Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Eva though in San Francisco.
Speaker 2: This is Bloomberg Tech coming up. The weight is it over?
Speaker 3: TikTok says it's signed agreements for the new US joint venture.
Speaker 3: Plus who better to talk about the new TikTok era
Speaker 3: than former CEO Kevin Meyer.
Speaker 2: He joins us at the top of the hour and.
Speaker 3: The latest reports on Opening Eyes potential valuation the Wall
Speaker 3: Street Journal giving in an eight hundred and thirty billion.
Speaker 2: Dollar price tech. But first we go to our top story.
Speaker 3: The details are they there for a proposed TikTok deal.
Speaker 2: Grimos kirt Wagner, who covers social.
Speaker 3: Media, can talk us through the intricacies because we understand
Speaker 3: that still byte Dance will be playing a role, but
Speaker 3: a less than twenty percent role.
Speaker 4: That's right, so byte Dance will have an ownership stake
Speaker 4: in this in this new US entity. We previously reported
Speaker 4: as well that you know byite Dance will be the
Speaker 4: licensing its content algorithm to this new US TikTok that
Speaker 4: they would then use that licensed algorithm to build a
Speaker 4: new one based on US user data. But you know,
Speaker 4: the law, Caroline is pretty clear, which is that byte
Speaker 4: Dance is not supposed to have any operational role in
Speaker 4: this new US TikTok. And so this has sort of
Speaker 4: been the complaint all along is that is Byteedance's involvement,
Speaker 4: even if it's a small ownership stake or as a
Speaker 4: licensing partner on the algorithm, is that considered too much.
Speaker 4: I don't know if anyone is actually going to push
Speaker 4: back and try and you know, fight this. No one
Speaker 4: has to date, but those who are following the letter
Speaker 4: of the law do have questions about whether this actually
Speaker 4: follows the letter of the law.
Speaker 3: And also the players involve ka Oracle, which seems to
Speaker 3: be everywhere at the moment, is playing an outsize role
Speaker 3: with a fifteen percent holding, but they are of a
Speaker 3: private equity involvement.
Speaker 2: There's Middle East an involvement, there.
Speaker 4: Is, and Oracle gets all the headlines because you know,
Speaker 4: it's the large American tech company. It's also going to
Speaker 4: have an outsized role in terms of sort of securing
Speaker 4: that US data. You may recall that there was a
Speaker 4: similar arrangement agreed upon a few years ago called the
Speaker 4: Project Texas that was supposed to have Oracle at the
Speaker 4: center of protecting this. What's interesting about that is that
Speaker 4: at that time the arrangement with Oracle was not considered
Speaker 4: to be a solution. Regulators in the US did not
Speaker 4: feel that it went far enough to actually protect US data.
Speaker 4: Now they're sort of pitching the same framework as they
Speaker 4: did a few years ago, and again the question is
Speaker 4: is anybody going to step up and actually push back
Speaker 4: on this? But as you mentioned, there's several different parties involved.
Speaker 4: Everyone is even ORCLE owns only fifteen percent of this,
Speaker 4: so there will be a lot of sort of hands
Speaker 4: in the pot.
Speaker 3: Here Brumbo's Kat Wagner, we thank you, extraordinary story, a
Speaker 3: developing story. Let's talk about what we can expect from
Speaker 3: a US majority owned TikTok. None other than Kevin Maher
Speaker 3: here's co CEO of Candle Media. You're also with a
Speaker 3: former top CEO. You're the COO of Byte Dance as well.
Speaker 3: And it blows my mind to think that it was
Speaker 3: August twenty twenty when you resigned because you couldn't see
Speaker 3: a par forward of managing TikTok globally. Five years later,
Speaker 3: here we are Kevin, what do you make of this
Speaker 3: potential deal?
Speaker 5: Well, here we are, thanks for having me.
Speaker 6: I really appreciate it. Look, I think Kurt did a
Speaker 6: good job of describing the deal. I think it works operationally.
Speaker 6: I think having a company like Oracle, a very trusted
Speaker 6: company run by Larry Elson, who was a trustworthy figure
Speaker 6: obviously being in the center in charge of looking after
Speaker 6: and securing the US data, that's crucial. And I think
Speaker 6: they're licensing the algorithm from China, so Biteance will still
Speaker 6: own the code. But I do think this license will
Speaker 6: take another instance of the algorithm, all the code put
Speaker 6: on Oracle service and then trained on the US data
Speaker 6: that Oracle alone.
Speaker 5: Has access to.
Speaker 6: So I think it's going to end up having a
Speaker 6: vastly different feed and sort of content rhythm then you'll
Speaker 6: see around the world. So I think that that will work.
Speaker 6: And I think that byte Dance will you know, it
Speaker 6: is now below twenty percent ownership, in nineteen point nine
Speaker 6: percent ownership. That's a substantial difference from status quo. And
Speaker 6: I do think that by Dance has an operation role
Speaker 6: commercializing TikTok, selling ads, making sure e commerce works, and
Speaker 6: all the other commercialization factors but really it will be
Speaker 6: run by a US board and be a separate US company.
Speaker 3: It works, It works, but the proof is in the
Speaker 3: putting as to whether the algorithm is powerful. How do
Speaker 3: you see, as someone who's in charge of content development
Speaker 3: wanting to get your content out there in a marketing capacity,
Speaker 3: do you have confidence there will be as good without
Speaker 3: bytedoance as heavily involved.
Speaker 5: Well, I think it probably will be.
Speaker 6: There's a lot of intricacies and a lot of AI
Speaker 6: as the word of the day, in that code, and
Speaker 6: I think that code base being kept intact is crucial.
Speaker 6: I think had they tried to recreate a new algorithm
Speaker 6: from scratch because of security concerns, that would have been
Speaker 6: exceedingly difficult. That has taken years and years and thousands
Speaker 6: of engineers in China to develop as a very sophisticated
Speaker 6: AI recommendation engine.
Speaker 5: So the fact that they all access to that it.
Speaker 6: Will remain interoperable with all the other TikTok instances around
Speaker 6: the world, I think that matters quite a bit. And
Speaker 6: I think just retraining that same code base, that same
Speaker 6: algorithm with US data should provide a very robust solution.
Speaker 5: I think it will be seamless.
Speaker 2: Really interesting.
Speaker 3: That interoperability because as someone who can see the power
Speaker 3: of TikTok, because you are able to get global content,
Speaker 3: not just US focused content.
Speaker 2: Is that really going to work?
Speaker 3: Is that something that you think will It's still remain
Speaker 3: a global business even though you're having this US part
Speaker 3: hived off.
Speaker 6: It has to it has to remain global. I think
Speaker 6: a social media platform, and I would call it TikTok
Speaker 6: more social entertainment actually than social media, that has to
Speaker 6: be global. If it were to be siphoned off and
Speaker 6: cording off from the rest of the world and having
Speaker 6: a US only presence, I think that would be a
Speaker 6: big detriment to US users.
Speaker 5: As I understand it. That's not the case.
Speaker 6: It is interoperable, and I think from a user perspective,
Speaker 6: be seamlessly accessing content from around the world and vice versa.
Speaker 6: Just the recommendation that will be US based only.
Speaker 3: I mean, you just think about the entertainment element. I mean,
Speaker 3: TikTok had its first red carbon moment yesterday doing awards.
Speaker 3: I mean, this really is trying to be a juggernaut
Speaker 3: of the way you and I consume our content going forward.
Speaker 2: Just from the national security.
Speaker 3: Perspective, How do you think that has been silenced in
Speaker 3: terms of criticism because many fail that perhaps bite out
Speaker 3: still has a bit too much involvement, particularly if it
Speaker 3: gets some profits as well well.
Speaker 6: I think Byedan's deriving profits there do that. I mean
Speaker 6: they built this entire ecosystem, this entire code base, the technology,
Speaker 6: the app. They paid a lot of money in marketing
Speaker 6: to get that app downloaded on hundreds of millions of
Speaker 6: billions frankly of devices around the world. They've earned that
Speaker 6: right to have a participation and profits, and I think
Speaker 6: it's structured in such a way that's very fair. And
Speaker 6: I do think that from a national security perspective, again,
Speaker 6: having that data walled off may ensure that our potential
Speaker 6: eversars outside of the US cannot access the algorithm. Again,
Speaker 6: how that algorithm recommends content content moderation policies and the
Speaker 6: actual data underneath it that drives the training of that algorithm,
Speaker 6: The fact that that is controlled by Oracle. It is
Speaker 6: like Project Texas, but I think Project Texas would have
Speaker 6: worked as well. So I think this is going to
Speaker 6: solve the whatever legitimate national security concerns that were now solved.
Speaker 3: The consumer has kind of cared less and less since
Speaker 3: the first ruling. Since that first under the Biden administration,
Speaker 3: desire to block us well to block TikTok, or at
Speaker 3: least separating them from by Dance. Initially people were really
Speaker 3: worried about the national security element, and now it seems
Speaker 3: that has faded. Do you think consumers are going to
Speaker 3: be interested in what they're now presented in terms of
Speaker 3: the algorithm. It's so interesting, I now get a stem
Speaker 3: element in TikTok. They've already tried to confront that feeling
Speaker 3: that we're being dumb down versus perhaps what they're being
Speaker 3: served by the competition in China.
Speaker 6: Yeah, I look, I think I think it's all just
Speaker 6: pretty good news. I think that Americans will be well
Speaker 6: served by having another voice, another platform. I think Americans
Speaker 6: speaking to Americans on this platform and Americans speaking to
Speaker 6: the world in the world back to us.
Speaker 5: It is healthy. It's a healthy dialogue to have.
Speaker 6: I think that if it's done in a way that
Speaker 6: is protecting our interests, that's protecting our security, I think
Speaker 6: that's very good news for consumers here, and I think
Speaker 6: they'll be well served. So I think it's correct that
Speaker 6: consumers should have now put this in the back of
Speaker 6: their mind a little bit. This seems like a permanent solution.
Speaker 6: The only element of doubt here and risk is that
Speaker 6: China hasn't come out and explicitly the Chinese government hasn't
Speaker 6: blessed the deal yet. I'd be a little concerned about that.
Speaker 6: You know, back five years ago we almost had to
Speaker 6: deal with Oracle you may recall, and the Chinese government
Speaker 6: put an end to it. It looks like, by all
Speaker 6: accounts in the Chinese media, the right words of being
Speaker 6: said today and then in the last few days about
Speaker 6: the deal looks good. Looks like China will approve it.
Speaker 6: Little of flying the ointment, but again, wouldn't be too
Speaker 6: concerned about it.
Speaker 5: Looks like it's going to happen.
Speaker 3: You're at the very cutting edge of where media is
Speaker 3: moving to. You're sort of the lead architect behind Disney
Speaker 3: Plus and how it was on failed. You're now thinking
Speaker 3: about new areas of brands, and you're helping Coco mel
Speaker 3: and get everywhere.
Speaker 2: In a cameo from.
Speaker 3: Kids, for example, what is TikTok in terms of its competition?
Speaker 3: Because we're also considering a totally different media landscape. We're
Speaker 3: thinking about whether a Netflix owning Warner Brothers would be
Speaker 3: the real competition?
Speaker 2: Is YouTube is the real competition? TikTok? How do you
Speaker 2: see this evolution right now?
Speaker 6: Well, there's a lot going on in the media business.
Speaker 6: Now it's going to it looks a lot different than
Speaker 6: it did even five years ago. There's young people and
Speaker 6: even you know, people my age, and across the demographic spectrum.
Speaker 6: People are watching more short form entertainment. That's something that
Speaker 6: TikTok actually in the beginning, YouTube, you know, pioneered short
Speaker 6: form entertainment.
Speaker 5: It became a full screen.
Speaker 6: Vertical when with vertical phones when TikTok came along, and
Speaker 6: now YouTube is doing that with shorts. I think there's
Speaker 6: is a sea change in how people consume content, where
Speaker 6: the influence comes from. I mean, if you look at
Speaker 6: today the landscape and what's more central to the culture.
Speaker 6: Is it Hollywood, is a TikTok? Is it YouTube? The
Speaker 6: answer is it's a mix of all of the above.
Speaker 6: And as usage patterns continue to evolve, I think there's
Speaker 6: some challenges for Hollywood to catch up. My company, Candle
Speaker 6: Media owned, We own a company called Moonbug, and you
Speaker 6: mentioned cocomelon Cocomelon is centered on IP derived from YouTube.
Speaker 6: It's on the YouTube ecosystem. We're on shorts, we're on
Speaker 6: the traditional YouTube, you know video, and we have over
Speaker 6: two hundred million subscribers to that one English language channel,
Speaker 6: and we've been the biggest show on Netflix.
Speaker 5: So I think there is taking.
Speaker 6: Advantage of all the different platforms that people interact with,
Speaker 6: you know, streaming page, streaming services, advertising for the streaming services.
Speaker 6: The atrical windows wearing a Cocomelan movie come out in
Speaker 6: twenty twenty seven, and YouTube and TikTok at the center
Speaker 6: of that IP generation machine. That's the future of media,
Speaker 6: and media companies that are really at the cutting edge
Speaker 6: are really looking YouTube, TikTok short form video alongside the
Speaker 6: long form traditional storytelling that has been their bread and
Speaker 6: butter for decades.
Speaker 3: Do you have any anxiety for Hollywood for IP for
Speaker 3: content creation? If indeed Netflix does take ownership a Warner
Speaker 3: Brothers Discovery, if Paramount does for that example, indeed, what
Speaker 3: it means for your old alma mater, which is.
Speaker 5: Disney, Well, Disney's in a great position.
Speaker 6: Disney has the IP of the franchises they have that
Speaker 6: the brands that matter Disney, Star Wars, Marble, Pixar, Disney's
Speaker 6: in a pretty unassailable position. Put them aside for a second.
Speaker 6: What Hollywood needs is a healthy ecosystem. They need studios
Speaker 6: that have another revenue to cover their costs, that are profitable,
Speaker 6: and that are in a position to compete against these
Speaker 6: mths like TikTok, like YouTube and Google. So a combination
Speaker 6: there between Warner Brothers and one of Netflix or Paramount
Speaker 6: is crucial. I think to maintain the health and the
Speaker 6: profitability that ecosystems, it's better to have fewer competitors that
Speaker 6: are more financially viable and can buy more product and
Speaker 6: support a high production value than having a more buyers,
Speaker 6: one more buyer being Warner Brothers being independently in a
Speaker 6: reacer financial position.
Speaker 5: So I think that a combination is good.
Speaker 6: And even though Netflix won the first round, don't count
Speaker 6: out the Ellisons. They're incredibly smart and aggressive. Don't count
Speaker 6: out don't count out Jerry Cardinal at Redbird. These guys
Speaker 6: are very serious. I think they're going to come back
Speaker 6: with a higher bid.
Speaker 5: And when they.
Speaker 6: Approach, and remember shareholders still haven't spoken yet, I think
Speaker 6: the likelihood of hear is that Marner Brothers ends up
Speaker 6: with Paramount, and I think it's ultimately it is they
Speaker 6: cost some jobs. Obviously in Hollywood, there's no getting around that,
Speaker 6: but ultimately good for creators.
Speaker 3: I think one we might have to have you back
Speaker 3: very soon as all of these stories unfold. Kevin Mayer,
Speaker 3: What a joy to have you on Kindle Media co CEO,
Speaker 3: former TikTok CEO and CEO of byde Dance. Now let's
Speaker 3: get back to these markets that are in risk on
Speaker 3: mode as we head towards the very shortened week next
Speaker 3: week ahead of the holidays, and aslack is up one
Speaker 3: point two percent. In fact, stocks arising even as traders
Speaker 3: face the expiration of a record pile of options. Today,
Speaker 3: we're seeing Bitcoin up three point three percent. We're also
Speaker 3: looking at key names such as Oracle. We're up seven
Speaker 3: percent as that TikTok deal is it near the closing?
Speaker 3: What does it mean for Oracle's business model as its
Speaker 3: cloud partner the subroomberg Tech.
Speaker 2: Take a look at Oracle shares.
Speaker 3: They're doing strongly today and everywhere you turn this week,
Speaker 3: Oracle has dominated the headlines from anxiety around data center timetables,
Speaker 3: data center leases along with mounting debt piles, ability to
Speaker 3: raise financing for the Michigan project, not to mention Larry
Speaker 3: Ellison's other potential bet some Warner Brothers, Discovery and now TikTok.
Speaker 3: How is Oracle benefiting from this sale? How is it
Speaker 3: affording all of it? Let's go to mannixing briefly is
Speaker 3: global headed tech research, glue, meg intelligence.
Speaker 2: So why is the TikTok deal good? Why is all
Speaker 2: of this good for Oracle or not?
Speaker 7: Well, right now, I think the concerns around Oracle stem
Speaker 7: from the fact that they can finance that infrastructure build out.
Speaker 7: But I think the TikTok news and just this Michigan
Speaker 7: sort of build out happening is another sign that, you know,
Speaker 7: things are moving incrementally, and they have given a revenue
Speaker 7: guidance for the next four years. Even if you don't
Speaker 7: believe there are RPO number you have, you know, intermedate bogies,
Speaker 7: thirty two billion in is revenue for next year, you know,
Speaker 7: seventy three billion the year after and for that they
Speaker 7: have to build out infrastructure. Without that, that revenue won't
Speaker 7: gonna come to fruition. So from that perspective, you know
Speaker 7: these incremental steps are positive, and you know if the
Speaker 7: fact that they can build out data center in Michigan,
Speaker 7: to my mind, is another step towards you know, realizing
Speaker 7: that thirty two billion in revenue next year.
Speaker 3: I hope you're around next week because I have a
Speaker 3: feeling Oracle will also be on our minds. Then mandate
Speaker 3: Seeing and Blue meg Intelligence. Thanks so much for all
Speaker 3: of your coverage this week in your analysis. Let's get
Speaker 3: more on the market's moves today. Sephanie Ali Algez with
Speaker 3: US Global Market Strategies the JP Morgan. So we end
Speaker 3: the week on a high, but wow, have we been
Speaker 3: riddled with AI doubts?
Speaker 2: Where has your mind been app Yeah, it.
Speaker 8: Has been a really interesting tape in recent weeks and months.
Speaker 8: I mean the debate around AI, the return on investment
Speaker 8: around AI, around the quality of the balance sheets, the
Speaker 8: war on the model front right between chat GBT and
Speaker 8: Google's Gemini, and I think moving forward, markets are realizing
Speaker 8: this is going to be less of a competition on
Speaker 8: just the innovation, although the innovation is really important, but
Speaker 8: also on balance sheets and you know, the show me
Speaker 8: the money. This kind of desire for markets to really
Speaker 8: see companies with AI tied cash generation, which is a
Speaker 8: tricky environment to be in because if you want to
Speaker 8: see growth from AI but cash, you might need to
Speaker 8: actually let go of some cash in the near term
Speaker 8: right to invest in some of these infrastructure buildouts to
Speaker 8: ultimately get the growth that we're looking for.
Speaker 3: I mean, investor is being asked to be patient. The
Speaker 3: word I've heard time in ten again this week is discerning.
Speaker 3: Is that what you feel people are starting? It's not
Speaker 3: all boats arising, We're picking.
Speaker 2: On winners, yes, right exactly.
Speaker 8: It's we had three years of AI providing this really
Speaker 8: powerful tide, lifting a lot of boats, and this year
Speaker 8: we've seen a lot more discernment right amongst these names.
Speaker 2: We think that that can continue. Now.
Speaker 8: It doesn't mean that AI isn't still this kind of
Speaker 8: rising tide, but we're now seeing the different markets here,
Speaker 8: the markets around models, the markets around cloud services, markets
Speaker 8: around infrastructure, and now we want to see who are
Speaker 8: going to be the leaders, Who are they going to
Speaker 8: be the companies that actually capture the best economics in
Speaker 8: each of these markets. So it's not necessarily zero sum,
Speaker 8: but now competition is really ratcheting higher and balance sheets
Speaker 8: are starting to fray A little bit. Right, we're tapping
Speaker 8: into debt market, so companies are also seeing greater differentiation
Speaker 8: amongst themselves.
Speaker 2: That way, you are a cross perspective.
Speaker 3: Should people be owning the debt of these big companies
Speaker 3: cool propons as well as equity exposure?
Speaker 8: I mean, I guess it depends on what you're looking for.
Speaker 8: You know, I think the Fed is lowering interest rates,
Speaker 8: and you know, if you see interest rates move lower
Speaker 8: more broadly, like, there is going to be demand for this,
Speaker 8: this debt issuance, and we're expecting a lot of that.
Speaker 8: There's also five hundred billion dollars in dry powder and
Speaker 8: private credit, right, so I don't doubt that this capital
Speaker 8: we'll find.
Speaker 2: You know, at home.
Speaker 8: But I think the question for investors is to just
Speaker 8: make sure that you have some diversification to this seam
Speaker 8: in your portfolio. Because as extraordinary and transformative as AI
Speaker 8: is going to be, the last few weeks have reminded
Speaker 8: us that it's going to be choppy along the way.
Speaker 8: There can be surprises and knowns, So you want to
Speaker 8: make sure your portfolio is built to withstand those choppier
Speaker 8: waters while still benefiting from the secular opportunity that remains.
Speaker 3: What almost have been the theme of twenty twenty five
Speaker 3: is how dominant the private sector, private sector names have
Speaker 3: been on your maybe overexposure in your public portfolio. I
Speaker 3: think of a nameline open AI. We think of SpaceX
Speaker 3: and its valuation, open ai potentially being eight hundred and
Speaker 3: thirty billion, just to pit the post on SpaceX's eight
Speaker 3: hundred billion dollar valuation. How much are you seeing your
Speaker 3: clients wanting more exposure to the private markets and how
Speaker 3: is that going to translate to public in twenty twenty six.
Speaker 8: So key, and it's such a big difference from what
Speaker 8: we saw in the Internet era, right when all of
Speaker 8: these AI or sorry Internet startups were just going public
Speaker 8: on day one, and today you have these AI native
Speaker 8: companies reaching scale that we've never seen before in private markets.
Speaker 8: And of course there are the big model developers, but
Speaker 8: what's been actually most interesting for me has been seeing
Speaker 8: the explosion in AI applications. If you think about out
Speaker 8: who are the companies that are really at the center
Speaker 8: of end user demand, selling to consumers, selling to businesses,
Speaker 8: it's these more niche AI applications and they are growing
Speaker 8: at scales that we've never seen before. Right the average
Speaker 8: AI startup reaching one hundred million dollars in under twelve
Speaker 8: months on average at take and startups about roughly.
Speaker 2: Ten years to achieve.
Speaker 8: You had Patrick McGoldrick here yesterday from our firm talking
Speaker 8: about this dynamic. So absolutely like if you want some
Speaker 8: of that growth exposure, you're going to need a look
Speaker 8: in private markets. In our long term capital market assumptions,
Speaker 8: we actually see that the long term return expectation in
Speaker 8: private equity at ten point two versus large cap public
Speaker 8: equities in the US six point seven. A big reason
Speaker 8: for that is starting valuations in public equity markets. In
Speaker 8: private markets you have that issue too, So selectivity is
Speaker 8: going to be really really important. But we still think
Speaker 8: there's a lot of opportunity.
Speaker 3: What about opportunities for IPOs next year and those who
Speaker 3: haven't golled the private exposure getting it when it goes public.
Speaker 8: Yeah, that's going to be really interesting because some of
Speaker 8: these companies like open ai and SpaceX, at their private
Speaker 8: market valuation, they would already be top fifteen companies in
Speaker 8: the S and P five hundred, so they're not even
Speaker 8: public yet. And when they do go public, investors, you know,
Speaker 8: we're going to see what the demand is at that time.
Speaker 8: But you're going to be getting into a company that
Speaker 8: already looks kind of like a megacab, you know. And
Speaker 8: I think these companies are then going to have to
Speaker 8: stand against public market scrutiny like the scoreboard that these
Speaker 8: companies actually have to really attest to. So it'll be
Speaker 8: really interesting. I think if we get these IPOs next year,
Speaker 8: it'll be a really powerful, really like referendum on the
Speaker 8: AI ecosystem, which is an opportunity and a risk for
Speaker 8: the broader space next year.
Speaker 3: Regulators we understand in China have yet to say whether
Speaker 3: they'll approve the proposed sale and new structure for byte
Speaker 3: Dance owned TikTok and decision required for the deal to
Speaker 3: more forward. Now, the fate of TikTok has become a
Speaker 3: key issue in the US China relations under the Trump administration,
Speaker 3: putting meg Technology Editorim Washington, Michael Sheppard, you're joining us.
Speaker 3: You can help remind us actually what isn't agreed to yet?
Speaker 3: Because the market is pricing in a deal with new
Speaker 3: US ownership and control and less than twenty percent held
Speaker 3: by byteedowance of US TikTok. But what haven't we heard yet.
Speaker 9: Well, the loose end really is, you said, Caro, is
Speaker 9: Chinese government approval, and we may never really hear a
Speaker 9: full throat of blessing from Beijing for this transaction, and
Speaker 9: the way we might ordinarily expect. We have heard from
Speaker 9: the White House very clearly. We all remember September twenty fifth,
Speaker 9: President Donald Trump very publicly signed the declaration the order
Speaker 9: setting in motion the deal that was actually inked yesterday,
Speaker 9: and announced it an internal memo to TikTok employees by
Speaker 9: company CEO Shao Chu. Now, the interesting thing, Caro, when
Speaker 9: you think about it, is that these are serious players.
Speaker 9: When you think about Oracle, when you think about shaou Chu,
Speaker 9: when you think about Silver Lake and MGX, the other
Speaker 9: three main new investors here preparing to take a significant
Speaker 9: chunk together, they would control about forty five percent of
Speaker 9: the new US entity. They would not likely proceed unless
Speaker 9: they had a very good sense that China was willing
Speaker 9: to go along. Putting that pen to paper is a
Speaker 9: significant step forward than actually just talking about it, which
Speaker 9: is the stage we were at when we last heard
Speaker 9: back in September, with Trumps signing.
Speaker 3: Mike remind us, though, what else is really at State
Speaker 3: care between US and China, and Video is involved. We
Speaker 3: think about the chip war, the tech war more broadly,
Speaker 3: but also this week has been particularly concerning considering what's
Speaker 3: happening in terms of arms deals with Taiwan.
Speaker 2: Can you just.
Speaker 3: Remind us really where the relationship lies at this moment.
Speaker 9: Well, there are all sorts of cross currents happening here
Speaker 9: right now. You brought the Taiwan sale, and of course
Speaker 9: that envelops an industry that we cover so closely, chips,
Speaker 9: given that so many the lion's share of the advanced
Speaker 9: AI chips are actually produced on the self governing island.
Speaker 9: But the cross currents are so many you talked about
Speaker 9: in Nvidia and the pending approval that President Donald Trump,
Speaker 9: at least verbally on his truth social allowed the sales
Speaker 9: of in Video's h two hundred chips to China. Jameson Greer,
Speaker 9: the US trade representative, sat on Bloomberg TV this morning
Speaker 9: that he sees that as separate. He sees it as
Speaker 9: a separate issue within the China relationship. Perhaps TikTok in
Speaker 9: a way is too. US officials have brought up export
Speaker 9: controls and TikTok in their conversations with the Chinese, But
Speaker 9: the question is are they able to break them away
Speaker 9: from all the other questions surrounding things like rare earths
Speaker 9: and also the tariffs that the Trump administration has been
Speaker 9: threatening against Chinese goods. So how much separation do we
Speaker 9: see all in all of that, and are we going
Speaker 9: to see China offer something in return or the US
Speaker 9: vice versa? Is the H two hundred perhaps the olive
Speaker 9: branch that was needed to get China over the line
Speaker 9: on TikTok.
Speaker 5: We don't know.
Speaker 9: We're still trying to find out more about all of
Speaker 9: what went down, but we are looking ahead already to
Speaker 9: your AD twenty second and that is when the deal
Speaker 9: is scheduled to close.
Speaker 3: By Bloomberg's Mike Shepherd, a complete wrap from Washington.
Speaker 2: We thank you.
Speaker 3: Let's talk about TikTok ownership and how it is just
Speaker 3: one of several points of tech friction between Washington and Beijing.
Speaker 3: As Mike was outlining, Amy Webbs, your Future Today Strategy
Speaker 3: Group says the US trying to race to develop and
Speaker 3: control technology is set to define the future of AI,
Speaker 3: of chips, of quantum, she joins us. Now, Amy, how
Speaker 3: does TikTok and a potential agreement play into the relationship.
Speaker 2: Do you think I'm positive for that?
Speaker 10: Well, positive in terms of calming some of the concerns
Speaker 10: that the Trump administration had. You know, I would imagine
Speaker 10: that a lot of people didn't have Oracle on their
Speaker 10: binging go card is the biggest tech disruptor in twenty
Speaker 10: twenty five. But that's where we are, and that's because
Speaker 10: Oracle is a bit of a mixed bag. It's not
Speaker 10: on the forefront of innovation in critical technologies. This is
Speaker 10: a company that moves slowly. But at the end of
Speaker 10: the day, yep. But at the end of the day,
Speaker 10: business is just about relationships. And Larry Ellison as a
Speaker 10: friend of Donald Trump, and if we think about China
Speaker 10: going forward, China is all about relationships and how that's
Speaker 10: going to impact matches, the development of the artificial intelligence instant,
Speaker 10: so many other critical technologies that are now fully intertwined
Speaker 10: with business.
Speaker 3: Okay, I mean, so potentially it's a positive in the relationship,
Speaker 3: the diplomatic relationship between US and China. But what more
Speaker 3: broadly will dictate in twenty twenty six we keep on
Speaker 3: talking about this undercurrent of a race really and in
Speaker 3: one way, we have an olive branch for TikTok and
Speaker 3: another we have still a desire to restrict very integral
Speaker 3: technologies going to China and China and building up his
Speaker 3: own chip supply chain and resilience away from the United States.
Speaker 10: Who's winning, right, So again, I think at the moment,
Speaker 10: China's winning, which is a controversial view, but let me
Speaker 10: tell you why I think this way. China has spent
Speaker 10: years investing in infrastructure. The United States has really had
Speaker 10: sort of a free wheeling innovation focus and the challenges.
Speaker 10: We've got a handful of companies that are making through
Speaker 10: roads in their innovation and different technologies, but we don't
Speaker 10: have the physical infrastructure to support a lot of that,
Speaker 10: which is why you hear so much about data centers
Speaker 10: and energy consumption. China has been at the forefront of
Speaker 10: totally transforming what energy transfer looks like. In March, the
Speaker 10: CCP will have its meeting on China's annual five year Plan.
Speaker 10: AI is the centerpiece of that, and there is a
Speaker 10: very clearly outlined every five year look at how that
Speaker 10: entire country is going to transform. We just don't have
Speaker 10: that point of view in the United States. So again,
Speaker 10: this is I think the TikTok thing is partially about competition,
Speaker 10: but it also signals a challenge that we have in
Speaker 10: the US going forward. We have to have some type
Speaker 10: of coordinated effort if we're going to remain competitive, not
Speaker 10: just from a business point of view, but when we
Speaker 10: think about our national and international competitiveness, whether that comes
Speaker 10: to talent or security or even geopolitics.
Speaker 3: Yeah, remind us what's at stake, because we all like
Speaker 3: to talk about a race, but many of us forget
Speaker 3: what the winning of it really means and why many
Speaker 3: in Washington and more broadly in Silicon Valley and everywhere
Speaker 3: are worried about China leading when it comes to artificial
Speaker 3: general intelligence, or even superintelligence.
Speaker 10: So some of this has to do with the chipsets themselves,
Speaker 10: the technology itself, and where China has made some of
Speaker 10: those inroads. So we sort of moved beyond the point
Speaker 10: where data is all that matter. Hardware matters very much
Speaker 10: going forward because that has implications for everything from pharmaceuticals
Speaker 10: to robotics. You know, it cuts across every industry, and
Speaker 10: at the moment we are at a bit of a
Speaker 10: disadvantage because China has pushed very far ahead in the
Speaker 10: future of telecommunications and the hardware needed for that where
Speaker 10: they are deploying throughout Africa. You know, all of this
Speaker 10: is happening at a critical moment where the United States
Speaker 10: is retreating from a global stage. You know, that just
Speaker 10: sets us up for some significant challenges going forward, especially
Speaker 10: because technology is now part and parcel of everything that
Speaker 10: we do.
Speaker 3: And we haven't even mentioned why we're trying to see
Speaker 3: twenty twenty nine go for quantum for example, how much
Speaker 3: is that going to be something we talk about in
Speaker 3: twenty twenty six.
Speaker 10: Well, there have been some significant breakthroughs already in twenty
Speaker 10: twenty five, and you know that's come from sort of
Speaker 10: the usual suspects. So Google had some pretty big breakthroughs,
Speaker 10: as did Microsoft. And effectively, what this means is we're
Speaker 10: moving from theory into actual use cases in practice. So
Speaker 10: it does mean everybody's going to have a quantum computer
Speaker 10: next year. It does mean that the application becomes more accessible.
Speaker 10: But here too, we don't see a national perspective the
Speaker 10: way that we do in China. You know, we just
Speaker 10: have to start marshaling our resources in a cohesive direction. Again,
Speaker 10: not such that it is state dictated, but so that
Speaker 10: we have policy certainty, we have investment structures in place,
Speaker 10: and we are all able to row the boat of
Speaker 10: technology forward together well.
Speaker 3: Said Amy Webb, CEO of Future Future Today Strategy Groups.
Speaker 3: Wonderful to have some time with you, Thank you very much. Indeed,
Speaker 3: open ai is aiming to raise as much as one
Speaker 3: hundred billion dollars to pay for ambitious growth plans. Now
Speaker 3: that's according to the Wall Street Journal. The chatchypt maker
Speaker 3: is in early fundraising talks that couldn't value the company
Speaker 3: as much as eight hundred and thirty billion dollars. It
Speaker 3: needs a huge amount of capital, of course to build
Speaker 3: as AI models and stay competitive, but exuberants of AI
Speaker 3: is waning a little and public companies in the space
Speaker 3: seen investors pull back and show some anxiety around the
Speaker 3: infrastructure build out. But otherwise we're looking at productivity and
Speaker 3: deployment of open AI's chatchibt and the company is looking
Speaker 3: to win over the next generations. Workers are becoming they
Speaker 3: go to AI tool a choice in college now. According
Speaker 3: to purchase orders reviewed by Bloomberg, the company has sold
Speaker 3: more than seven hundred thousand chatchybet licenses too, about thirty
Speaker 3: five public universities for use by students and faculty. It's
Speaker 3: far more rivals like Microsoft need to tell us more,
Speaker 3: as bluembgs Liam Knox who covers higher education, and I
Speaker 3: mean remind me it was only about a year or
Speaker 3: so ago that we saw this deep anxiety and concern
Speaker 3: coming from faculty members from the future of education about
Speaker 3: the deployment of AI.
Speaker 11: Absolutely, there's been a lot of consternation among professors among
Speaker 11: educators about the effects of AI in the classroom, obviously
Speaker 11: about its use for things like you know, cheating and plagiarism,
Speaker 11: but also just its effect on learning outcomes for students.
Speaker 11: Since then, obviously it's kind of become an ubiquitous part
Speaker 11: of most classrooms, and so a lot has changed in
Speaker 11: the past couple of years.
Speaker 2: Okay, so why is open ai wanting to really lean
Speaker 2: in here?
Speaker 11: Well, there's a kind of tried and true, you know
Speaker 11: strategy in the tech world.
Speaker 5: Google had had.
Speaker 11: A similar strategy around its chromebooks and its suite of
Speaker 11: applications years ago when it offered free chromebooks and classes.
Speaker 11: Open ai is really hoping to make inroads with what
Speaker 11: they see as as their future customer base to put
Speaker 11: their Chatchipeta and AI tools at the center of kind
Speaker 11: of workforce preparation and skills training, and colleges are you
Speaker 11: know there. It's already been used by students on Massa colleges,
Speaker 11: so it's kind of an obvious place to start.
Speaker 3: Fascinating story open aiing's college deals, seizing early lead in education.
Speaker 2: Go read it.
Speaker 3: Bloom Meggs, Liam Knox, thank you, And let's talk about
Speaker 3: the fintech billionaire and SpaceX astronaut Jared Issacman, who's finally
Speaker 3: been confirmed as the next head of NASA. He's worked
Speaker 3: with Blue meg Tech's own Ed Ludlow about US plans
Speaker 3: to return to the Moon.
Speaker 12: This goes beyond just a recommitment to the Artemis program.
Speaker 12: This is the next big leap. You know, We're not
Speaker 12: just going back to the Moon under this space policy.
Speaker 12: We're declaring we're going back and we're going to establish
Speaker 12: the infrastructure. I mean, who doesn't what's space loving fan
Speaker 12: out there doesn't want to see a lunar base. And
Speaker 12: then we're going to invest in the technology that's going
Speaker 12: to enable you know, frequent, long duration missions to Mars
Speaker 12: and beyond, whether that be through nuclear propulsion or nuclear
Speaker 12: surface power, which which obviously has a number of useful
Speaker 12: applications be at the Moon or Mars. So it's an
Speaker 12: exciting day. It's absolutely extraordinary national space policy and one
Speaker 12: that I'm not surprised to see. Frankly, it was under
Speaker 12: President Trump's first term that we returned American spaceflight capability
Speaker 12: to the United States after a ten year hiatus. It's
Speaker 12: when he kicked off the Artemis program, and now you know,
Speaker 12: we're taking it to the next level.
Speaker 13: Administrator Isaacman jared. The question I get most for you
Speaker 13: right now, in response to everything that's happened in the
Speaker 13: last few weeks, is how is NASA still relevant right
Speaker 13: in a world where the private sector is dominating activity,
Speaker 13: it's dominant innovation.
Speaker 5: What is your answer to that question?
Speaker 12: Well, you know, that seems to be a common misconception.
Speaker 12: I mean, you go back to the nineteen sixties and
Speaker 12: NASA didn't go at it alone. I mean we had
Speaker 12: McDonald Douglas, we had Boeing, we had Northrope. These were
Speaker 12: all critical, critical vendors and contractors that helped us achieve
Speaker 12: the near impossible of sending American astronauts to the Moon
Speaker 12: and bring them back safely to night to Earth. I
Speaker 12: mean some of these companies still exist and play a
Speaker 12: huge part in the Artemis program. And then of course
Speaker 12: there are some new companies, you know, like SpaceX, who's
Speaker 12: given us rapid reusability their vehicles in Blue Origin and Stoke.
Speaker 12: But it's the same thing. NASA is leading in the
Speaker 12: ultimate high ground of space. And let's focus a little
Speaker 12: bit more on science too.
Speaker 8: In that.
Speaker 12: I mean, there are as much as I would love
Speaker 12: to see private companies and academic institutions building you know,
Speaker 12: Hubble Telescopes in James Webb Space Telescope and putting rovers
Speaker 12: on the Moon, that is squarely in the responsibility of NASA.
Speaker 3: Our own Ede Lalu is speaking with the new NASA administrator,
Speaker 3: Jared Isaacman.
Speaker 2: Now, next up, we're going to be talking all things
Speaker 2: twenty twenty six.
Speaker 3: Look ahead. Where are you in the world of tech?
Speaker 3: Tiffany Wade joining us in Columbia, thread Needle. This is
Speaker 3: Blumberg Tech. Welcome back to Bloomberg Tech. We check in
Speaker 3: on these markets. The higher on the day, the higher
Speaker 3: on the week. There on the year, we're up by
Speaker 3: twenty percent. Lest you forget some of the recent volatility.
Speaker 3: It has been a banner twenty twenty five. What about
Speaker 3: twenty twenty six? What's what the outlook opportunities? Risks pleased
Speaker 3: to say, Tiffany Wadeer is with our senior portfolio manager
Speaker 3: at Columbia thread Needle Investments. You've got a call se
Speaker 3: one hundred and fifteen billion dollars an assets under management.
Speaker 3: How much is tech going to still be leading the
Speaker 3: charge in next year?
Speaker 14: I think tech it's going to be good again next year.
Speaker 14: I honestly think they set up for twenty twenty six
Speaker 14: looks quite similar to this this last year. We'll see
Speaker 14: another year of FED raid cutting. In general, the economy
Speaker 14: looks pretty strong. Labor is a watch item for next year,
Speaker 14: but you know labor has been weakening for the most
Speaker 14: part of this year as well. And then we'll also
Speaker 14: see fiscal stimulus next year, and that'll come from existing
Speaker 14: stimulus continuing such as the IRA but also the tax bill.
Speaker 14: And then AI is going to be a tailwind next year.
Speaker 14: So I think it sets up well for tech and
Speaker 14: growth generally.
Speaker 3: What needs to be proven now in twenty twenty six,
Speaker 3: because I feel like twenty twenty five we've all needed
Speaker 3: to understand the infrastructure needs, and then we've questioned the
Speaker 3: ability to afford all of them. But twenty twenty six,
Speaker 3: we're starting to see real needs to show signs of
Speaker 3: productivity and actual growth here.
Speaker 2: Yeah.
Speaker 14: Yeah, I think we're just starting to see the use
Speaker 14: cases build for AI, and we're starting to see it
Speaker 14: across the economy.
Speaker 8: Right.
Speaker 14: Certainly tech is one of the early adopters for AI,
Speaker 14: but we're seeing it across the consumer space, across financials
Speaker 14: as well. And I think as that continues to build,
Speaker 14: that continues to you know, increase the use cases and
Speaker 14: the proof that AI is going to be ubiquitous across
Speaker 14: the economy. But also I think, you know, similar to
Speaker 14: a bit of the concerns we had earlier this year,
Speaker 14: we need to see that companies still continue to invest
Speaker 14: in AI and they still see the returns from that
Speaker 14: being beneficial to continue the spending.
Speaker 3: Have you done much analysis and what that actually means
Speaker 3: for the labor outlook, because we've had how Mark saying
Speaker 3: this is sort of a disaster basically for the labor market.
Speaker 2: All of this AI for.
Speaker 3: Focus, but we've had perhaps what people call AI washing
Speaker 3: and people liking to blame job cuts on AI, but
Speaker 3: we're trying to actually discern how much it really is.
Speaker 14: Yeah, I think it's hard to say right now how
Speaker 14: much of the job cuts so far have been related
Speaker 14: to AI. There's some surveys, certainly that suggests that some
Speaker 14: of the AI some of the job cuts have been.
Speaker 2: Specifically related to AI.
Speaker 14: I do think there will probably be a period of
Speaker 14: digestion in the workforce. It's hard to say over in
Speaker 14: the near term what the displacement is going to be.
Speaker 2: Over the long term.
Speaker 14: I imagine, like many sorts of technology innovations we've have
Speaker 14: over time, that this will probably be in a positive
Speaker 14: over a longer period of time.
Speaker 3: So you're looking at your portfolio aligning it for twenty
Speaker 3: twenty six. Is it going to be the same winners.
Speaker 3: Is it going to be the infrastructure play the in videos,
Speaker 3: the chip makers, or is them mile more of a
Speaker 3: shift for your mindset of getting into where the productivity
Speaker 3: actually happens, where the applications happen.
Speaker 14: Yeah, I think we're very positive on the infrastructure spending
Speaker 14: as well, more so on the hyperscalers and some of
Speaker 14: the electrical equipment names that are involved in sort of
Speaker 14: the physical infrastructure spending, and then also some of the
Speaker 14: companies that are involved in helping to make AI scalable.
Speaker 14: So thinking of technology companies that enable the usage, the deployment,
Speaker 14: the security around AI. So I think that's where we
Speaker 14: might see.
Speaker 2: Something like a Palan Networks, also.
Speaker 14: A Mango dB something like that. So the companies that
Speaker 14: allow AI to be scalable, that allow companies to clean.
Speaker 2: Up their data to get it ready for AI.
Speaker 14: So that's something that we've heard from a lot of
Speaker 14: companies is that the process of getting your data cleaned
Speaker 14: up and ready to be put into AI is very
Speaker 14: difficult and something that a lot of companies are working on.
Speaker 14: I don't know that the productivity benefits. I think that's
Speaker 14: something that's probably still a little farther out, but it
Speaker 14: will be very widespread when it happens.
Speaker 3: What about the end of year concerns around of financing,
Speaker 3: about exposure to open AI and whether or not it
Speaker 3: can hit the revenue run rate that it's going to
Speaker 3: and indeed odd desire to be even more discerning really
Speaker 3: about specific names.
Speaker 2: Yeah, I actually think that the.
Speaker 14: You know, the market being discerning about these names is
Speaker 14: a good indication that we're not sort of in a
Speaker 14: bubble territory right now. Right if we think about what
Speaker 14: happened back in the late nineties and two thousands, we
Speaker 14: were not concerned about whether or not companies were generating
Speaker 14: fee cash flow, what the returns were on their investments.
Speaker 14: The fact that we're concerned about these, I think means
Speaker 14: that the market is pretty healthy in the way it's
Speaker 14: thinking about investing in AI. And also, I think over
Speaker 14: the next couple of years, if you look at sort
Speaker 14: of the Hyperscaler group in general, the amount of capex
Speaker 14: that's expected to be spent on AI infrastructure and broadly
Speaker 14: on AI, they're free cash flow dwarfs that by several times,
Speaker 14: So I think that there's plenty of you know, of
Speaker 14: return and cash flow available to keep the spending going.
Speaker 3: We've been talking a lot about the impact of the
Speaker 3: private markets. Are you expecting that they will become public
Speaker 3: next year? And how have your own client's been navigating
Speaker 3: exposure to big private companies.
Speaker 14: Yeah, it's possible that we will see a number of
Speaker 14: these companies come public next year. I think that's going
Speaker 14: to be very interesting, especially for large cap investors. Certainly,
Speaker 14: it's going to pack the indexes because these will most
Speaker 14: certainly be included in a number of the indexes, possibly
Speaker 14: in size, which we'll have implications for large gap investors
Speaker 14: who may need to hold some of these names. And
Speaker 14: you know, we'll see where the funding comes from out
Speaker 14: of other parts of the economy.
Speaker 3: So we've got less than thirty seconds left. Do you
Speaker 3: want more diversification globally or across different companies as well?
Speaker 14: Right now, I think we're still very comfortable the US.
Speaker 14: You know, I think growth in the US still looks
Speaker 14: much better than lots of other parts of the of
Speaker 14: the globe. Certainly corporate earnings growth does as well as
Speaker 14: GDP growth. So I think we're still very comfortable with
Speaker 14: the US. And then again, you know, we still think
Speaker 14: the tech and other names related to AI infrastructure look
Speaker 14: very appealing for next year, as well as consumer spending
Speaker 14: on the back of some of that stimulus. Stimulus we'll
Speaker 14: see early next.
Speaker 3: Year come back any next year, we hope, Tiffany Wade,
Speaker 3: We wish a very happy holidays, your portfolio manager over
Speaker 3: at Columbia Thread Needle Investments. Are That does it for
Speaker 3: this edition of Bloomberg Tech. Don't forget to check out
Speaker 3: the podcast. Find it on the terminal, as well as
Speaker 3: online on Apple, Spotify, and iHeart.
Speaker 2: Have yourself a wonderful weekend. I'll see you back, same place,
Speaker 2: same time on Monday. This is Bloomberg Tech