WEBVTT - Samsung Inks $16.5B Deal with Tesla for AI Chips 0:00:02.520 --> 0:00:13.680 Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is live 0:00:13.720 --> 0:00:17.479 from coast to coast with Caroline Hide in New York 0:00:17.800 --> 0:00:20.880 and ever Low in San Francisco. 0:00:22.960 --> 0:00:24.279 This is Bloomberg Tech. 0:00:24.360 --> 0:00:28.480 Coming up, Samsung will produce AI chips for Tesla in Texas, 0:00:28.520 --> 0:00:32.000 a new multi year deal worth sixteen point five billion dollars. 0:00:32.159 --> 0:00:34.200 PA's the US and E you agree on a deal 0:00:34.280 --> 0:00:37.040 that we'll see the bloc face fifteen percent tariffs on 0:00:37.080 --> 0:00:40.560 most of its exports, including chips and cars. 0:00:41.080 --> 0:00:44.040 And what to expect from the big tech earnings coming up? 0:00:44.080 --> 0:00:48.559 With Microsoft, Meta, Apple, and Amazon all reporting this week. 0:00:49.080 --> 0:00:52.680 That is a huge market capitalization that we watch out 0:00:52.680 --> 0:00:56.160 for in terms of those megacaps coming with earnings ed, we're. 0:00:56.000 --> 0:00:58.280 On ten hooks ahead of it. So we are fading 0:00:58.400 --> 0:00:58.760 some of the. 0:00:58.840 --> 0:01:01.360 Rally that we've seen in big today, we're still clinging 0:01:01.360 --> 0:01:02.920 on to gains and now's that one hundred and a 0:01:02.960 --> 0:01:04.679 new record high. We're up a third of a percent, 0:01:05.000 --> 0:01:06.120 But those rallies. 0:01:05.840 --> 0:01:07.560 That we saw in Europe have faded completely. 0:01:07.600 --> 0:01:10.520 We're in the red as that fifteen percent tariff looks 0:01:10.640 --> 0:01:13.000 ugly on the EU side of things, but you're digging 0:01:13.000 --> 0:01:14.279 into the micro stories today. 0:01:14.880 --> 0:01:17.960 Yeah, Tesla and Samsung in this arrangement to make AI 0:01:18.080 --> 0:01:21.560 chips in Texas is driving markets. Tesla's gains have really 0:01:21.560 --> 0:01:25.199 accelerated up three point eight almost four percent overnight in career. 0:01:25.440 --> 0:01:26.720 Look at Samsung shares. 0:01:27.280 --> 0:01:31.520 It's for the AI six chip, the next generation of 0:01:31.920 --> 0:01:34.960 full self driving silicon that goes into the vehicles. Samsung 0:01:34.959 --> 0:01:37.720 already does quite a lot with Tesla on prior generations, 0:01:37.720 --> 0:01:41.440 and at the same time Tesla has some diversifying and 0:01:41.480 --> 0:01:44.160 some hedge with TSMC. But this is a big one. 0:01:44.280 --> 0:01:47.200 Elon must has been talking about it on X of course. 0:01:47.480 --> 0:01:47.920 Funny that. 0:01:48.120 --> 0:01:50.400 Well, let's get the inside track with Peter Elstrom, who 0:01:50.440 --> 0:01:52.560 joins US now for more on this. This is a 0:01:52.640 --> 0:01:56.080 vote of confidence in Samsung's chip manufacturing when it had 0:01:56.120 --> 0:01:57.360 been losing market share. 0:01:57.400 --> 0:02:00.000 Peter, Yeah, that's exactly. 0:02:00.640 --> 0:02:03.720 Samsung, of course makes a whole bunch of things, including smartphones. 0:02:03.960 --> 0:02:06.840 They've really made most of their profits, though recently, out 0:02:06.880 --> 0:02:10.080 of their semiconductor business. They're the leading maker of most 0:02:10.080 --> 0:02:13.160 memory chips out there, but they've been trying to build 0:02:13.160 --> 0:02:16.040 this foundry business so that they could compete with TSMC, 0:02:16.160 --> 0:02:18.640 compete for some of that high margin business from the 0:02:18.760 --> 0:02:21.440 likes of Nvidia and Apple, and now what they've got 0:02:21.520 --> 0:02:24.120 is really a marquee customer in Tesla where they can 0:02:24.160 --> 0:02:26.880 point to them and say, hey, Tesla is trusting us 0:02:26.880 --> 0:02:29.160 with the ability to make their high end chips, these 0:02:29.200 --> 0:02:32.520 AI six chips, as Ed was mentioning earlier, which is 0:02:32.600 --> 0:02:36.160 very important for their self driving technology, which they hope 0:02:36.200 --> 0:02:39.040 to really bring on enforce next year and the year after. 0:02:39.440 --> 0:02:42.120 So for Samsung, this is a big step forward. It 0:02:42.200 --> 0:02:43.560 is a decent amount of money. 0:02:44.000 --> 0:02:46.280 As we were talking about, it could increase their growth 0:02:46.280 --> 0:02:49.280 in the foundry business by about ten percent. But probably 0:02:49.320 --> 0:02:52.000 more importantly than that is the strategic importance of being 0:02:52.000 --> 0:02:54.400 able to say they have this big marquee customer for 0:02:54.480 --> 0:02:55.400 the foundry business. 0:02:56.040 --> 0:02:59.600 Bloomberg broke the story that it was Tesla that was 0:02:59.680 --> 0:03:03.640 this at that time unnamed marquee customer, and it was 0:03:03.680 --> 0:03:05.640 interesting because Elon Musk actually gave us a lot of 0:03:05.639 --> 0:03:10.080 detail on social sixteen point five billion dollars over multiple years. 0:03:10.360 --> 0:03:12.720 But Musk seems to be indicating it's bigger than that, 0:03:13.160 --> 0:03:15.520 and also Peter, he talks about why it's important that 0:03:15.560 --> 0:03:18.280 it's in Texas, he seems to be suggesting that his 0:03:18.480 --> 0:03:21.680 proximity to the fab means that Tesla can be involved 0:03:21.720 --> 0:03:24.720 in the engineering and the ramp, but that he himself 0:03:24.720 --> 0:03:27.040 can wander the lines himself. 0:03:28.720 --> 0:03:29.840 Right, Yeah, how. 0:03:29.680 --> 0:03:33.120 Many businesses can Elon must get involved in Now apparently 0:03:33.120 --> 0:03:35.920 he's going to do semiconductors too. Yeah, it's quite interesting 0:03:35.920 --> 0:03:39.440 that he has said. He says that this deal allows 0:03:39.520 --> 0:03:42.480 him to be able to be personally involved, intimately involved, 0:03:42.480 --> 0:03:44.520 to be able to walk the lines and help with production. 0:03:44.800 --> 0:03:46.920 I don't know how much he knows exactly about semi 0:03:46.960 --> 0:03:49.880 conductor manufacturing, but you can imagine that having such an 0:03:49.920 --> 0:03:52.960 important customer there on premises is going to put some 0:03:53.000 --> 0:03:55.400 pressure on them to be able to build out quite quickly. 0:03:55.640 --> 0:03:57.840 Now it's important to kind of step back here. Of course, 0:03:58.000 --> 0:04:00.480 the US has been trying to rebuild their semi conductor 0:04:00.520 --> 0:04:02.600 industry for a number of years. We saw the Biden 0:04:02.640 --> 0:04:05.720 administration come out with the Chips Act that offered thirty 0:04:05.800 --> 0:04:08.360 nine billion dollars in incentives. Samsung is one of the 0:04:08.360 --> 0:04:10.520 big beneficiaries here, and one of the reasons that they're 0:04:10.520 --> 0:04:14.040 expanding their capacity in Texas is specifically so that they 0:04:14.040 --> 0:04:16.680 can supply US customers they're going to skirt their way 0:04:16.720 --> 0:04:19.680 around the Trump tariffs if they're able to produce within 0:04:19.720 --> 0:04:21.479 the country, and Elon Musk will be able to go 0:04:21.520 --> 0:04:23.200 there to Texas to be able to try out some 0:04:23.240 --> 0:04:25.120 of these things and then use them in the self 0:04:25.200 --> 0:04:26.080 driving technology. 0:04:26.160 --> 0:04:27.720 So it is a step. 0:04:27.440 --> 0:04:29.440 Forward for that Chips Act and that effort to kind 0:04:29.440 --> 0:04:32.840 of rebuild the domestic industry. TSMC and Intel are both 0:04:32.880 --> 0:04:34.839 also beneficiaries of that effort. 0:04:35.640 --> 0:04:38.600 It is interesting, though, isn't it that it is overseas 0:04:38.640 --> 0:04:41.600 manufacturers building in the US that are able to make 0:04:41.680 --> 0:04:44.320 big tech win in terms of the chip supply chain. 0:04:44.520 --> 0:04:47.960 What surprised me was also how integral, of course, Samsung 0:04:48.000 --> 0:04:49.920 is once again to the COSPY. I think the costpy 0:04:49.960 --> 0:04:52.400 the South Korean Index is one of the best performers 0:04:52.400 --> 0:04:55.440 globally this year. Sk Heinex has a lot to thank 0:04:55.480 --> 0:04:56.520 for it as well, though. 0:04:57.640 --> 0:05:00.240 Right yes, Skhynix has jumped out ahead. 0:05:00.120 --> 0:05:03.239 In the memory chips that are most used for AI, 0:05:03.320 --> 0:05:05.680 these HBM memory chips. They've actually gotten quite a bit 0:05:05.720 --> 0:05:08.120 of Samsung ahead of Samsung on that front, which is 0:05:08.160 --> 0:05:10.599 a bit of a blow to Samsung, But Samsung is 0:05:10.640 --> 0:05:13.359 making some progress kind of climbing its way back trying 0:05:13.360 --> 0:05:16.520 to get authorization to be able to sell those HBM 0:05:16.600 --> 0:05:19.320 chips to in Nvidia, which is the most important partner 0:05:19.360 --> 0:05:19.919 at this point. 0:05:20.080 --> 0:05:21.320 But you've brought her a point. 0:05:21.400 --> 0:05:24.359 Yes, it's really TSMC has been leading the way in 0:05:24.480 --> 0:05:27.960 advanced chip manufacturing. It gets that high margin business from 0:05:28.160 --> 0:05:31.080 Nvidia and Apple right now and many other customers. There 0:05:31.080 --> 0:05:33.880 were many hopes within Washington that the next competitor in 0:05:33.920 --> 0:05:35.599 that foundry business would be Intel. 0:05:35.800 --> 0:05:37.880 They have not made that progress. We saw that last 0:05:37.880 --> 0:05:38.840 week in the. 0:05:38.800 --> 0:05:42.280 Earnings report in Bhutan's questions about whether maybe he's going 0:05:42.320 --> 0:05:45.160 to pursue that foundry business. But we're seeing that Samsung 0:05:45.240 --> 0:05:49.680 is emerging is probably the strongest alternative to TSMC. Everybody 0:05:49.720 --> 0:05:52.560 in the industry wants some competition in that market. They 0:05:52.560 --> 0:05:55.679 don't want to just have TSMC making the most advanced 0:05:55.760 --> 0:05:56.800 chips in the industry. 0:05:56.960 --> 0:05:58.240 They want to have some alternatives. 0:05:58.240 --> 0:06:00.880 Whether it's Samsung, whether it's Intel, there it's somebody else. 0:06:02.160 --> 0:06:04.040 Got a lot of questions about those alternatives have been 0:06:04.040 --> 0:06:05.760 in both Peter Els from Thank you very much to 0:06:05.839 --> 0:06:08.120 dive into all of this with Michael Green, chief investment 0:06:08.160 --> 0:06:12.120 strategist and portfolio manager at Simplify Asset Management, which has 0:06:12.120 --> 0:06:14.640 over eight billion dollars in assets under management. And it's interesting. 0:06:15.000 --> 0:06:17.280 I want to take advantage of the timing, Michael. Last 0:06:17.279 --> 0:06:19.799 time you were on, we were talking about Elon Musk 0:06:19.960 --> 0:06:21.919 alienating himself from. 0:06:21.760 --> 0:06:22.920 Both political parties. 0:06:22.920 --> 0:06:27.400 If you remember, now, this is an example of a 0:06:27.480 --> 0:06:32.320 leading American company, an individual, and Elon Musk doing a big, 0:06:32.480 --> 0:06:36.800 big deal over multiple years with a foreign technology company 0:06:37.680 --> 0:06:40.120 to onshore industry in this country. What do you make 0:06:40.160 --> 0:06:42.360 of that in the economic opportunity it presents. 0:06:43.480 --> 0:06:46.400 Well, I think this is actually the tension that exists 0:06:46.480 --> 0:06:49.760 right on shoring into America, particularly bringing back high value 0:06:49.760 --> 0:06:53.839 added tech tech manufacturing like chips that's not going to 0:06:53.880 --> 0:06:57.599 overly stress the labor force that has relatively low employment levels, 0:06:57.600 --> 0:07:01.360 but a large fiscal impact and a large impact. This 0:07:01.400 --> 0:07:04.159 is fantastic and it's exactly what we would hope to 0:07:04.200 --> 0:07:07.359 see under a Trump administration, raising the costs of companies 0:07:07.400 --> 0:07:10.760 doing business abroad and shipping stuff to the United States. 0:07:11.720 --> 0:07:13.160 How successful it's going to be. 0:07:13.320 --> 0:07:15.960 As was alluded to earlier, these are two companies that 0:07:15.960 --> 0:07:18.320 are both kind of struggling in their respective fields that 0:07:18.360 --> 0:07:24.320 have announced a major investment. Is it enough to bring 0:07:24.360 --> 0:07:27.640 both companies significantly higher? Clearly the stock market thinks that 0:07:27.720 --> 0:07:31.040 it's helpful. I don't see how it's not, but it 0:07:31.160 --> 0:07:33.080 still is something that remains to be seen in terms 0:07:33.120 --> 0:07:35.280 of its long term impact of. 0:07:35.360 --> 0:07:39.320 The contract manufacturers. We mentioned Samsung, TSMC, and Intel. 0:07:40.000 --> 0:07:43.440 Which do you like and why? Well? 0:07:43.480 --> 0:07:45.280 The quick answer is is that I'm a strategist. I 0:07:45.280 --> 0:07:47.560 don't spend as much time on the individual securities. It's 0:07:47.680 --> 0:07:51.120 very hard to argue with TSMC's overall technical lead in 0:07:51.160 --> 0:07:54.920 the space. They have managed to build an extraordinary business 0:07:54.920 --> 0:07:58.040 that has slowly taken out competitors like Intel and for 0:07:58.080 --> 0:08:03.240 that matter, Samsung. You know, they're all extremely capable. This 0:08:03.320 --> 0:08:05.840 is an industry with tremendous growth, But if you're putting 0:08:05.880 --> 0:08:09.280 bets on change, you have to look at companies like 0:08:09.320 --> 0:08:12.920 Samsung et cetera to undercut or Tesla. The whole story, 0:08:12.960 --> 0:08:16.920 effectively is the increased competition is coming for both TSMC 0:08:17.320 --> 0:08:20.320 and in video. I think that's probably the biggest takeaway 0:08:20.320 --> 0:08:20.480 on this. 0:08:21.800 --> 0:08:22.360 Give us the. 0:08:22.280 --> 0:08:25.240 Broader context here then, as a strategist as well, Michael 0:08:25.520 --> 0:08:28.960 as to how over exposed investors are written large on 0:08:29.000 --> 0:08:33.200 the semiconductor space, semiconductor equipment. More broadly, I'm looking at 0:08:33.240 --> 0:08:35.120 how Goldman at the moment is saying the US prime 0:08:35.160 --> 0:08:38.440 book is really heavily weighted and overexposed to that, and 0:08:38.440 --> 0:08:42.280 we've seen judge funds of particular dial back ahead of earnings. 0:08:43.320 --> 0:08:45.400 Yeah, you definitely have seen that. And one of the 0:08:45.400 --> 0:08:47.839 factors that we've seen in this rally as it has 0:08:47.920 --> 0:08:51.120 extended off of the April thows, has been extraordinary retail 0:08:51.160 --> 0:08:54.840 participation and dramatic increase in the quantity of margin that 0:08:54.960 --> 0:08:58.840 is being utilized, and equally important, a dramatic decline in 0:08:58.880 --> 0:09:01.600 the quantity of short end That's really what's hitting the 0:09:01.640 --> 0:09:04.640 hedge fund positioning because they tend to have that bias 0:09:05.160 --> 0:09:08.280 of being long the more quality oriented name short the 0:09:08.360 --> 0:09:12.600 shorted names. That's causing distress in the hedge fund space. 0:09:12.640 --> 0:09:14.960 That I think it's causing them to take all exposures 0:09:15.000 --> 0:09:18.920 down as compared to isolating to particular risk for those 0:09:19.000 --> 0:09:22.319 leading companies. I think most people anticipate that this earnings 0:09:22.360 --> 0:09:25.680 report this earning season is going to be relatively favorable, 0:09:26.160 --> 0:09:28.040 if for no other reason than the stocks are near 0:09:28.120 --> 0:09:32.480 all time highs. That lowers the incentive to introduce special 0:09:32.559 --> 0:09:36.080 charges or anything else that you would classify. So I 0:09:36.080 --> 0:09:38.720 think most people are actually expecting a pretty good earning season. 0:09:39.200 --> 0:09:42.640 It's just market conditions are extraordinarily difficult for hedge funds 0:09:42.720 --> 0:09:43.080 right now. 0:09:43.160 --> 0:09:45.800 They've got to be pretty perfect these earnings for us 0:09:45.840 --> 0:09:48.120 to live up to the hype in a way, Michael. 0:09:48.160 --> 0:09:50.760 But what's also so clear is that hedge funds have 0:09:50.760 --> 0:09:52.800 been under exposed to software services. 0:09:53.240 --> 0:09:55.079 Does that change in the nattern. 0:09:55.800 --> 0:09:57.880 Well, I think ultimately that hedge funds are going to 0:09:57.920 --> 0:10:00.200 follow whatever is working. So if it can take we 0:10:00.240 --> 0:10:05.199 continue to see under performance in the high quality hardware space, 0:10:05.440 --> 0:10:09.520 or the impressive performance that we're seeing from cyclicals right 0:10:09.559 --> 0:10:13.520 now versus defensives, you will see hedge funds ultimately rotate 0:10:13.559 --> 0:10:15.880 because they are more interested in making money than they 0:10:15.880 --> 0:10:16.640 are in being right. 0:10:18.160 --> 0:10:22.080 Oh, there's always the quandary. Michael Green from Simplify Asset 0:10:22.080 --> 0:10:24.679 Management putting it straight on where the focus has to 0:10:24.720 --> 0:10:27.480 live for hedge funds right now? Coming up, We thank 0:10:27.559 --> 0:10:29.800 him and we move over to Victoria espanel or the 0:10:29.800 --> 0:10:32.440 Business Software Alliance, just talking about how software has been 0:10:32.440 --> 0:10:33.120 a bit unloved. 0:10:33.160 --> 0:10:34.240 But where are we. 0:10:34.240 --> 0:10:37.200 Going to be seeing the differences in regulations across the globe. 0:10:37.240 --> 0:10:40.120 How is that impacting software companies and the approach to AI? 0:10:40.920 --> 0:10:41.960 This is Bloomberg tech. 0:10:58.800 --> 0:11:00.520 So I just want to go grow you. 0:11:00.559 --> 0:11:04.400 I think it's I think it's great that we made 0:11:04.400 --> 0:11:06.760 a deal today instead of playing games. 0:11:07.240 --> 0:11:08.800 And maybe not making a deal at all. 0:11:08.880 --> 0:11:11.000 I think it's I'm going to. 0:11:11.040 --> 0:11:12.960 Let you say, but I think it's the biggest deal 0:11:12.960 --> 0:11:13.960 ever made. 0:11:15.600 --> 0:11:18.720 I was President Trump there speaking in Scotland. Many of 0:11:18.720 --> 0:11:21.760 the details from the US EU trade deal are still 0:11:21.760 --> 0:11:24.880 to be announced. The semiconductor industry, though, rallying on the 0:11:24.920 --> 0:11:28.520 news that it will not face a separate tariff rate. Instead, 0:11:28.840 --> 0:11:31.360 it will be included in the fifteen percent rate applied 0:11:31.600 --> 0:11:34.320 to all EU goods exported to the United States. Want 0:11:34.360 --> 0:11:36.760 to get out to Washington, d C. And Blumbo's klie 0:11:36.840 --> 0:11:39.280 lyones give us the details of what we do know 0:11:39.360 --> 0:11:42.080 what was agreed, and the President saying there it's the 0:11:42.120 --> 0:11:43.160 best deal he's ever done. 0:11:44.920 --> 0:11:47.800 Yeah, the biggest deal ever made, to use the president's words, 0:11:47.920 --> 0:11:50.120 ed I'll leave that up to determination as to whether 0:11:50.200 --> 0:11:52.680 or not that is actually true. But of course this 0:11:52.920 --> 0:11:55.680 is a big win for Europe, which was facing the 0:11:55.720 --> 0:11:58.720 threat if a thirty percent tariff come Friday August first, 0:11:58.720 --> 0:12:01.040 if this deal was not struck, fifteen percent obviously a 0:12:01.120 --> 0:12:03.520 much lower rate than that, And key here is really 0:12:03.520 --> 0:12:05.480 the fact that they got that fifteen percent rate to 0:12:05.520 --> 0:12:09.120 apply to sectors in particular, not just automobiles, but as 0:12:09.120 --> 0:12:13.200 you mentioned, also semiconductors and pharmaceutical tariffs, which of course 0:12:13.240 --> 0:12:16.120 there is a Section two thirty two investigation underway into 0:12:16.120 --> 0:12:18.360 both of those sectors already, in which the end result 0:12:18.400 --> 0:12:20.760 could be that other non EU countries face a higher 0:12:20.800 --> 0:12:24.920 teriff rate than that on those specific materials. Europe was 0:12:24.960 --> 0:12:27.120 able to secure a fifteen percent rate that will be 0:12:27.400 --> 0:12:30.240 applicable effectively across the board, but the exception still of 0:12:30.280 --> 0:12:33.400 steel and aluminum, which of course faces a fifty percent tariff. 0:12:33.480 --> 0:12:35.840 Key to doing so, we understand, though no details are 0:12:35.880 --> 0:12:39.760 yet on paper, we haven't actually gotten a formal readout 0:12:39.480 --> 0:12:42.719 or or full list of what this deal actually will 0:12:42.840 --> 0:12:45.200 entail beyond what we've been told and what officials familiar 0:12:45.200 --> 0:12:48.640 have told Bloomberg. But key, according to sources familiar with 0:12:48.679 --> 0:12:50.800 the matter, was the fact that Europe has also agreed 0:12:50.800 --> 0:12:53.240 to make more investment into the United States as part 0:12:53.280 --> 0:12:56.400 of this deal including six hundred billion dollars investments into 0:12:56.400 --> 0:12:58.800 the US and seven hundred and fifty billion dollars of 0:12:59.160 --> 0:13:02.160 purchases of a American energy over the course of the 0:13:02.200 --> 0:13:04.880 next several years, in addition to what President Trump described 0:13:04.920 --> 0:13:08.720 as vast purchases of US military equipment. So all of 0:13:08.760 --> 0:13:11.360 that is what we understand this deal to essentially look 0:13:11.480 --> 0:13:13.680 like in the broadest of terms, but we're still waiting 0:13:13.840 --> 0:13:15.120 for that granular detail. 0:13:15.320 --> 0:13:18.120 And of course we assume and understand that there's a 0:13:18.160 --> 0:13:20.800 carve out for chip equipment in particular where they face 0:13:21.080 --> 0:13:23.480 a zero taris and on the asml is on the 0:13:23.520 --> 0:13:25.920 highest side, Kanie. What's really interesting is pushing us forward, 0:13:25.960 --> 0:13:29.439 is what this fifteen percent number means for the China 0:13:29.520 --> 0:13:31.320 negotiations that's actually happening in Sweden. 0:13:31.320 --> 0:13:34.719 We understand, Yeah, they're underway in Sweden right now. It 0:13:34.720 --> 0:13:38.280 will be two days of talks spearheaded by Chinese Premier 0:13:38.360 --> 0:13:41.320 to Le fun as well as the Treasury Secretary Scott Besson. 0:13:41.400 --> 0:13:44.320 They are underway. China, of course, already is facing a 0:13:44.360 --> 0:13:46.840 higher tariff rate than most Twenty percent is the level 0:13:46.920 --> 0:13:50.199 specifically applied in retaliation for the trade of fent and 0:13:50.240 --> 0:13:52.880 all that is going to be something specifically that we 0:13:53.000 --> 0:13:55.520 understand is one of the focuses of the US at 0:13:55.520 --> 0:13:58.199 these talks. They're going to be talking about whether or 0:13:58.240 --> 0:14:00.160 not China is actually able to tamp down on the 0:14:00.160 --> 0:14:02.440 flow of fentanel out of the country, though China obviously 0:14:02.440 --> 0:14:05.079 disputes that, saying it's a US domestic problem. But in 0:14:05.120 --> 0:14:07.320 addition to trying to get that terifright lower, which there 0:14:07.320 --> 0:14:09.680 may or may not be progress on the real crux 0:14:09.679 --> 0:14:12.080 of these talks, as has been for the previous iterations 0:14:12.080 --> 0:14:14.360 of this, as we've seen multiple rounds in the last 0:14:14.400 --> 0:14:16.760 several months, is going to be around export controls. On 0:14:16.800 --> 0:14:19.080 the US side, of course, that includes export controls of 0:14:19.400 --> 0:14:23.880 critical technology including semiconductor and equipment for the manufacturing that 0:14:23.920 --> 0:14:26.120 we've already seen some easing of that with the allowance 0:14:26.160 --> 0:14:28.520 of H twenty chips from Nvidia to start flowing back 0:14:28.840 --> 0:14:31.000 into China for export. But on the Chinese side, it's 0:14:31.040 --> 0:14:33.560 really about rare earth and critical minerals that of course 0:14:33.600 --> 0:14:35.760 they have a choke hold on at this time, and 0:14:35.800 --> 0:14:37.760 it was been the easing of the flow of that 0:14:37.800 --> 0:14:41.600 allowing American importers to get the licenses to actually bring 0:14:41.600 --> 0:14:44.520 those critical minerals in that has been critical for advancing 0:14:45.240 --> 0:14:49.000 this at least deston shall we say forward, which is 0:14:49.040 --> 0:14:50.600 also going to be one of the key pushes for 0:14:50.720 --> 0:14:53.240 these talks. The Treasury Secretary Scott Best and indicating one 0:14:53.240 --> 0:14:55.680 of the primary outcomes they're looking for here is an 0:14:55.720 --> 0:14:58.440 extension of the current troops that is in place beyond 0:14:58.440 --> 0:15:00.840 the deadline that currently stands of August. 0:15:00.520 --> 0:15:03.360 Twelfth, been important for in videos h twenties as well 0:15:03.440 --> 0:15:06.200 to get back into China. Bloomberg's Kylee lines brilliant wrap 0:15:06.280 --> 0:15:07.400 up of all things trade. 0:15:07.440 --> 0:15:08.440 But let's get. 0:15:08.280 --> 0:15:11.440 More on how these deals and indeed developing global regulations 0:15:11.440 --> 0:15:15.360 for artificial intelligence really impacting developers. Victoria Espinel's with our 0:15:15.360 --> 0:15:18.880 CEO the Business Software Alliance and the context here Victoria 0:15:19.080 --> 0:15:21.520 is one of the AI Action Plan announce why the 0:15:21.600 --> 0:15:25.280 US government really to take on China and the AI 0:15:25.520 --> 0:15:29.160 race that the US wants to win from a regulatory perspective. 0:15:29.760 --> 0:15:31.920 How do you think the US is winning. 0:15:31.680 --> 0:15:31.960 Or not. 0:15:33.760 --> 0:15:34.040 So? 0:15:35.640 --> 0:15:37.160 I think there's a lot of good that's in the 0:15:37.200 --> 0:15:39.760 AI Action Plan, but here is one part. You know, 0:15:39.800 --> 0:15:42.040 there's a lot of conversation about who's going to win 0:15:42.040 --> 0:15:45.040 the AI race, and a lot of that focuses on 0:15:45.080 --> 0:15:46.760 who's going to be at the cutting edge of innovation, 0:15:47.080 --> 0:15:50.560 and that is obviously important. But a conversation that is 0:15:50.720 --> 0:15:53.600 just starting to happen that I think is will potentially 0:15:53.600 --> 0:15:55.920 have an even bigger impact is who is going to 0:15:55.960 --> 0:15:58.920 win the race on AI adoption. By that, I mean 0:15:59.320 --> 0:16:02.080 which are the countries that are going to figure out 0:16:02.160 --> 0:16:05.600 how to use AI best, Because it is those countries 0:16:05.840 --> 0:16:08.200 that are going to see the biggest economic benefit from AI. 0:16:08.800 --> 0:16:12.360 That is the race, and that is that is largely 0:16:12.440 --> 0:16:14.960 up for grabs right now. I think the United States 0:16:15.040 --> 0:16:17.520 has an advantage there, and I think the AI Action 0:16:17.680 --> 0:16:20.880 Plan has a number of aspects that are focused on adoption, 0:16:21.560 --> 0:16:24.600 But that race is up for grabs, and I think 0:16:24.680 --> 0:16:29.040 that is going to be a big indicator of where 0:16:29.080 --> 0:16:31.880 we see the biggest economic benefit over the next decade. 0:16:32.000 --> 0:16:35.400 So we're not focused, therefore, from your perspective on AI adoption, 0:16:35.600 --> 0:16:39.280 on training talent to ensure that in enterprise we're actually 0:16:39.280 --> 0:16:41.600 getting banged from a bot productivity actually goes up into 0:16:41.600 --> 0:16:41.880 the right. 0:16:43.280 --> 0:16:46.240 So there are a few aspects that I think are 0:16:46.280 --> 0:16:49.480 critical to AI adoption, and actually at BSA, we released 0:16:49.520 --> 0:16:52.040 an agenda just before the AI Action Plan came out 0:16:52.080 --> 0:16:54.880 earlier last week. The focus is on three aspects. One 0:16:55.280 --> 0:16:57.760 is talent and workforce, and that is critical. I think 0:16:57.760 --> 0:17:02.440 there's no aspect more essential. The second is infrastructure and data, 0:17:02.920 --> 0:17:05.640 and the third is the governance framework and making sure 0:17:05.640 --> 0:17:08.440 that we get that right. And those three elements are 0:17:08.480 --> 0:17:11.440 things that the United States, but governments around the world 0:17:12.000 --> 0:17:14.679 need to be figuring out right now if they are 0:17:14.680 --> 0:17:18.000 going to win the race on AI adoption Victoria. 0:17:18.080 --> 0:17:20.800 Last week on the program, Michael Kratzios, who leads to 0:17:20.960 --> 0:17:22.879 the Office of Science and Tech at the White House, 0:17:22.920 --> 0:17:27.399 came on and he talked about packages that he sees 0:17:27.440 --> 0:17:31.040 America being a net exporter of everything in the stack, 0:17:31.119 --> 0:17:34.600 from hardware through to the models themselves. You were talking 0:17:34.600 --> 0:17:37.719 about adoption a moment ago. How does America is an 0:17:37.760 --> 0:17:39.600 exporter of AI fit into that. 0:17:41.280 --> 0:17:43.240 I think that's a critical piece. So a lot of 0:17:43.240 --> 0:17:45.840 the innovation has happening here in the United States for 0:17:45.960 --> 0:17:48.760 governments to be able to adopt AI, to have their 0:17:48.800 --> 0:17:52.360 private sector using AI in a way that they get 0:17:52.359 --> 0:17:54.560 the most economic benefit. A big piece of that is 0:17:54.600 --> 0:17:58.800 going to be AI exportation from the United States and 0:17:58.840 --> 0:18:02.359 There was conversation last week about the data centers and 0:18:02.400 --> 0:18:05.000 the chips, but obviously an important element of that is 0:18:05.040 --> 0:18:07.359 the software and the cloud services. 0:18:07.040 --> 0:18:08.560 Because it is literally. 0:18:08.160 --> 0:18:11.760 Not possible to adopt AI unless you have cutting edge 0:18:11.760 --> 0:18:14.639 cloud services, unless you have cutting edge software, and a 0:18:14.680 --> 0:18:16.640 lot of that's going to be coming from right here 0:18:16.640 --> 0:18:17.560 in the United States. 0:18:18.440 --> 0:18:22.280 There was also a discussion about copyright, and the President 0:18:22.400 --> 0:18:23.160 talked about. 0:18:22.920 --> 0:18:24.080 This during his address. 0:18:24.600 --> 0:18:26.960 Given that you kind of represent more the software side 0:18:26.960 --> 0:18:29.560 of the stack, how did you think about that, you know, Karen, 0:18:29.560 --> 0:18:32.240 and I increasingly comes up in the show. Is a 0:18:32.280 --> 0:18:35.560 point of priority, particularly for the frontier model or just 0:18:35.600 --> 0:18:37.080 model makers generally. 0:18:38.359 --> 0:18:39.160 It's a big issue. 0:18:39.160 --> 0:18:40.760 It's an issue here in the United States and in 0:18:40.800 --> 0:18:44.639 other markets as well. So, as you know, in the 0:18:44.640 --> 0:18:47.200 white Hat and the AI action plan that was released 0:18:47.320 --> 0:18:50.359 last week, there's not a lot of discussion of the 0:18:50.400 --> 0:18:54.760 copyright issue specifically, but the President and his public remarks 0:18:54.800 --> 0:18:57.440 spoke to it quite forcefully in terms of the importance 0:18:57.440 --> 0:19:01.199 of training data and for the AI builders to be 0:19:01.240 --> 0:19:04.159 able to get that training data and use it with 0:19:04.280 --> 0:19:07.840 relative e So he was very very clear on that aspect, 0:19:07.840 --> 0:19:10.920 and that's something that we are anticipating seeing the White 0:19:10.960 --> 0:19:12.960 House say more about and the next year or so. 0:19:13.080 --> 0:19:15.399 But the President was very clear in terms of his 0:19:15.520 --> 0:19:18.680 opinion on the importance of training data and how important 0:19:18.720 --> 0:19:21.359 that is for the United States to stay ahead of 0:19:21.400 --> 0:19:23.200