixes geopolitics now interesting in McDonald's. I wanted to
Speaker 2: shine a light on this particular company because it has
Speaker 2: a macro read across they're posting on LinkedIn the CEO
Speaker 2: they're saying it is having a meaningful impact of the business.
Speaker 2: What's happening in the Middle East, So clearly that is
Speaker 2: having an effect on consumers and on overall big corporate America.
Speaker 4: I'm looking at though, at Bitcoin.
Speaker 2: Let's end on the green up two point eight percent
Speaker 2: and actually just pouring back some of those.
Speaker 4: Losses that we saw yesterday.
Speaker 2: Not forty five thousand, but forty four thousand looks pretty
Speaker 2: healthy in terms of recent numbers. R this is all
Speaker 2: about the anticipation of whether we get a spot bitcoin.
Speaker 2: ETF signed off as soon as January the tenth.
Speaker 3: I think there's still a lot to talk about when
Speaker 3: it comes to bitcoin. I feel like we have consensus
Speaker 3: on what the catalyst is here.
Speaker 6: Let's keep the conversation.
Speaker 3: Going with ragu Ya Lagada falcon X CEO, and you know,
Speaker 3: we're only three shows into the year, but you know,
Speaker 3: it is not uniform that all of the trading activity
Speaker 3: is being driven by enthusiasm that the SEC will approve
Speaker 3: bitcoin spot ETF. There are others out there argue that
Speaker 3: argue this is either a market functioning an institutional level
Speaker 3: impact on the market. Where do you stand in this
Speaker 3: New year's debate?
Speaker 10: Yeah, thanks so much for having me ed first and
Speaker 10: foremost the context of the market. We're seeing some of
Speaker 10: the highest open interest in the market since the collapse
Speaker 10: of Teleluna, which is more than the year. So in
Speaker 10: that context of very high open interest, now, there were
Speaker 10: a couple of sparks over the last twenty four or
Speaker 10: forty eight hours. The one spark was the major export report,
Speaker 10: seeing that UTF approval is probably not likely, and in
Speaker 10: the context of very high open interest and leverage, that
Speaker 10: spark triggered a bunch of quidations, so liquidations all to
Speaker 10: the tuna of like, you know, two hundred and thirty
Speaker 10: million dollars in bitcoin and eat alone. Now one of
Speaker 10: the tier questions, one of the big sentiments that we
Speaker 10: are hearing. So we checked again with some of the
Speaker 10: largest hedge fonds, asset managers, and the crypto native funds.
Speaker 10: What do you think about bitcoin ETF, And consistently we
Speaker 10: are hearing that bitcoin ETF is very likely going to
Speaker 10: be approved. Now, the one very prominent question that's on
Speaker 10: everyone's mind is Okay, is.
Speaker 11: This price then?
Speaker 6: Now?
Speaker 10: What we're hearing is we've been spending time with a
Speaker 10: lot of our partners as well on this, including falcon
Speaker 10: Ex research. What we are hearing is most people are
Speaker 10: pricing the net inflows into bitcoin ETF in the first
Speaker 10: week or so at one or two billion dollars. So
Speaker 10: if the net inflows are less than one or two
Speaker 10: billion dollars, it will have an adverse effect on the price,
Speaker 10: and if it's more than one or two billion dollars,
Speaker 10: it will have much more positive effect on the price.
Speaker 10: So that's the sentiment that we're hearing.
Speaker 2: But just remind us, Raghu, like for many who come
Speaker 2: into this and think that there's already a bitcoin ATF,
Speaker 2: it's a future's ETF.
Speaker 4: Why are we going.
Speaker 2: To see such seismic move from institutional players retail players
Speaker 2: to get in on a spot bitcoin etf reser v futures.
Speaker 10: Yeah, So we're hearing two main things, Caroline. The first
Speaker 10: thing is, if you look at the Bitcoin Future CTF
Speaker 10: and the architecture underneath that there is a future's rollover
Speaker 10: cost that instrument incurs on a monthly basis, and that's
Speaker 10: a very profitable trade for people who know that bitcoind
Speaker 10: futures issuers are going to come transact in the market
Speaker 10: in a very predictable way, so that the future's rollover
Speaker 10: cost is a meaningful cost. So that's one. The second
Speaker 10: thing we've been speaking to some of the retail investment
Speaker 10: advisors and also the statistics on the self directed retail
Speaker 10: there are arias who cannot transact in few space DF.
Speaker 6: Now for the first time, the.
Speaker 10: Iria market, which is about thirty trillion dollar market, will
Speaker 10: have access to Bitcoin SPOTDF, which is much more efficient
Speaker 10: in a very simless way. So those are the two
Speaker 10: reasons that we are hearing consistently on why is SPOTYDF
Speaker 10: is better? But granted both have their pros and cons
Speaker 10: and nuances.
Speaker 2: It's really interesting that you've given us this number, Raku.
Speaker 2: The fact that you're talking to your clients, those big
Speaker 2: investors and hedge funds.
Speaker 4: That already dabble in a world or crypto.
Speaker 2: And managing to pull out what what did you say
Speaker 2: want two billion dollars in terms of inflows over the
Speaker 2: first same week that the ATF goes live. What if
Speaker 2: that date is delayed? What if you said it's likely
Speaker 2: that these spot ETFs do get signed off, but if
Speaker 2: they're not, does it ultimately matter and the short term.
Speaker 4: To the price point.
Speaker 10: So I'll bring that into two parts. The first part
Speaker 10: is like, what are the odds right it is very
Speaker 10: likely that a bitcoin EDF is going to be approved? Now,
Speaker 10: then you want there is there could be an approval
Speaker 10: with caveats that could delay the launch of that could
Speaker 10: delay the time between an approval an actual instrument traded
Speaker 10: in the secondary markets. So that is one plausibility, But
Speaker 10: we don't expect the delays to be very very long,
Speaker 10: right given the grayscale wordic that came out in October,
Speaker 10: there are very little or few reasons where the caveats
Speaker 10: could delay it by months and months. So that is
Speaker 10: one part of it. Now the second part, what if
Speaker 10: this doesn't happen? Right? A fundamentally think twenty twenty four
Speaker 10: is very well set up for crypto. You have the
Speaker 10: bitcoin EDF new cycle and the expectation the optimism around it.
Speaker 10: You have Harving coming there is a major ethereum upgrade.
Speaker 10: And earlier in the show, we were talking about the
Speaker 10: VC funding in general being a little slow, but if
Speaker 10: you look at Massari's recent report on krypto funding, quarter
Speaker 10: on quarter, the crypto fundraise grew eighty percent to about
Speaker 10: three hundred eighty billion. So if you add all these things,
Speaker 10: even like you know, with EDF, potential dealis it's very
Speaker 10: unlikely that it won't be proven. So even with potential
Speaker 10: dia delias, the year is very well set up, is
Speaker 10: what we feel.
Speaker 3: Yeah mean, I mean you said the year is very
Speaker 3: well set up for crypto broadly. You didn't say bitcoin.
Speaker 3: And this is the bit that I'm struggling to understand
Speaker 3: when it becomes more than bitcoin. So on a market
Speaker 3: capitalization basis, Bitcoin's forty nine percent of the global dis
Speaker 3: assets market, right, it almost acted as the proxy for
Speaker 3: an industry that was about in twenty twenty three scandal,
Speaker 3: you know FTX, what happened with binance. Towards the end,
Speaker 3: do you think other tokens, other distal assets, other use
Speaker 3: cases will get some limelight this year?
Speaker 10: Yeah, the first off the year we think will be
Speaker 10: dominated by bitcoin. Right, Bitcoin the regulatedly clarity and all
Speaker 10: the asset the institutional interest that we are hearing and
Speaker 10: actually seeing right, I mean, we're seeing some record volumes.
Speaker 10: Everything that happened in the space twenty two to twenty
Speaker 10: twenty three are volumes tripled, and a lot of it
Speaker 10: is around the excitement around bitcoin. So the first half
Speaker 10: of the year we expect a lot of activity around
Speaker 10: bitcoin and the bitcoin domination continuing. But towards the later
Speaker 10: part of the year that's where it gets interesting. Etherium
Speaker 10: could potentially whiper an DAF approval as well spot DF approval.
Speaker 10: So the news cycle around Etherium and some of the
Speaker 10: upgrades coming with Ethereum are things that in social investors
Speaker 10: are watching, but we think in terms of five to
Speaker 10: ten years, and back to the core of the show,
Speaker 10: which is the technology. The reason why I jumped into
Speaker 10: crypto is Scrypto is perhaps the first use case of toganization,
Speaker 10: and if you look at the number of toganization investments
Speaker 10: and the subtle advances that are happening, it's meaningful. So
Speaker 10: beyond twenty twenty four, I think the story is going
Speaker 10: to be about toganization more than just one instrument within crypto.
Speaker 4: You're in hardware and Motorola.
Speaker 2: You're in Google leading product management over at Cromos, who
Speaker 2: of course made that diversion into the world of crypto.
Speaker 2: And thanks for telling us exactly why. Ragu Yo Lagada
Speaker 2: he joins us falcon X CEO the spot point coin ETF. Meanwhile,
Speaker 2: coming up, No, we're going to go back to what
Speaker 2: we were just hearing from Rugu who was talking about
Speaker 2: the VC community perhaps being a bit down in the dumps.
Speaker 2: Max Grazer from CDR Capital is going to be on
Speaker 2: what was he seeing in the world of VC for.
Speaker 4: Twenty twenty four.
Speaker 2: This is a Bloomberg, yet more data painting the bleak
Speaker 2: picture for Silicon Valley.
Speaker 4: That was twenty twenty three. The value of VC deals
Speaker 4: in the US last year.
Speaker 2: Felt lever has not seen since twenty nineteen, according to Pitchbook,
Speaker 2: and while investors poured money into AI startups and the
Speaker 2: rest of the industry pretty much founded. Here to break
Speaker 2: it all down, Bloomberg, Sarah McBride and I guess we
Speaker 2: were bracing ourselves some pretty lousy numbers and then living
Speaker 2: up to expectations.
Speaker 6: Yeah, that's right.
Speaker 1: I mean the numbers for twenty twenty three were bad.
Speaker 1: There's no way around it. Then again back in twenty nineteen,
Speaker 1: we thought the numbers looked okay, and that's back where
Speaker 1: we are right now. Levels just a little bit higher
Speaker 1: than in twenty nineteen. So investors at venture firms invested
Speaker 1: less money in startups and then they also raised a
Speaker 1: lot less money from their backers. So no matter which
Speaker 1: way you looked at it, it was a pretty gloomy year.
Speaker 1: One tiny bright spot is that the fourth quarter numbers
Speaker 1: fell less than in the earlier quarters, so it could
Speaker 1: be an indication that things are starting to stabilize.
Speaker 3: That's kind of the dulla measure of the US venture industry.
Speaker 3: But it's interesting if you look globally because not all
Speaker 3: markets behaved in this same way. You know, the drop
Speaker 3: in the US was I think a two thirds dropped
Speaker 3: from the prior year, but globally half and there were
Speaker 3: bright spots.
Speaker 6: Sarah, what were the bright spots?
Speaker 1: Okay, it's a very tiny bright spot because it's such
Speaker 1: a small part of the overall venture market. But in
Speaker 1: Latin America funding was actually up, but that's in part
Speaker 1: because it's so small that one outsize fund can move
Speaker 1: the market. And last year we saw the announcement of
Speaker 1: what is a huge fund for Latin America, five hundred
Speaker 1: million dollar fund run by former SoftBank executive Marcelo Klore
Speaker 1: and Shuniyata, And that was enough to really boost things
Speaker 1: in Latin America. But that's just two billion dollars out
Speaker 1: of a market that's well over one hundred and fifty billion.
Speaker 3: All right, Bloomberg Sarah McBride with the latest pitchbook data
Speaker 3: out this morning, let's keep the conversation going in today's
Speaker 3: VC spotlight bring and CRV general partner Max Gazer. Let's
Speaker 3: bring up the data again, the US data, specifically twenty
Speaker 3: twenty three, the year that was.
Speaker 6: You can show the chart.
Speaker 3: And you can go over the dollar values, But what
Speaker 3: story does that chart tell you about your industry?
Speaker 12: Thanks?
Speaker 9: Ed.
Speaker 6: I think it's a very simple explanation.
Speaker 13: Which is that the growth capital markets in twenty two
Speaker 13: and twenty three basically dried up. And so if you
Speaker 13: look at it by dollar amount, that would explain the
Speaker 13: drop off from twenty one, which is to explain that
Speaker 13: most VC activity in the growth stage pre IPO has
Speaker 13: slowed down.
Speaker 6: In the early stages.
Speaker 13: Where CRV operates, the activity is still very strong and
Speaker 13: many of the companies that we funded, for example, last
Speaker 13: year in twenty three are still in stealth, which wouldn't
Speaker 13: have been represented by the data there. So it feels
Speaker 13: all within sort of the bounds of what's natural and
Speaker 13: what feels right. We're very excited about twenty four and
Speaker 13: the IPO window possibly opening up to reaccelerate VC.
Speaker 3: Let's go one layer deeper. You talked about some of
Speaker 3: your early stage investments being in stealth. The other story
Speaker 3: of twenty three continuing from twenty two is layoffs. All
Speaker 3: of these talented people were laid off from big tech companies,
Speaker 3: and we had evidence on this program at least that
Speaker 3: they went and started businesses. Was that the main catalyst?
Speaker 13: Well, you know, with respect to the layoffs, I think
Speaker 13: a lot of that was just right sizing. A lot
Speaker 13: of these companies had exceeded what was expected of them
Speaker 13: as in the public markets, and so a lot of
Speaker 13: that was just sort of the natural right sizing of
Speaker 13: those companies.
Speaker 6: To the point that you made about you.
Speaker 13: Know, people leaving and starting new companies, that's absolutely catalyst.
Speaker 13: We think that we'll continue in twenty four with some
Speaker 13: liquidity in the IPOs and people, you know, having an
Speaker 13: opportunity to start new companies with that resource.
Speaker 2: When you're looking at a potential IPO windows, are there
Speaker 2: certain names you're anticipating. Do they have to be AI
Speaker 2: related names? Can they be ones that have been grown
Speaker 2: because many of us sort of have seen these companies
Speaker 2: just having to start to write size their own valuations
Speaker 2: having taken money back in the heady days of twenty
Speaker 2: twenty one on a private market basis.
Speaker 13: Well, Caroline, there's over one hundred companies when we last
Speaker 13: counted that I think are ip already. We have close
Speaker 13: to a dozen in our own portfolio at CRV that
Speaker 13: are on that path, whether it's you know, this year
Speaker 13: or sometime later. We think that based on how the
Speaker 13: public market reacts to some of these public offerings, it's
Speaker 13: going to change the narrative, right, And so I think
Speaker 13: that many are anticipating and expecting AI you know, IPOs.
Speaker 6: To drive the narrative.
Speaker 13: It could be something else, but what we've seen over
Speaker 13: our history in fifty three years is that the public
Speaker 13: markets certainly influence how even early stage vcs think about
Speaker 13: opportunities and where you know, public investments reward companies the most.
Speaker 13: We think data and AI are going to be front
Speaker 13: and center, and there's a long pipeline of great companies
Speaker 13: that we anticipate will do well.
Speaker 2: I'm interested in the way in which you said in
Speaker 2: the early stage, look, things are still active, checks still
Speaker 2: being written. Are they being written at the right sort
Speaker 2: of valuations from your perspective, has that right size or
Speaker 2: are you seeing sort of bigger funds muscling in an
Speaker 2: earlier stage investments because everyone's to worry to try and
Speaker 2: write some of the larger series later series checks that
Speaker 2: are necessary.
Speaker 6: Yeah.
Speaker 13: Well, it's been well documented that the valuation correction the
Speaker 13: public markets saw has not quite yet trickled down into
Speaker 13: the private markets. And so what you see is vcs
Speaker 13: being a little bit more selective, paying the price that
Speaker 13: the market bears, but maybe doing fewer of them, or
Speaker 13: you know, being a little bit more selective with the
Speaker 13: criteria required to underwrite those. And so again, I think
Speaker 13: that's just a normal cycle until the IPO window opens
Speaker 13: and vcs concerted document and demonstrate results and raise more
Speaker 13: capital to fuel the next generation of companies. And so
Speaker 13: I think that liquidity window is very important.
Speaker 6: I want to take a look at your portfolio at CRV.
Speaker 3: You know, half the job of an early stage investor
Speaker 3: is writing checks for new companies. But there are those
Speaker 3: companies that you backed almost a decade ago and you
Speaker 3: must now be sitting there and thinking, what should I
Speaker 3: advise them to do in this environment? Is the one
Speaker 3: blanket rule at the moment for all.
Speaker 6: Of them, you know, growing.
Speaker 13: Responsibly, right. I think it's sort of the still the
Speaker 13: sentiment this year. You know, many of the companies that
Speaker 13: we've we've demonstrated here Airtable, Iterable for sell Cribble, all
Speaker 13: companies that we invest in the very early stages when
Speaker 13: the company was in you know a few people, and
Speaker 13: so it's very rewarding to see the companies grow. And
Speaker 13: we want to make sure that we're creating companies of
Speaker 13: enduring value so once those companies go public, that they
Speaker 13: can continue to compound growth.
Speaker 6: But you know, I think the theme.
Speaker 13: This year is to make sure that we're ready for
Speaker 13: the IPOs.
Speaker 6: All right, CRV General partner Max Gazer, Thank you.
Speaker 1: So.
Speaker 2: Over the past year, Instagram has released a slot of
Speaker 2: new features, avatar stickers, new verification program, and bonus program.
Speaker 2: And that's a top of dozens of behind the scenes
Speaker 2: algorithm changes to try and compete of course with TikTok.
Speaker 4: Now those changes make the.
Speaker 2: App more about the user's interests rather than who they
Speaker 2: actually follow, and we'll shell a little tier.
Speaker 4: Therefore for some of the creators who depend on the.
Speaker 2: Platform for their livelihoods, and that just makes it harder
Speaker 2: and harder to predictably reach their fan.
Speaker 4: Base and therefore, course said generate some real income.
Speaker 6: Well.
Speaker 3: Speaking of competition, particularly with TikTok, it's not only Instagram's
Speaker 3: worst nightmare.
Speaker 6: It might become.
Speaker 3: Amazons too, because TikTok is aiming to grow the size
Speaker 3: of its US e commerce business tenfold to as much
Speaker 3: as seventeen point five billion dollars this year, according to sources,
Speaker 3: an ambitious target that sets up a clash not just
Speaker 3: with Amazon but also some of the Chinese owned outfits
Speaker 3: Timu and Sheen. Let's bring in Bloomberg's Alex Brinka. One
Speaker 3: of the bylines in this report that merchandise volume number.
Speaker 6: Give me the reporting on it. That's big.
Speaker 12: Yeah, seventeen point five billion for the US for TikTok
Speaker 12: Shop US, which you'll recall just fully launched right before
Speaker 12: the holiday season.
Speaker 11: I want to put that in perspective.
Speaker 12: Ed Earlier last year, my colleagues and I also broke
Speaker 12: that globally all of TikTok was looking to sell twenty
Speaker 12: billion dollars worth of merchandise in twenty twenty three. So
Speaker 12: that US number for twenty twenty four is already close
Speaker 12: to and edging out that global number in twenty twenty three.
Speaker 11: The vast majority of that volume came from sales in
Speaker 11: Southeast Asia. So this is a.
Speaker 12: Really big move for TikTok, and it's probably the first
Speaker 12: big tech social media company that might have Amazon actually worried.
Speaker 12: TikTok has really gained its presence here in the US
Speaker 12: as an entertainment platform.
Speaker 6: This year.
Speaker 11: They've been rolling out an interesting strategy.
Speaker 12: To get people actually purchasing, and the company told me
Speaker 12: that over the holiday month, over Black Friday and Cyber Monday,
Speaker 12: they had about five million new people buy something on
Speaker 12: the app here in the US, So a big push
Speaker 12: for them and a very ambitious target for twenty twenty four.
Speaker 2: E Commerce Front and Center so Too is sort of
Speaker 2: using it for live programming. And what was interesting is
Speaker 2: Peloton today, I mean shares about nine percent on the
Speaker 2: fact that they're doing a deal with TikTok and going
Speaker 2: to be offering some of their live classes through the platform.
Speaker 2: Will e commas be sort of interweaved into that? Do
Speaker 2: we think how much is this about drawing our attention
Speaker 2: more and more to the app?
Speaker 12: It will and I did some reporting last year. TikTok,
Speaker 12: remember really started with live stream commerce in Southeast Asia
Speaker 12: and Indonesia and Malaysia. It's sister company, Douyenne under the
Speaker 12: bytdance Umbrella does live stream commerce in China where people
Speaker 12: get on live videos and they sell things. It's incredibly
Speaker 12: popular in the Asian market.
Speaker 11: Try to port that over first.
Speaker 12: To the UK and then to the US, but users
Speaker 12: here are just not willing to tune in at the
Speaker 12: same time to shop, so they actually split their strategy.
Speaker 11: They said, hey, let's focus.
Speaker 12: On developing live so people tune in for live videos
Speaker 12: even if it's without shopping, well at the same time
Speaker 12: rolling out our shopping business. This Peloton deal Caroline definitely
Speaker 12: falls in the bucket of live that live push.
Speaker 2: As Blorenka always on top of all things social media,
Speaker 2: we thank you so much now does it for this
Speaker 2: edition a Bloomberg Technology Don't forget to check out the
Speaker 2: podcast this is Bloomberg,