WEBVTT - Google's Antitrust Trial and Huawei's Surprise Comeback 0:00:01.920 --> 0:00:07.200 From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN. 0:00:07.560 --> 0:00:11.559 This is Bloomberg Technology with Caroline Hyde and Ed lud Love. 0:00:25.960 --> 0:00:28.440 I'm Caroline Heinde at Bloomberg's World headquarters in New York, 0:00:28.840 --> 0:00:30.360 and I'm Ed Loudlin in San Francisco. 0:00:30.400 --> 0:00:33.200 Happy Friday. This is Blaming Big Technology. 0:00:33.280 --> 0:00:35.640 Coming up, Ed, we'll dig into the details coming to light, 0:00:35.720 --> 0:00:38.520 I mean Google's anti trust trial. Will dive deeper into 0:00:38.560 --> 0:00:40.479 that and get a look at big text performance this. 0:00:40.440 --> 0:00:44.839 Week and how Huawei's surprise comeback marks a new phase 0:00:44.920 --> 0:00:47.720 in the tech cold war. Will have the latest on 0:00:47.760 --> 0:00:51.160 the US and China's battle for technological dominance. That's ahead. 0:00:51.360 --> 0:00:53.280 Plus we'll get a read on the state of crypto. 0:00:53.440 --> 0:00:56.400 One year since Fchex's collapsed and as the co founder 0:00:56.440 --> 0:01:00.000 of Three Arrows Capital, it's detained trying to leave Singapore. 0:01:00.520 --> 0:01:02.640 The first Let's check in on these markets, including crypto. 0:01:02.680 --> 0:01:04.760 But I'm looking at the NASTAC actually coming off of 0:01:04.800 --> 0:01:06.759 its highs. We're up more than one point four percent 0:01:06.800 --> 0:01:07.679 in earlier trade. 0:01:07.720 --> 0:01:10.479 The mood dips a little bit on the back of well, the. 0:01:10.440 --> 0:01:13.440 Strike's still being protracted and shifting up a gear when 0:01:13.440 --> 0:01:15.600 it comes to the auto sector. But when you looked 0:01:15.600 --> 0:01:18.279 at some of the infrationary pressures, particularly the preferred gauge 0:01:18.319 --> 0:01:21.480 from the Fed PCE, actually looking like inflationary pressure just 0:01:21.520 --> 0:01:23.320 easing off a bit. So we're up six tens percent. 0:01:23.319 --> 0:01:25.839 The two year yield dips down only by two basis points, 0:01:25.840 --> 0:01:28.000 but still we're now at five point zero four let's 0:01:28.000 --> 0:01:30.520 call it on the two year Blueberg Dollar index bounces 0:01:30.520 --> 0:01:32.360 off of its lows, but we're still off by about 0:01:32.360 --> 0:01:35.440 tenth of a percent, So I think that's helping risk 0:01:35.440 --> 0:01:37.800 appetite today across the board. Moving on, have a little 0:01:37.840 --> 0:01:41.280 look at what's happening on individual areas asset classes. I 0:01:41.319 --> 0:01:43.399 bring you crypto because as the dollar is lower, so 0:01:43.520 --> 0:01:46.440 to his bitcoin, so actually risk aversion when it comes 0:01:46.480 --> 0:01:48.640 to the world of crypto, we're basically the bouncing around 0:01:48.680 --> 0:01:52.000 a certain area of trade twenty six, eight hundred and seventy. Look, 0:01:52.080 --> 0:01:54.200 we've been really range bound at the moment ed, but 0:01:54.240 --> 0:01:56.320 going to some of the micros, the individual moves when 0:01:56.320 --> 0:01:57.400 it comes to stocks. 0:01:57.560 --> 0:02:00.200 Yeah, there's no sort of hyperbolic or standout move. I 0:02:00.200 --> 0:02:02.120 know that we're going to be looking really closely at 0:02:02.160 --> 0:02:05.280 Google and the government's antitrust pursuit of Google in the 0:02:05.320 --> 0:02:08.200 search context. Throughout the show, that stock a little bit softer, 0:02:08.280 --> 0:02:11.160 two tents of one percent in the session. Bloomberger reported, 0:02:11.200 --> 0:02:15.079 citing sources that back in twenty twenty, Apple was considering 0:02:15.240 --> 0:02:18.760 buying bing from Microsoft, that search engine. That's kind of 0:02:18.800 --> 0:02:21.920 played into what's happening in the courts with the testimony 0:02:21.960 --> 0:02:25.160 we've had from Apple executives about the relationship with Google 0:02:25.200 --> 0:02:28.240 and search. That stock seven tens of percent higher. Not 0:02:28.280 --> 0:02:31.079 saying there's a causal relationship there, but it's just interesting 0:02:31.080 --> 0:02:33.360 to see Apple up for a second day. I actually 0:02:33.400 --> 0:02:35.320 want to go back to the index level because there's 0:02:35.360 --> 0:02:38.000 a lot going on right now. We're kind of modestly 0:02:38.080 --> 0:02:40.440 higher on the week on the Nasdaq one hundred, around 0:02:40.480 --> 0:02:43.359 half a percentage point or so, but we're snapping, as 0:02:43.400 --> 0:02:46.400 it stands three straight weeks of declines on the Nasdaq 0:02:46.440 --> 0:02:50.080 one hundred, and we're passing economic data. We're thinking about, well, 0:02:50.240 --> 0:02:53.320 if the FED leaves rates higher for longer, does that 0:02:53.400 --> 0:02:56.480 make megacaps attractive in the scheme of things. Na's that 0:02:56.520 --> 0:02:58.600 one hundred up to six tens one percent on the week, 0:02:58.760 --> 0:03:01.320 but actually September has been a bit rough for technology 0:03:01.720 --> 0:03:04.280 in general, and I cited the case of Apple. Apple's 0:03:04.320 --> 0:03:06.359 actually down quite a lot from each julypeak. What's going 0:03:06.400 --> 0:03:07.000 on here, Karl? 0:03:07.160 --> 0:03:09.280 Yeah, let's ask someone who knows who's going to get 0:03:09.440 --> 0:03:12.560 us a broad investing outlook Sarada's money is with US 0:03:12.560 --> 0:03:16.320 portfolio manager Martin Curry, head of Global Long Term Unconstrained 0:03:16.360 --> 0:03:17.400 Invents Investing. 0:03:17.560 --> 0:03:19.320 It's great to have you here, Welcome to the show. 0:03:19.400 --> 0:03:19.760 Thank you. 0:03:20.240 --> 0:03:21.760 What do you make of the landscape right now? 0:03:21.800 --> 0:03:23.680 There are headwinds when it comes to regulation, there are 0:03:23.720 --> 0:03:26.799 headwinds when it comes to macro environment when we're thinking 0:03:26.840 --> 0:03:29.799 more inflationary pressure. Can technology still be an area to 0:03:29.840 --> 0:03:31.320 be allocating over allocating to? 0:03:31.880 --> 0:03:34.960 The short answer is yes, we're very positive still on technology, 0:03:35.000 --> 0:03:37.480 but you have to be very selective in particular, you 0:03:37.560 --> 0:03:41.440 have to have devolution discipline always, but more so at 0:03:41.520 --> 0:03:43.600 this stage in the cycle, when we're heading into a 0:03:43.640 --> 0:03:48.600 potential risk of sloden or potential recession. That discussion around 0:03:48.920 --> 0:03:53.120 recession risk has receded for Visuo, but we believe that 0:03:53.160 --> 0:03:56.200 when we're looking into twenty twenty four, there are headwinds 0:03:56.240 --> 0:04:00.760 that could make the economic landscape more uncertain Notably, we've 0:04:00.760 --> 0:04:05.240 got the US economy with grappling with rates that have 0:04:05.720 --> 0:04:08.880 increased quite rapidly. We've got the Chinese economy as the 0:04:08.880 --> 0:04:13.160 second largest economy globally that is starting to lose momentum, 0:04:13.160 --> 0:04:16.360 and there's uncertainty but next year after the initial recovery 0:04:16.360 --> 0:04:18.240 that we've seen this year. So there are a lot 0:04:18.279 --> 0:04:20.920 of things to grapple with on the economic front. 0:04:21.560 --> 0:04:24.440 You've grappled for years before, we've had downturns. I know 0:04:24.800 --> 0:04:26.960 you come from very senior roles at Black Rock. You 0:04:27.320 --> 0:04:30.160 waded through two thousand and eight financial crisis. You've been there, 0:04:30.240 --> 0:04:32.719 done that, And therefore, with that sort of mindset, do 0:04:32.760 --> 0:04:35.839 you have to be allocating into mega trends. You have 0:04:35.920 --> 0:04:39.400 to be thinking about valuations, even with the optimism around AI. 0:04:39.480 --> 0:04:43.000 I mean, as in video, just too extraordinarily highly valued now. 0:04:43.400 --> 0:04:45.040 Yes, So there are a few things that we'd want 0:04:45.080 --> 0:04:48.159 to highlight. Firstly, on valuation, we want to remain discipline, 0:04:48.200 --> 0:04:52.320 so we use a discount rate that is capturing some 0:04:52.400 --> 0:04:57.640 of the potential for rates to be longer higher for longer. 0:04:57.960 --> 0:05:00.720 So we've got an assumption of five percent for our 0:05:00.760 --> 0:05:03.680 restory rate in the long term and this is something 0:05:03.720 --> 0:05:07.120 that we've been assuming for a long time. 0:05:07.160 --> 0:05:07.880 So even when. 0:05:07.760 --> 0:05:10.240 Rates were at zero close to zero negative in some 0:05:10.320 --> 0:05:14.880 economies eighteen months ago, we use the assumption that monetary 0:05:14.880 --> 0:05:18.440 policies would normalize and rates would go to initially four percent, 0:05:18.600 --> 0:05:21.800 and then last September we increase assumption to five percent, 0:05:22.000 --> 0:05:24.360 and that was on the basis of an assumption that 0:05:24.400 --> 0:05:28.400 inflation was going to be stickier and longer lasting. So 0:05:28.440 --> 0:05:30.800 we're assuming a long term inflation in our models of 0:05:30.839 --> 0:05:33.600 three percent. So that's on the economic side and on 0:05:33.640 --> 0:05:36.640 the valuation front. Then in terms of mega trends, you're 0:05:36.640 --> 0:05:40.240 absolutely right. The way we look at opportunities going forward 0:05:40.320 --> 0:05:44.080 is looking at three mega trends, demographic changes, future of technology, 0:05:44.400 --> 0:05:47.039 and resource scarcity. And these are mega trends we'll be 0:05:47.080 --> 0:05:50.000 talking about for the next decade, two decades, three decades. 0:05:50.000 --> 0:05:50.839 They're here to stay. 0:05:50.960 --> 0:05:53.440 There are themes that are evolving within those mega trends, 0:05:53.520 --> 0:05:57.440 and AI is an important one in particular, but generally speaking, 0:05:57.520 --> 0:06:00.440 that permits us to put our clients strateg is on 0:06:00.680 --> 0:06:05.400 long term structural growth opportunities looking forward rather than looking backwards. 0:06:05.600 --> 0:06:09.200 Then onto your third question, which is around Nvidia and 0:06:09.400 --> 0:06:12.839 AI and valuation around that. Our view is that you 0:06:12.920 --> 0:06:17.320 have to focus on companies that have a profitable profile, 0:06:17.720 --> 0:06:19.920 and we look at that as companies that have high 0:06:20.000 --> 0:06:23.800 returns and invested capital improvement in returns as well as 0:06:23.800 --> 0:06:26.279 an attractive gross profile. And we like that gross to 0:06:26.320 --> 0:06:29.000 come from revenues, not just profits. So when you look 0:06:29.000 --> 0:06:32.280 at a company like Nvidia, we forecast sales growth at 0:06:32.400 --> 0:06:36.680 Nvidia of about thirty percent annualized over the next five years, 0:06:36.920 --> 0:06:38.480 and when you look at the bottom line, we're looking 0:06:38.520 --> 0:06:41.560 at closer to forty percent annualized over the next five years. 0:06:41.680 --> 0:06:44.280 So then when you're looking at the valuation of the stock, 0:06:44.360 --> 0:06:47.680 even just taking the pe a P twelve months forward 0:06:47.720 --> 0:06:50.520 of about thirty times, you look at a company on 0:06:50.560 --> 0:06:53.680 a PE to earnings gross ratio over the next five 0:06:53.760 --> 0:06:57.000 years of less than one. So that to us, as 0:06:57.040 --> 0:06:59.919 a rule of some can argue that Nvidia still has 0:07:00.080 --> 0:07:01.360 strong voluation support. 0:07:02.440 --> 0:07:04.400 Zerio it to dead in San Francisco. It's good to 0:07:04.440 --> 0:07:07.359 see you and thank you for making it through the 0:07:07.400 --> 0:07:10.160 storm in New York City to join us on the program. 0:07:10.720 --> 0:07:12.840 On that assumption that you just outline, I think it's 0:07:12.840 --> 0:07:15.960 so interesting because there's an element of surprise that some 0:07:16.000 --> 0:07:19.240 of the other mega caps in trench market positions big 0:07:19.280 --> 0:07:23.360 balance sheets also get hit. Right that you outline this 0:07:23.400 --> 0:07:26.640 assumption that the rest of the market has higher for longer. 0:07:27.160 --> 0:07:29.800 Does the case for being overweight a name like Apple 0:07:29.880 --> 0:07:33.360 or another megacap hold up in a world where treasuries 0:07:33.680 --> 0:07:35.800 are pushing five percent? Do you see what I mean? 0:07:36.360 --> 0:07:39.520 Yes, you're absolutely right hired. So there's a few things 0:07:39.520 --> 0:07:43.520 to bear in mind. Yes, quality gross companies such as Apple, 0:07:43.640 --> 0:07:47.160 such as Nvidia, which we define as high returns high 0:07:47.240 --> 0:07:52.240 gross profile, generally tend to be impacted negatively by rising 0:07:52.320 --> 0:07:55.920 rates or rising rates expectations because these are long duration names. 0:07:56.080 --> 0:07:57.480 But there's a few aspects to mention. 0:07:58.400 --> 0:08:01.320 Firstly, as you've got right in rates, you've got potential 0:08:01.560 --> 0:08:06.760 risk of economic cycle turning more negative, and in that instance, 0:08:06.800 --> 0:08:11.160 we want to have companies that have both structural growth 0:08:11.200 --> 0:08:14.800 exposures because that permits them to generate their own weather 0:08:15.520 --> 0:08:18.400 at a time when growth could be challenged at the 0:08:18.400 --> 0:08:22.200 economic level. Secondly, companies that have strong balance sheets, because 0:08:22.240 --> 0:08:25.240 if we're heading towards a sharp slowdown or potential risk 0:08:25.240 --> 0:08:29.679 of recession, you want companies to have solid balance sheets. Thirdly, 0:08:29.840 --> 0:08:33.880 companies that have pricing power because in a higher inflation 0:08:34.240 --> 0:08:37.480 for longer environment, companies with pricing power will be able 0:08:37.520 --> 0:08:42.000 to better protect their margins and force companies that have 0:08:42.360 --> 0:08:45.840 resilience in terms of earning stand grades, because we still 0:08:45.840 --> 0:08:47.600 have a view that there's going to be ongoing earning 0:08:47.600 --> 0:08:49.440 standing grades. So we want to be in companies that 0:08:49.480 --> 0:08:52.720 either resist those stand grades or are able to actually 0:08:53.760 --> 0:08:56.720 quite at the opposite surprise on the upside. 0:08:56.800 --> 0:08:58.360 And so when we look across some. 0:08:58.280 --> 0:09:01.520 Of the technological landscape, we do companies that have all 0:09:01.559 --> 0:09:03.920 those characteristics. And that's so once we want to focus 0:09:04.000 --> 0:09:07.400 on so yes, nearer term, the market will always have 0:09:07.440 --> 0:09:11.320 the knee jerk reaction of selling down or selling out 0:09:11.360 --> 0:09:15.280 of quality growth companies as rates increase because of them 0:09:15.320 --> 0:09:18.400 being longer duration and therefore more sensitive to rates. But 0:09:18.480 --> 0:09:21.080 as you think about the second round effect of higher 0:09:21.160 --> 0:09:24.400 rates bringing potential risks to the economic cycle, you want 0:09:24.440 --> 0:09:26.520 to be in exactly those companies that can weather. 0:09:26.559 --> 0:09:29.360 That's taught we've gone so macro. 0:09:29.520 --> 0:09:31.040 I just want to go micro for a minute, because 0:09:31.080 --> 0:09:33.760 I know you follow in video very closely. The news 0:09:34.120 --> 0:09:38.000 twenty four hours ago was that France's regulator raided in 0:09:38.120 --> 0:09:41.920 videos Paris offices in a sort of antitrust action. Do 0:09:42.040 --> 0:09:43.240 something like that concern you. 0:09:44.679 --> 0:09:48.760 We did see that there was that anti antitrust grade. 0:09:49.120 --> 0:09:51.640 At this stage, we're still taking stock of that news. 0:09:52.120 --> 0:09:56.880 We do have a consistent assessment of companies in terms 0:09:56.880 --> 0:10:00.280 of risks, and in the company risk section we have 0:10:00.320 --> 0:10:04.520 an element of regulatory risk assessment. We rate our companies 0:10:04.559 --> 0:10:06.959 from one to five, one being low risk, five being 0:10:07.000 --> 0:10:09.320 high risk, and in the case of Nvidia, we have 0:10:09.440 --> 0:10:13.360 a risk rating on the regulatory side of three, so 0:10:13.600 --> 0:10:16.560 neutral generally. So we're going to be keeping an eye 0:10:16.640 --> 0:10:21.320 on this specific news, but at this stage we are 0:10:21.360 --> 0:10:22.839 not able to comment any further. 0:10:23.640 --> 0:10:25.840 You can go so global for us though, and I 0:10:25.920 --> 0:10:29.360 like that you mentioned China as a macro headwind. China 0:10:29.440 --> 0:10:33.800 on the geopolitical and micro perspective as well, is going 0:10:33.840 --> 0:10:36.520 to be impacting the likes of in video of well, 0:10:36.679 --> 0:10:40.600 any company Tesla with an exposure to China. How do 0:10:40.640 --> 0:10:42.480 you think about that in your risk modeling? 0:10:42.840 --> 0:10:44.400 It's an important focus for us. 0:10:44.400 --> 0:10:47.520 So you asked earlier about mega trends, but within those 0:10:47.559 --> 0:10:50.520 mega trends there are themes, and there are eight themes 0:10:50.520 --> 0:10:54.160 that we particularly focus on going forward in the midterm. 0:10:54.520 --> 0:10:58.120 Four of them are actually related to that technological and 0:10:58.640 --> 0:11:02.000 potential geopolitical and certainty, and the biggest one is what 0:11:02.120 --> 0:11:06.080 we label technological and geopolitical fragmentation, and that comes from 0:11:06.080 --> 0:11:11.319 that risk around Taiwan and the China ambitions around Taiwan, 0:11:11.880 --> 0:11:15.280 the US and the European approach to that territory, the 0:11:15.400 --> 0:11:19.240 need to actually manage the geopolitical risk by the governments, 0:11:19.280 --> 0:11:23.520 and therefore the US encouraging TSMC to build a plant 0:11:23.720 --> 0:11:27.160 in their territory, Japan doing the same. We believe Europe 0:11:27.160 --> 0:11:31.239 will be doing the same. That's leading to technological fragmentation. 0:11:31.640 --> 0:11:35.840 There are potential challenges from that for companies like TSMC, 0:11:36.120 --> 0:11:39.520 but there are also opportunities for companies like SML. We 0:11:39.600 --> 0:11:42.760 believe that that technological fragmentation will be a benefit because 0:11:42.800 --> 0:11:45.360 where they were shipping their tools to Taiwan, they'll be 0:11:45.400 --> 0:11:49.360 shipping some to each of those territories. Those factories become 0:11:49.480 --> 0:11:53.120 live and that will create some boosts to the top 0:11:53.160 --> 0:11:55.760 line as well as scale economies, which will also enhance 0:11:55.760 --> 0:11:57.240 the profitability of that company. 0:11:57.760 --> 0:12:00.920 European chip equipment makers to big players in the US 0:12:01.040 --> 0:12:04.319 and more globally. What a great conversation, Sarah does Manie, 0:12:04.440 --> 0:12:15.079 thank you so much. Of course, from Martin Curry, Google 0:12:15.240 --> 0:12:18.440 antitrust a trial it is underway with the latest piece 0:12:18.440 --> 0:12:20.760 of evidence from the Justice Department saying that a senior 0:12:20.760 --> 0:12:24.079 Google executive wants like in the company's search advertising business 0:12:24.600 --> 0:12:25.560 to selling drugs. 0:12:25.840 --> 0:12:27.480 Now, there is nuance to this, and. 0:12:27.440 --> 0:12:31.480 We're talking about an executive, Michael Rozak, who's vice president 0:12:31.520 --> 0:12:35.200 for finance at Alphabet's Google ed and he's made the 0:12:35.200 --> 0:12:39.880 claim that, look, this was actually hyperbole, exaggeration, This was 0:12:39.920 --> 0:12:42.440 all done for a course in communications. This is not true, 0:12:42.480 --> 0:12:44.520 and I was not sending it to others. But still 0:12:44.880 --> 0:12:46.800 this was a piece of evidence, and it's actually getting 0:12:46.960 --> 0:12:49.600 very murky, a, isn't it as to what evidence should 0:12:49.600 --> 0:12:52.440 be shown. Its arguments coming from both sides is what 0:12:52.440 --> 0:12:53.400 should be made public. 0:12:54.200 --> 0:12:57.280 So it's notes that Michael Rossak's made in a twenty 0:12:57.440 --> 0:13:03.040 seventeen internal presentation only on communications. But his point was 0:13:03.640 --> 0:13:07.000 that you can focus on the supply side, the advertisers, 0:13:07.400 --> 0:13:09.960 not necessarily the end users, in much the same way 0:13:10.080 --> 0:13:12.440 that if you're in the cigarettes industry, which was the 0:13:12.600 --> 0:13:15.720 analogy that he made. You know, you're focus on the 0:13:15.800 --> 0:13:18.839 selling the advertising, not the consequence to the end user. 0:13:19.160 --> 0:13:21.280 That's the point he was trying to make. But it 0:13:21.600 --> 0:13:22.920 a bit of a statement, isn't it. 0:13:23.080 --> 0:13:26.560 Yeah, and perhaps as you're trying to claim an exaggerated. 0:13:25.880 --> 0:13:27.960 One, exaggerated one. 0:13:28.000 --> 0:13:30.480 Indeed. Okay, let's keep the conversation going on the anti 0:13:30.520 --> 0:13:34.320 trust action against Google and bring in Adam Kavakovic, who's 0:13:34.360 --> 0:13:37.760 the CEO and founder of the Chamber of Progress. Where 0:13:37.760 --> 0:13:42.880 we're at the latest conversation is around the dominance of 0:13:43.000 --> 0:13:45.199 search and you know it's important to point out this 0:13:45.280 --> 0:13:47.560 is in the context of a trial brought by the government. 0:13:48.000 --> 0:13:51.760 But what if you learned this week about how dominant 0:13:51.840 --> 0:13:53.640 Google is in the search market. 0:13:55.160 --> 0:13:57.839 Well, we're also only in week three of ten, and 0:13:57.840 --> 0:14:00.000 it's hard to believe because we still have a work 0:14:00.160 --> 0:14:03.000 trial ahead of us. I think this week was bookended 0:14:03.040 --> 0:14:07.320 really by two main aspects of testimony. The first part 0:14:07.320 --> 0:14:09.800 of the week was really about Apple. Eddiq from Apple 0:14:09.880 --> 0:14:13.080 testified earlier in the week and the focus of his 0:14:13.160 --> 0:14:15.560 testimony was that Apple has picked Google as at search 0:14:15.640 --> 0:14:19.280 default because it thinks that Google's results are the best. 0:14:19.680 --> 0:14:21.640 But even though at Google's deals with Apple have been 0:14:21.720 --> 0:14:23.800 kind of the center of this case. There's another company 0:14:23.800 --> 0:14:26.360 that kind of looms over this whole case, and that's Microsoft. 0:14:26.960 --> 0:14:30.480 DOJ has argued that Being is Google's only real competitor 0:14:30.520 --> 0:14:33.280 in general search, and that the reason it hasn't done 0:14:33.360 --> 0:14:36.920 better is because of Google's search default deals, and Being 0:14:36.960 --> 0:14:40.240 would probably be the biggest winner if the DOJ won 0:14:40.320 --> 0:14:44.040 this case. Later in the week, we saw two separate 0:14:44.080 --> 0:14:48.280 Microsoft executives testify the trial, and in their testimony it 0:14:48.320 --> 0:14:51.240 kind of came out that Microsoft has underinvested in Being 0:14:51.280 --> 0:14:54.280 compared to Google's investments, and they also acknowledged even the 0:14:54.400 --> 0:14:58.120 Windows sets Being as the default search engine, most Windows 0:14:58.200 --> 0:15:01.200 users actually quickly change their default search from Being to Google. 0:15:01.240 --> 0:15:04.320 So that kind of undermined aspects of the government's argument 0:15:04.400 --> 0:15:07.360 that search defaults are really sticky and hard to switch. 0:15:07.400 --> 0:15:10.320 But the real main event is probably Sati and Adella 0:15:10.320 --> 0:15:14.040 from Microsoft CEO. He'll be testifying next Monday, and but 0:15:14.080 --> 0:15:16.040 as I said, this are seven more weeks of this trial. 0:15:16.080 --> 0:15:17.400 That will be a moment to watch, but there'll be 0:15:17.400 --> 0:15:18.880 a lot more moments. 0:15:18.560 --> 0:15:21.760 And I think, well, we're all fascinated by how EDQ 0:15:21.880 --> 0:15:26.080 would vindicate the billions that come towards Apple from this 0:15:26.240 --> 0:15:29.360 focus on using Google's search. But what's so interesting was 0:15:29.400 --> 0:15:31.080 come to light is that at one point back in 0:15:31.120 --> 0:15:34.160 twenty twenty, well, Tim Kok and Sati and Adella were 0:15:34.200 --> 0:15:37.840 in rooms talking about maybe even Apple buying thing that 0:15:37.960 --> 0:15:40.600 of course didn't come to bear, in large part because 0:15:40.600 --> 0:15:42.200 the argument was it's not as good a product. 0:15:42.280 --> 0:15:43.160 But do you think. 0:15:42.960 --> 0:15:48.320 That that really just shows the overall monopolistic environment in 0:15:48.360 --> 0:15:50.360 which we are. Do you think that ultimately this is 0:15:50.480 --> 0:15:52.280 better serving a consumer. 0:15:52.840 --> 0:15:55.400 I don't know how that plays. That's important to say. 0:15:55.440 --> 0:15:57.800 I think you know that came out through Bloomberg's reporting 0:15:57.880 --> 0:16:01.000 non in court, but I don't know how that plays 0:16:01.040 --> 0:16:04.520 because it's just uncertain. I think I don't know. It 0:16:04.600 --> 0:16:06.920 seems somewhat peripheral to me to the heart of this question. 0:16:07.200 --> 0:16:09.680 The heart of the trial is really how to Google 0:16:09.720 --> 0:16:14.240 achieve its share in whether these search default deals were 0:16:14.320 --> 0:16:16.200 the thing or whether it was their quality. And so 0:16:16.440 --> 0:16:18.440 in a trial like this, there's sort of arguments and 0:16:18.880 --> 0:16:21.680 things atmospherically that are kind of interesting and sallacious, but 0:16:21.680 --> 0:16:24.000 I'm not sure have that much bearing on the core 0:16:24.080 --> 0:16:24.600 of the case. 0:16:25.240 --> 0:16:27.960 The other sort of big focus right now is the 0:16:28.000 --> 0:16:30.800 FTC's action against Amazon. We knew it would come. It 0:16:30.840 --> 0:16:34.640 did come Tuesday. By the way, out a chamber of progress. 0:16:34.720 --> 0:16:38.520 You represent the technology industry, right, Your essentially industry grew, 0:16:38.600 --> 0:16:42.520 so implants point out, But what is your assessment of 0:16:42.560 --> 0:16:46.840 the FTC's likelihood of success in its action against Amazon. 0:16:47.480 --> 0:16:49.680 Well, the interesting thing is this case probably won't see 0:16:49.720 --> 0:16:52.720 a courtroom for two years at least, based on the 0:16:52.760 --> 0:16:55.680 normal trajectory of these things. I think some of the 0:16:55.840 --> 0:16:58.960 big dynamic I noticed about this case is it's really 0:16:59.120 --> 0:17:02.880 motivated by the complaints of some sellers on Amazon. Sellers 0:17:02.880 --> 0:17:05.760 are mentioned three hundred and sixty eight times in the 0:17:05.800 --> 0:17:10.000 FTC's complaint, Consumers were only mentioned fifty one times. And 0:17:10.040 --> 0:17:13.200 of course the FDC's argument is that Amazon's behavior towards 0:17:13.200 --> 0:17:16.479 sellers has downstream impacts on consumers. But I think one 0:17:16.520 --> 0:17:18.400 of the challenges they're going to face when they finally 0:17:18.480 --> 0:17:21.280 do get to court is that Amazon has pro consumer 0:17:21.480 --> 0:17:25.879 justifications for these behaviors. So good example, Amazon tells sellers 0:17:25.880 --> 0:17:28.120 that if they want their products to have the Amazon 0:17:28.240 --> 0:17:31.720 Prime label, they have to be shipped through Amazon's own warehouses, 0:17:31.760 --> 0:17:33.520 And of course some sellers don't like that they don't 0:17:33.560 --> 0:17:37.080 like the fees. But when Amazon experimented several years agone 0:17:37.200 --> 0:17:41.560 giving sellers the freedom to ship prime products themselves, only 0:17:41.600 --> 0:17:44.760 sixteen percent of the products made it to consumers in time. 0:17:45.200 --> 0:17:47.320 So even though sellers might complain about a rule like 0:17:47.359 --> 0:17:50.159 that and the FTC, does those rules protect consumers? And 0:17:50.200 --> 0:17:52.600 so I think when this case finally gets to court, 0:17:52.800 --> 0:17:54.800 you can bet that that's going to be a big 0:17:54.840 --> 0:17:57.240 tension in the case the interest of sellers versus the 0:17:57.240 --> 0:17:58.400 interest of the consumer. 0:17:58.920 --> 0:18:01.280 Adams always great catching up with you, Thank you and 0:18:01.640 --> 0:18:05.400 Kavakovic of the Chamber of Progress, wishing you a great weekend. Meanwhile, 0:18:05.400 --> 0:18:08.919 coming up, well, we're not only discussing regulation here in 0:18:08.960 --> 0:18:10.720 the US, but also let's go global as well. 0:18:10.800 --> 0:18:12.760 US curbing China. 0:18:12.560 --> 0:18:15.080 The chips there, but it hasn't actually stopped from developing, 0:18:15.119 --> 0:18:17.320 surprising the advanced technology in that country. We'll bring you 0:18:17.320 --> 0:18:20.159 the details from today's A big take. Yes, we're talking Huawei. 0:18:20.400 --> 0:18:47.560 This has been big technology. 0:18:36.320 --> 0:18:36.480 Now. 0:18:36.520 --> 0:18:39.640 After years of geopolitical back and forth, the conflict between 0:18:39.760 --> 0:18:42.320 US and China are over chips switching a crucial moment 0:18:42.359 --> 0:18:44.800 and Huawei is one company at the center of things. 0:18:45.119 --> 0:18:47.679 A surprise release of the Make sixty pro smartphone in 0:18:47.760 --> 0:18:49.800 late August. Well, it was viewed kind of as a 0:18:49.840 --> 0:18:52.480 statement to the United States, a statement that China may 0:18:52.520 --> 0:18:56.280 still be able to capable to develop advanced technology despite 0:18:56.359 --> 0:18:59.040 US restrictions. Is the focus of today's Big Take for 0:18:59.080 --> 0:19:00.680 more on the broader tech which is between US and 0:19:00.760 --> 0:19:03.280 China where police are welcome. Mark Montgomery is a retired 0:19:03.280 --> 0:19:06.159 Rear Admiral and Senior director of the Central Cyber and 0:19:06.160 --> 0:19:11.399 Technology Innovation And from your perspective, Mark, is China able 0:19:11.640 --> 0:19:13.440 to bypass restrictions? 0:19:13.760 --> 0:19:16.240 Do they even need to be using US technology? 0:19:16.320 --> 0:19:18.040 Can they grow it at home now in a more 0:19:18.080 --> 0:19:19.160 advanced manner than we thought? 0:19:20.440 --> 0:19:22.440 Well, first, Carolyn, thanks for having me, And that's a 0:19:22.440 --> 0:19:25.880 great question. I think it's probably a mix. First, we 0:19:25.960 --> 0:19:29.760 do have to continue to uh, you know, put in 0:19:29.800 --> 0:19:36.360 place export controls and other policy leavers to prevent the tech, 0:19:36.480 --> 0:19:40.320 the transfer technology to China, really to prevent their military 0:19:40.320 --> 0:19:44.040 from using dual use technology, to continue to build systems 0:19:44.040 --> 0:19:46.000 at place US at risk, but also to create a 0:19:46.080 --> 0:19:50.280 level playing field for our companies. And this phone definitely 0:19:50.320 --> 0:19:53.680 shows that they can work their way around our export controls. 0:19:54.000 --> 0:19:57.400 There's a few areas that really worry me. Risk five, 0:19:57.440 --> 0:20:01.359 which is the open source chip design, is really getting 0:20:01.440 --> 0:20:02.040 us in trouble. 0:20:03.720 --> 0:20:06.560 Mark, I'm so glad you went there. Seven nanometer was 0:20:06.600 --> 0:20:08.520 a surprise, right, and the chips found in the May 0:20:08.600 --> 0:20:12.439 sixty pro Risk five the architecture, Why is that a 0:20:12.480 --> 0:20:15.320 technological concern to you? You see it as a backdoor. 0:20:16.480 --> 0:20:19.240 Absolutely, you described it perfectly. It is a backdoor to 0:20:19.400 --> 0:20:23.760 allow the intellectual property work being done by engineers in 0:20:23.800 --> 0:20:27.000 the United States to be easily exported into China. It 0:20:27.040 --> 0:20:30.919 avoids the export controls that we put on very specific 0:20:31.520 --> 0:20:36.800 company chip designs of certain sizes and the provision of 0:20:37.320 --> 0:20:42.359 semiconductor manufacturing equipment for companies like AMSL and others. So 0:20:43.119 --> 0:20:47.200 this is allowing that intellectual property get back into China. 0:20:47.359 --> 0:20:50.080 And if you look at who's using the Risk five products, 0:20:50.160 --> 0:20:52.120 it is broadly these Chinese companies. 0:20:53.320 --> 0:20:53.560 Mark. 0:20:53.600 --> 0:20:56.960 If the investigation finds breaches of sanctions, what is the remedy? 0:20:57.000 --> 0:20:58.760 What can the US actually do about this? 0:21:00.040 --> 0:21:03.160 What I think first, put the proper export control where 0:21:03.200 --> 0:21:06.199 there was a gap, close the gap, and we definitely 0:21:06.200 --> 0:21:09.000