WEBVTT - TikTok Says Its Reached a US-Majority Ownership Deal 0:00:02.520 --> 0:00:13.560 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.600 --> 0:00:17.440 from coast to coast with Caroline Hyde in New York 0:00:17.720 --> 0:00:20.840 and Eva though in San Francisco. 0:00:21.840 --> 0:00:25.119 This is Bloomberg Tech coming up. The weight is it over? 0:00:25.560 --> 0:00:29.240 TikTok says it's signed agreements for the new US joint venture. 0:00:29.480 --> 0:00:32.200 Plus who better to talk about the new TikTok era 0:00:32.479 --> 0:00:33.880 than former CEO Kevin Meyer. 0:00:34.200 --> 0:00:36.080 He joins us at the top of the hour and. 0:00:36.080 --> 0:00:39.319 The latest reports on Opening Eyes potential valuation the Wall 0:00:39.320 --> 0:00:42.560 Street Journal giving in an eight hundred and thirty billion. 0:00:42.280 --> 0:00:45.800 Dollar price tech. But first we go to our top story. 0:00:46.040 --> 0:00:49.480 The details are they there for a proposed TikTok deal. 0:00:49.720 --> 0:00:51.720 Grimos kirt Wagner, who covers social. 0:00:51.520 --> 0:00:54.720 Media, can talk us through the intricacies because we understand 0:00:54.720 --> 0:00:56.880 that still byte Dance will be playing a role, but 0:00:56.880 --> 0:00:58.120 a less than twenty percent role. 0:00:59.400 --> 0:01:02.240 That's right, so byte Dance will have an ownership stake 0:01:02.320 --> 0:01:06.240 in this in this new US entity. We previously reported 0:01:06.319 --> 0:01:08.560 as well that you know byite Dance will be the 0:01:08.640 --> 0:01:13.280 licensing its content algorithm to this new US TikTok that 0:01:13.319 --> 0:01:16.160 they would then use that licensed algorithm to build a 0:01:16.240 --> 0:01:19.000 new one based on US user data. But you know, 0:01:19.080 --> 0:01:21.720 the law, Caroline is pretty clear, which is that byte 0:01:21.760 --> 0:01:24.480 Dance is not supposed to have any operational role in 0:01:24.520 --> 0:01:27.720 this new US TikTok. And so this has sort of 0:01:27.760 --> 0:01:30.880 been the complaint all along is that is Byteedance's involvement, 0:01:30.920 --> 0:01:33.480 even if it's a small ownership stake or as a 0:01:33.520 --> 0:01:36.800 licensing partner on the algorithm, is that considered too much. 0:01:36.880 --> 0:01:38.600 I don't know if anyone is actually going to push 0:01:38.640 --> 0:01:42.160 back and try and you know, fight this. No one 0:01:42.240 --> 0:01:45.240 has to date, but those who are following the letter 0:01:45.280 --> 0:01:47.400 of the law do have questions about whether this actually 0:01:47.440 --> 0:01:48.760 follows the letter of the law. 0:01:49.080 --> 0:01:52.560 And also the players involve ka Oracle, which seems to 0:01:52.560 --> 0:01:55.200 be everywhere at the moment, is playing an outsize role 0:01:55.240 --> 0:01:56.880 with a fifteen percent holding, but they are of a 0:01:56.920 --> 0:01:58.120 private equity involvement. 0:01:58.160 --> 0:02:01.320 There's Middle East an involvement, there. 0:02:01.280 --> 0:02:04.240 Is, and Oracle gets all the headlines because you know, 0:02:04.320 --> 0:02:07.200 it's the large American tech company. It's also going to 0:02:07.240 --> 0:02:10.200 have an outsized role in terms of sort of securing 0:02:10.240 --> 0:02:13.040 that US data. You may recall that there was a 0:02:13.160 --> 0:02:15.760 similar arrangement agreed upon a few years ago called the 0:02:15.800 --> 0:02:18.400 Project Texas that was supposed to have Oracle at the 0:02:18.400 --> 0:02:21.160 center of protecting this. What's interesting about that is that 0:02:21.360 --> 0:02:24.840 at that time the arrangement with Oracle was not considered 0:02:24.840 --> 0:02:27.360 to be a solution. Regulators in the US did not 0:02:27.440 --> 0:02:29.960 feel that it went far enough to actually protect US data. 0:02:30.160 --> 0:02:32.880 Now they're sort of pitching the same framework as they 0:02:32.919 --> 0:02:35.600 did a few years ago, and again the question is 0:02:35.600 --> 0:02:37.959 is anybody going to step up and actually push back 0:02:37.960 --> 0:02:40.880 on this? But as you mentioned, there's several different parties involved. 0:02:41.000 --> 0:02:43.840 Everyone is even ORCLE owns only fifteen percent of this, 0:02:43.919 --> 0:02:45.640 so there will be a lot of sort of hands 0:02:45.880 --> 0:02:46.360 in the pot. 0:02:46.400 --> 0:02:50.480 Here Brumbo's Kat Wagner, we thank you, extraordinary story, a 0:02:50.560 --> 0:02:53.519 developing story. Let's talk about what we can expect from 0:02:53.560 --> 0:02:56.920 a US majority owned TikTok. None other than Kevin Maher 0:02:57.040 --> 0:02:59.520 here's co CEO of Candle Media. You're also with a 0:02:59.560 --> 0:03:03.200 former top CEO. You're the COO of Byte Dance as well. 0:03:03.240 --> 0:03:05.040 And it blows my mind to think that it was 0:03:05.080 --> 0:03:08.760 August twenty twenty when you resigned because you couldn't see 0:03:08.760 --> 0:03:12.560 a par forward of managing TikTok globally. Five years later, 0:03:13.160 --> 0:03:14.920 here we are Kevin, what do you make of this 0:03:15.000 --> 0:03:15.760 potential deal? 0:03:16.520 --> 0:03:17.840 Well, here we are, thanks for having me. 0:03:17.880 --> 0:03:20.240 I really appreciate it. Look, I think Kurt did a 0:03:20.240 --> 0:03:24.480 good job of describing the deal. I think it works operationally. 0:03:24.840 --> 0:03:27.560 I think having a company like Oracle, a very trusted 0:03:27.600 --> 0:03:30.880 company run by Larry Elson, who was a trustworthy figure 0:03:30.919 --> 0:03:35.600 obviously being in the center in charge of looking after 0:03:35.760 --> 0:03:38.760 and securing the US data, that's crucial. And I think 0:03:39.000 --> 0:03:42.720 they're licensing the algorithm from China, so Biteance will still 0:03:42.720 --> 0:03:45.760 own the code. But I do think this license will 0:03:45.840 --> 0:03:49.400 take another instance of the algorithm, all the code put 0:03:49.440 --> 0:03:52.160 on Oracle service and then trained on the US data 0:03:52.360 --> 0:03:53.720 that Oracle alone. 0:03:53.440 --> 0:03:54.080 Has access to. 0:03:54.160 --> 0:03:55.840 So I think it's going to end up having a 0:03:55.960 --> 0:04:00.800 vastly different feed and sort of content rhythm then you'll 0:04:00.800 --> 0:04:03.000 see around the world. So I think that that will work. 0:04:03.280 --> 0:04:04.920 And I think that byte Dance will you know, it 0:04:05.000 --> 0:04:07.640 is now below twenty percent ownership, in nineteen point nine 0:04:07.640 --> 0:04:11.520 percent ownership. That's a substantial difference from status quo. And 0:04:11.560 --> 0:04:13.520 I do think that by Dance has an operation role 0:04:13.720 --> 0:04:17.520 commercializing TikTok, selling ads, making sure e commerce works, and 0:04:17.520 --> 0:04:20.600 all the other commercialization factors but really it will be 0:04:20.680 --> 0:04:25.000 run by a US board and be a separate US company. 0:04:25.040 --> 0:04:27.719 It works, It works, but the proof is in the 0:04:27.720 --> 0:04:31.560 putting as to whether the algorithm is powerful. How do 0:04:31.640 --> 0:04:34.320 you see, as someone who's in charge of content development 0:04:34.400 --> 0:04:37.039 wanting to get your content out there in a marketing capacity, 0:04:37.320 --> 0:04:39.800 do you have confidence there will be as good without 0:04:39.800 --> 0:04:41.160 bytedoance as heavily involved. 0:04:42.160 --> 0:04:43.760 Well, I think it probably will be. 0:04:43.960 --> 0:04:46.719 There's a lot of intricacies and a lot of AI 0:04:47.240 --> 0:04:49.960 as the word of the day, in that code, and 0:04:50.040 --> 0:04:53.479 I think that code base being kept intact is crucial. 0:04:53.480 --> 0:04:56.320 I think had they tried to recreate a new algorithm 0:04:56.400 --> 0:04:59.520 from scratch because of security concerns, that would have been 0:05:00.000 --> 0:05:03.400 exceedingly difficult. That has taken years and years and thousands 0:05:03.440 --> 0:05:06.000 of engineers in China to develop as a very sophisticated 0:05:06.200 --> 0:05:07.960 AI recommendation engine. 0:05:08.040 --> 0:05:10.440 So the fact that they all access to that it. 0:05:10.400 --> 0:05:13.840 Will remain interoperable with all the other TikTok instances around 0:05:13.880 --> 0:05:16.120 the world, I think that matters quite a bit. And 0:05:16.160 --> 0:05:19.240 I think just retraining that same code base, that same 0:05:19.279 --> 0:05:22.240 algorithm with US data should provide a very robust solution. 0:05:22.320 --> 0:05:23.440 I think it will be seamless. 0:05:23.880 --> 0:05:24.440 Really interesting. 0:05:24.480 --> 0:05:28.479 That interoperability because as someone who can see the power 0:05:28.520 --> 0:05:31.760 of TikTok, because you are able to get global content, 0:05:31.880 --> 0:05:33.640 not just US focused content. 0:05:34.120 --> 0:05:35.120 Is that really going to work? 0:05:35.160 --> 0:05:37.320 Is that something that you think will It's still remain 0:05:37.360 --> 0:05:39.840 a global business even though you're having this US part 0:05:39.920 --> 0:05:40.480 hived off. 0:05:41.279 --> 0:05:43.159 It has to it has to remain global. I think 0:05:43.200 --> 0:05:46.120 a social media platform, and I would call it TikTok 0:05:46.200 --> 0:05:49.960 more social entertainment actually than social media, that has to 0:05:50.000 --> 0:05:53.400 be global. If it were to be siphoned off and 0:05:53.480 --> 0:05:55.360 cording off from the rest of the world and having 0:05:55.360 --> 0:05:57.520 a US only presence, I think that would be a 0:05:57.520 --> 0:05:58.920 big detriment to US users. 0:05:59.120 --> 0:06:00.720 As I understand it. That's not the case. 0:06:00.800 --> 0:06:03.680 It is interoperable, and I think from a user perspective, 0:06:04.160 --> 0:06:07.360 be seamlessly accessing content from around the world and vice versa. 0:06:07.680 --> 0:06:10.320 Just the recommendation that will be US based only. 0:06:10.800 --> 0:06:13.520 I mean, you just think about the entertainment element. I mean, 0:06:13.560 --> 0:06:16.960 TikTok had its first red carbon moment yesterday doing awards. 0:06:17.000 --> 0:06:18.920 I mean, this really is trying to be a juggernaut 0:06:19.040 --> 0:06:21.400 of the way you and I consume our content going forward. 0:06:21.640 --> 0:06:23.520 Just from the national security. 0:06:23.040 --> 0:06:26.040 Perspective, How do you think that has been silenced in 0:06:26.120 --> 0:06:28.600 terms of criticism because many fail that perhaps bite out 0:06:28.680 --> 0:06:31.240 still has a bit too much involvement, particularly if it 0:06:31.279 --> 0:06:33.520 gets some profits as well well. 0:06:33.560 --> 0:06:37.120 I think Byedan's deriving profits there do that. I mean 0:06:37.160 --> 0:06:41.720 they built this entire ecosystem, this entire code base, the technology, 0:06:41.920 --> 0:06:44.400 the app. They paid a lot of money in marketing 0:06:44.440 --> 0:06:47.279 to get that app downloaded on hundreds of millions of 0:06:47.279 --> 0:06:50.400 billions frankly of devices around the world. They've earned that 0:06:50.480 --> 0:06:52.920 right to have a participation and profits, and I think 0:06:53.120 --> 0:06:54.960 it's structured in such a way that's very fair. And 0:06:54.960 --> 0:06:57.919 I do think that from a national security perspective, again, 0:06:58.040 --> 0:07:02.320 having that data walled off may ensure that our potential 0:07:02.320 --> 0:07:06.080 eversars outside of the US cannot access the algorithm. Again, 0:07:06.920 --> 0:07:10.960 how that algorithm recommends content content moderation policies and the 0:07:11.000 --> 0:07:14.400 actual data underneath it that drives the training of that algorithm, 0:07:14.520 --> 0:07:17.320 The fact that that is controlled by Oracle. It is 0:07:17.360 --> 0:07:19.480 like Project Texas, but I think Project Texas would have 0:07:19.480 --> 0:07:21.720 worked as well. So I think this is going to 0:07:21.760 --> 0:07:26.600 solve the whatever legitimate national security concerns that were now solved. 0:07:27.160 --> 0:07:30.720 The consumer has kind of cared less and less since 0:07:30.760 --> 0:07:33.680 the first ruling. Since that first under the Biden administration, 0:07:34.320 --> 0:07:37.400 desire to block us well to block TikTok, or at 0:07:37.480 --> 0:07:41.240 least separating them from by Dance. Initially people were really 0:07:41.280 --> 0:07:43.560 worried about the national security element, and now it seems 0:07:43.600 --> 0:07:47.000 that has faded. Do you think consumers are going to 0:07:47.200 --> 0:07:49.800 be interested in what they're now presented in terms of 0:07:49.840 --> 0:07:51.880 the algorithm. It's so interesting, I now get a stem 0:07:51.920 --> 0:07:55.239 element in TikTok. They've already tried to confront that feeling 0:07:55.640 --> 0:07:58.400 that we're being dumb down versus perhaps what they're being 0:07:58.440 --> 0:08:00.400 served by the competition in China. 0:08:01.880 --> 0:08:04.400 Yeah, I look, I think I think it's all just 0:08:04.440 --> 0:08:07.400 pretty good news. I think that Americans will be well 0:08:07.440 --> 0:08:11.120 served by having another voice, another platform. I think Americans 0:08:11.120 --> 0:08:13.760 speaking to Americans on this platform and Americans speaking to 0:08:13.760 --> 0:08:15.560 the world in the world back to us. 0:08:15.720 --> 0:08:17.440 It is healthy. It's a healthy dialogue to have. 0:08:17.840 --> 0:08:20.120 I think that if it's done in a way that 0:08:20.240 --> 0:08:23.680 is protecting our interests, that's protecting our security, I think 0:08:23.720 --> 0:08:26.320 that's very good news for consumers here, and I think 0:08:26.360 --> 0:08:29.520 they'll be well served. So I think it's correct that 0:08:29.560 --> 0:08:31.440 consumers should have now put this in the back of 0:08:31.440 --> 0:08:33.840 their mind a little bit. This seems like a permanent solution. 0:08:34.200 --> 0:08:37.120 The only element of doubt here and risk is that 0:08:37.200 --> 0:08:40.280 China hasn't come out and explicitly the Chinese government hasn't 0:08:40.280 --> 0:08:42.719 blessed the deal yet. I'd be a little concerned about that. 0:08:42.840 --> 0:08:45.440 You know, back five years ago we almost had to 0:08:45.440 --> 0:08:48.440 deal with Oracle you may recall, and the Chinese government 0:08:48.520 --> 0:08:51.520 put an end to it. It looks like, by all 0:08:51.559 --> 0:08:54.520 accounts in the Chinese media, the right words of being 0:08:54.520 --> 0:08:56.800 said today and then in the last few days about 0:08:56.800 --> 0:08:59.679 the deal looks good. Looks like China will approve it. 0:09:00.040 --> 0:09:02.719 Little of flying the ointment, but again, wouldn't be too 0:09:02.720 --> 0:09:03.640 concerned about it. 0:09:03.640 --> 0:09:04.720 Looks like it's going to happen. 0:09:05.520 --> 0:09:08.120 You're at the very cutting edge of where media is 0:09:08.160 --> 0:09:12.400 moving to. You're sort of the lead architect behind Disney 0:09:12.440 --> 0:09:15.360 Plus and how it was on failed. You're now thinking 0:09:15.360 --> 0:09:18.160 about new areas of brands, and you're helping Coco mel 0:09:18.200 --> 0:09:18.840 and get everywhere. 0:09:18.840 --> 0:09:19.920 In a cameo from. 0:09:19.840 --> 0:09:24.679 Kids, for example, what is TikTok in terms of its competition? 0:09:24.880 --> 0:09:28.080 Because we're also considering a totally different media landscape. We're 0:09:28.080 --> 0:09:31.959 thinking about whether a Netflix owning Warner Brothers would be 0:09:32.160 --> 0:09:33.000 the real competition? 0:09:33.080 --> 0:09:35.400 Is YouTube is the real competition? TikTok? How do you 0:09:35.480 --> 0:09:37.720 see this evolution right now? 0:09:38.360 --> 0:09:40.280 Well, there's a lot going on in the media business. 0:09:40.360 --> 0:09:42.240 Now it's going to it looks a lot different than 0:09:42.280 --> 0:09:45.040 it did even five years ago. There's young people and 0:09:45.040 --> 0:09:49.959 even you know, people my age, and across the demographic spectrum. 0:09:50.120 --> 0:09:53.120 People are watching more short form entertainment. That's something that 0:09:53.200 --> 0:09:57.880 TikTok actually in the beginning, YouTube, you know, pioneered short 0:09:57.880 --> 0:09:58.680 form entertainment. 0:09:58.920 --> 0:10:00.200 It became a full screen. 0:10:00.200 --> 0:10:04.720 Vertical when with vertical phones when TikTok came along, and 0:10:04.760 --> 0:10:07.160 now YouTube is doing that with shorts. I think there's 0:10:07.559 --> 0:10:10.559 is a sea change in how people consume content, where 0:10:10.720 --> 0:10:13.000 the influence comes from. I mean, if you look at 0:10:13.320 --> 0:10:15.960 today the landscape and what's more central to the culture. 0:10:16.040 --> 0:10:18.720 Is it Hollywood, is a TikTok? Is it YouTube? The 0:10:18.800 --> 0:10:20.640 answer is it's a mix of all of the above. 0:10:21.000 --> 0:10:24.320 And as usage patterns continue to evolve, I think there's 0:10:24.520 --> 0:10:28.080 some challenges for Hollywood to catch up. My company, Candle 0:10:28.160 --> 0:10:30.920 Media owned, We own a company called Moonbug, and you 0:10:30.960 --> 0:10:35.840 mentioned cocomelon Cocomelon is centered on IP derived from YouTube. 0:10:35.880 --> 0:10:38.000 It's on the YouTube ecosystem. We're on shorts, we're on 0:10:38.040 --> 0:10:42.400 the traditional YouTube, you know video, and we have over 0:10:42.440 --> 0:10:45.880 two hundred million subscribers to that one English language channel, 0:10:46.000 --> 0:10:47.480 and we've been the biggest show on Netflix. 0:10:47.480 --> 0:10:49.640 So I think there is taking. 0:10:49.400 --> 0:10:51.880 Advantage of all the different platforms that people interact with, 0:10:52.160 --> 0:10:56.440 you know, streaming page, streaming services, advertising for the streaming services. 0:10:56.520 --> 0:10:59.079 The atrical windows wearing a Cocomelan movie come out in 0:10:59.120 --> 0:11:02.000 twenty twenty seven, and YouTube and TikTok at the center 0:11:02.080 --> 0:11:05.560 of that IP generation machine. That's the future of media, 0:11:05.880 --> 0:11:08.679 and media companies that are really at the cutting edge 0:11:08.720 --> 0:11:13.079 are really looking YouTube, TikTok short form video alongside the 0:11:13.160 --> 0:11:15.920 long form traditional storytelling that has been their bread and 0:11:15.920 --> 0:11:16.840 butter for decades. 0:11:17.559 --> 0:11:20.280 Do you have any anxiety for Hollywood for IP for 0:11:20.400 --> 0:11:23.880 content creation? If indeed Netflix does take ownership a Warner 0:11:23.920 --> 0:11:27.920 Brothers Discovery, if Paramount does for that example, indeed, what 0:11:28.040 --> 0:11:30.800 it means for your old alma mater, which is. 0:11:30.720 --> 0:11:33.480 Disney, Well, Disney's in a great position. 0:11:33.520 --> 0:11:35.880 Disney has the IP of the franchises they have that 0:11:36.120 --> 0:11:40.840 the brands that matter Disney, Star Wars, Marble, Pixar, Disney's 0:11:40.840 --> 0:11:43.520 in a pretty unassailable position. Put them aside for a second. 0:11:44.040 --> 0:11:48.479 What Hollywood needs is a healthy ecosystem. They need studios 0:11:48.640 --> 0:11:52.240 that have another revenue to cover their costs, that are profitable, 0:11:52.520 --> 0:11:55.800 and that are in a position to compete against these 0:11:56.080 --> 0:11:59.880 mths like TikTok, like YouTube and Google. So a combination 0:12:00.080 --> 0:12:03.280 there between Warner Brothers and one of Netflix or Paramount 0:12:03.360 --> 0:12:06.080 is crucial. I think to maintain the health and the 0:12:06.080 --> 0:12:10.160 profitability that ecosystems, it's better to have fewer competitors that 0:12:10.200 --> 0:12:13.480 are more financially viable and can buy more product and 0:12:13.800 --> 0:12:18.080 support a high production value than having a more buyers, 0:12:18.200 --> 0:12:20.959 one more buyer being Warner Brothers being independently in a 0:12:21.000 --> 0:12:22.040 reacer financial position. 0:12:22.080 --> 0:12:25.199 So I think that a combination is good. 0:12:25.400 --> 0:12:27.880 And even though Netflix won the first round, don't count 0:12:27.920 --> 0:12:32.000 out the Ellisons. They're incredibly smart and aggressive. Don't count 0:12:32.080 --> 0:12:34.960 out don't count out Jerry Cardinal at Redbird. These guys 0:12:35.000 --> 0:12:37.040 are very serious. I think they're going to come back 0:12:37.040 --> 0:12:37.840 with a higher bid. 0:12:38.200 --> 0:12:38.640 And when they. 0:12:38.600 --> 0:12:41.400 Approach, and remember shareholders still haven't spoken yet, I think 0:12:41.400 --> 0:12:44.040 the likelihood of hear is that Marner Brothers ends up 0:12:44.040 --> 0:12:46.720 with Paramount, and I think it's ultimately it is they 0:12:46.760 --> 0:12:49.920 cost some jobs. Obviously in Hollywood, there's no getting around that, 0:12:50.240 --> 0:12:51.600 but ultimately good for creators. 0:12:52.320 --> 0:12:53.920 I think one we might have to have you back 0:12:54.000 --> 0:12:57.400 very soon as all of these stories unfold. Kevin Mayer, 0:12:57.440 --> 0:12:59.640 What a joy to have you on Kindle Media co CEO, 0:13:00.120 --> 0:13:04.280 former TikTok CEO and CEO of byde Dance. Now let's 0:13:04.320 --> 0:13:06.920 get back to these markets that are in risk on 0:13:07.080 --> 0:13:10.920 mode as we head towards the very shortened week next 0:13:10.920 --> 0:13:13.240 week ahead of the holidays, and aslack is up one 0:13:13.280 --> 0:13:15.800 point two percent. In fact, stocks arising even as traders 0:13:15.800 --> 0:13:18.920 face the expiration of a record pile of options. Today, 0:13:19.160 --> 0:13:21.680 we're seeing Bitcoin up three point three percent. We're also 0:13:21.760 --> 0:13:24.720 looking at key names such as Oracle. We're up seven 0:13:24.800 --> 0:13:27.840 percent as that TikTok deal is it near the closing? 0:13:28.080 --> 0:13:29.960 What does it mean for Oracle's business model as its 0:13:30.000 --> 0:13:31.960 cloud partner the subroomberg Tech. 0:13:43.520 --> 0:13:44.839 Take a look at Oracle shares. 0:13:44.840 --> 0:13:47.640 They're doing strongly today and everywhere you turn this week, 0:13:47.880 --> 0:13:51.880 Oracle has dominated the headlines from anxiety around data center timetables, 0:13:51.960 --> 0:13:55.439 data center leases along with mounting debt piles, ability to 0:13:55.520 --> 0:13:58.600 raise financing for the Michigan project, not to mention Larry 0:13:58.600 --> 0:14:02.200 Ellison's other potential bet some Warner Brothers, Discovery and now TikTok. 0:14:02.520 --> 0:14:05.280 How is Oracle benefiting from this sale? How is it 0:14:05.280 --> 0:14:07.640 affording all of it? Let's go to mannixing briefly is 0:14:07.640 --> 0:14:09.719 global headed tech research, glue, meg intelligence. 0:14:10.000 --> 0:14:12.240 So why is the TikTok deal good? Why is all 0:14:12.320 --> 0:14:14.400 of this good for Oracle or not? 0:14:16.120 --> 0:14:19.440 Well, right now, I think the concerns around Oracle stem 0:14:19.480 --> 0:14:23.080 from the fact that they can finance that infrastructure build out. 0:14:23.080 --> 0:14:26.240 But I think the TikTok news and just this Michigan 0:14:26.960 --> 0:14:30.960 sort of build out happening is another sign that, you know, 0:14:31.080 --> 0:14:35.320 things are moving incrementally, and they have given a revenue 0:14:35.360 --> 0:14:38.040 guidance for the next four years. Even if you don't 0:14:38.080 --> 0:14:41.880 believe there are RPO number you have, you know, intermedate bogies, 0:14:41.920 --> 0:14:45.320 thirty two billion in is revenue for next year, you know, 0:14:45.360 --> 0:14:49.000 seventy three billion the year after and for that they 0:14:49.040 --> 0:14:53.000 have to build out infrastructure. Without that, that revenue won't 0:14:53.120 --> 0:14:56.120 gonna come to fruition. So from that perspective, you know 0:14:56.160 --> 0:14:59.120 these incremental steps are positive, and you know if the 0:14:59.200 --> 0:15:02.360 fact that they can build out data center in Michigan, 0:15:02.720 --> 0:15:06.160 to my mind, is another step towards you know, realizing 0:15:06.200 --> 0:15:08.920 that thirty two billion in revenue next year. 0:15:09.800 --> 0:15:11.280 I hope you're around next week because I have a 0:15:11.280 --> 0:15:13.400 feeling Oracle will also be on our minds. Then mandate 0:15:13.440 --> 0:15:15.680 Seeing and Blue meg Intelligence. Thanks so much for all 0:15:15.720 --> 0:15:18.120 of your coverage this week in your analysis. Let's get 0:15:18.120 --> 0:15:20.520 more on the market's moves today. Sephanie Ali Algez with 0:15:20.600 --> 0:15:24.320 US Global Market Strategies the JP Morgan. So we end 0:15:24.360 --> 0:15:26.440 the week on a high, but wow, have we been 0:15:26.520 --> 0:15:27.720 riddled with AI doubts? 0:15:27.840 --> 0:15:29.760 Where has your mind been app Yeah, it. 0:15:29.720 --> 0:15:32.520 Has been a really interesting tape in recent weeks and months. 0:15:32.560 --> 0:15:37.640 I mean the debate around AI, the return on investment 0:15:37.680 --> 0:15:40.880 around AI, around the quality of the balance sheets, the 0:15:40.920 --> 0:15:43.960 war on the model front right between chat GBT and 0:15:43.960 --> 0:15:47.920 Google's Gemini, and I think moving forward, markets are realizing 0:15:48.680 --> 0:15:51.280 this is going to be less of a competition on 0:15:51.560 --> 0:15:54.200 just the innovation, although the innovation is really important, but 0:15:54.320 --> 0:15:57.560 also on balance sheets and you know, the show me 0:15:57.600 --> 0:16:01.080 the money. This kind of desire for markets to really 0:16:01.120 --> 0:16:06.000 see companies with AI tied cash generation, which is a 0:16:06.080 --> 0:16:09.000 tricky environment to be in because if you want to 0:16:09.000 --> 0:16:12.760 see growth from AI but cash, you might need to 0:16:13.160 --> 0:16:16.400 actually let go of some cash in the near term 0:16:16.480 --> 0:16:18.960 right to invest in some of these infrastructure buildouts to 0:16:19.080 --> 0:16:20.760 ultimately get the growth that we're looking for. 0:16:20.840 --> 0:16:22.920 I mean, investor is being asked to be patient. The 0:16:23.000 --> 0:16:25.920 word I've heard time in ten again this week is discerning. 0:16:26.240 --> 0:16:28.080 Is that what you feel people are starting? It's not 0:16:28.120 --> 0:16:29.880 all boats arising, We're picking. 0:16:29.600 --> 0:16:30.960 On winners, yes, right exactly. 0:16:31.320 --> 0:16:34.480 It's we had three years of AI providing this really 0:16:34.600 --> 0:16:37.640 powerful tide, lifting a lot of boats, and this year 0:16:37.680 --> 0:16:41.200 we've seen a lot more discernment right amongst these names. 0:16:41.480 --> 0:16:43.160 We think that that can continue. Now. 0:16:43.160 --> 0:16:45.080 It doesn't mean that AI isn't still this kind of 0:16:45.160 --> 0:16:48.440 rising tide, but we're now seeing the different markets here, 0:16:48.760 --> 0:16:51.880 the markets around models, the markets around cloud services, markets 0:16:51.880 --> 0:16:54.520 around infrastructure, and now we want to see who are 0:16:54.520 --> 0:16:55.840 going to be the leaders, Who are they going to 0:16:55.840 --> 0:16:59.200 be the companies that actually capture the best economics in 0:16:59.200 --> 0:17:02.520 each of these markets. So it's not necessarily zero sum, 0:17:02.920 --> 0:17:08.320 but now competition is really ratcheting higher and balance sheets 0:17:08.359 --> 0:17:10.639 are starting to fray A little bit. Right, we're tapping 0:17:10.640 --> 0:17:15.040 into debt market, so companies are also seeing greater differentiation 0:17:15.119 --> 0:17:15.800 amongst themselves. 0:17:15.840 --> 0:17:18.199 That way, you are a cross perspective. 0:17:18.400 --> 0:17:20.520 Should people be owning the debt of these big companies 0:17:20.560 --> 0:17:22.680 cool propons as well as equity exposure? 0:17:23.600 --> 0:17:25.800 I mean, I guess it depends on what you're looking for. 0:17:26.000 --> 0:17:28.240 You know, I think the Fed is lowering interest rates, 0:17:28.280 --> 0:17:30.600 and you know, if you see interest rates move lower 0:17:30.680 --> 0:17:33.639 more broadly, like, there is going to be demand for this, 0:17:33.640 --> 0:17:36.119 this debt issuance, and we're expecting a lot of that. 0:17:36.160 --> 0:17:38.800 There's also five hundred billion dollars in dry powder and 0:17:38.840 --> 0:17:42.000 private credit, right, so I don't doubt that this capital 0:17:42.240 --> 0:17:43.200 we'll find. 0:17:42.920 --> 0:17:44.200 You know, at home. 0:17:44.680 --> 0:17:46.919 But I think the question for investors is to just 0:17:46.960 --> 0:17:49.880 make sure that you have some diversification to this seam 0:17:49.920 --> 0:17:54.359 in your portfolio. Because as extraordinary and transformative as AI 0:17:54.440 --> 0:17:56.560 is going to be, the last few weeks have reminded 0:17:56.640 --> 0:17:58.440 us that it's going to be choppy along the way. 0:17:58.760 --> 0:18:01.240 There can be surprises and knowns, So you want to 0:18:01.240 --> 0:18:04.560 make sure your portfolio is built to withstand those choppier 0:18:04.600 --> 0:18:08.240 waters while still benefiting from the secular opportunity that remains. 0:18:08.359 --> 0:18:10.480 What almost have been the theme of twenty twenty five 0:18:10.680 --> 0:18:14.760 is how dominant the private sector, private sector names have 0:18:14.880 --> 0:18:19.040 been on your maybe overexposure in your public portfolio. I 0:18:19.040 --> 0:18:21.200 think of a nameline open AI. We think of SpaceX 0:18:21.280 --> 0:18:23.719 and its valuation, open ai potentially being eight hundred and 0:18:23.720 --> 0:18:26.399 thirty billion, just to pit the post on SpaceX's eight 0:18:26.480 --> 0:18:30.120 hundred billion dollar valuation. How much are you seeing your 0:18:30.160 --> 0:18:33.080 clients wanting more exposure to the private markets and how 0:18:33.119 --> 0:18:35.520 is that going to translate to public in twenty twenty six. 0:18:35.600 --> 0:18:37.800 So key, and it's such a big difference from what 0:18:37.840 --> 0:18:40.040 we saw in the Internet era, right when all of 0:18:40.080 --> 0:18:43.159 these AI or sorry Internet startups were just going public 0:18:43.200 --> 0:18:47.240 on day one, and today you have these AI native 0:18:47.280 --> 0:18:50.560 companies reaching scale that we've never seen before in private markets. 0:18:50.920 --> 0:18:53.760 And of course there are the big model developers, but 0:18:53.840 --> 0:18:56.720 what's been actually most interesting for me has been seeing 0:18:56.720 --> 0:19:00.200 the explosion in AI applications. If you think about out 0:19:00.480 --> 0:19:03.399 who are the companies that are really at the center 0:19:03.560 --> 0:19:07.879 of end user demand, selling to consumers, selling to businesses, 0:19:08.200 --> 0:19:11.960 it's these more niche AI applications and they are growing 0:19:12.000 --> 0:19:14.199 at scales that we've never seen before. Right the average 0:19:14.240 --> 0:19:17.320 AI startup reaching one hundred million dollars in under twelve 0:19:17.320 --> 0:19:20.320 months on average at take and startups about roughly. 0:19:20.080 --> 0:19:21.040 Ten years to achieve. 0:19:21.280 --> 0:19:23.840 You had Patrick McGoldrick here yesterday from our firm talking 0:19:23.840 --> 0:19:27.600 about this dynamic. So absolutely like if you want some 0:19:27.640 --> 0:19:30.160 of that growth exposure, you're going to need a look 0:19:30.160 --> 0:19:33.400 in private markets. In our long term capital market assumptions, 0:19:33.440 --> 0:19:36.800 we actually see that the long term return expectation in 0:19:36.840 --> 0:19:39.879 private equity at ten point two versus large cap public 0:19:39.920 --> 0:19:42.840 equities in the US six point seven. A big reason 0:19:42.840 --> 0:19:46.720 for that is starting valuations in public equity markets. In 0:19:46.760 --> 0:19:49.199