Speaker 1: Bloomberg Audio Studios, podcasts, radio news from the heart of
Speaker 1: where innovation, money and power collide in Silicon Valley and beyond.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 2: Live from New York. I'm Caroline Hyde.
Speaker 3: And I'm Mike Sheppard in San Francisco. This is Bloomberg Technology, and.
Speaker 4: We have special coverage of the Chinese AI competitor Deep
Speaker 4: Seek and its impact on technanues the broader markets at large.
Speaker 4: Let's look at the nastat, currently having its worst day
Speaker 4: in more than a month, as we question the need
Speaker 4: for compute power to get us ever more efficient, ever
Speaker 4: more specific generative AI.
Speaker 2: We're down too point six percent.
Speaker 4: Move on and look at the individual names, because this
Speaker 4: is when we question in video the compute power, the
Speaker 4: necessity forever more efficient chips, and the cost of them.
Speaker 2: In Vidia has its.
Speaker 4: Worst route in history in terms of market capitalization ever
Speaker 4: on the market. We have never seen almost half a
Speaker 4: trillion dollars wiped out from one single name. This is
Speaker 4: global ASML chip equipment maker in Europe down almost six percent,
Speaker 4: But Hong Kong stocks do well as we start to
Speaker 4: see AI as a real champion for China. Let's talk
Speaker 4: about it all with Bloomberg Intelligence senior analyst man Leap
Speaker 4: Singh who joins us some more. How does this change
Speaker 4: the game for llm's in the US, for chip equipment
Speaker 4: in the US.
Speaker 5: Yeah, Look, I mean we look at it from a
Speaker 5: stack perspective, and with generative AI, so far, all the
Speaker 5: value was captured by the chip makers, the semicap equipment guys,
Speaker 5: and the LLM companies like open Ai and Tropic, and
Speaker 5: the software guys were really missing out because everyone was like,
Speaker 5: their margins will be compressed, they have to pay more
Speaker 5: for chips, pay for this LLM layer. Well, guess what
Speaker 5: if the price can come down and what deep seek
Speaker 5: has shown us is the price per token, price per
Speaker 5: query can come down drastically, then suddenly the I think
Speaker 5: the power goes back to the software guys because now
Speaker 5: they can incorporate AI in everything they want, in their
Speaker 5: app and their website, whatever functionality they have, they can
Speaker 5: add a layer of AI without having to pay too much,
Speaker 5: you know, and hurting their growth margins. And so I
Speaker 5: think this really is a big development. And every cloud company,
Speaker 5: whether it's Alphabet or Microsoft, they'll be looking to leverage
Speaker 5: their compute more efficiently because they will benefit from the
Speaker 5: cloud revenue on the infrastructure side, but also on the
Speaker 5: application side, which is why I think Meta raise their
Speaker 5: capex on Friday.
Speaker 3: Mandep How does this undercut in Video in particular in
Speaker 3: its argument for advances like the Blackwell product that it
Speaker 3: is pushing out now and what may come after it?
Speaker 3: Is it becoming much harder for Jensen want to sell
Speaker 3: that to Microsoft and it's other customers.
Speaker 5: Now all of a sudden, look, I mean the last
Speaker 5: three months we were debating about the scaling laws and
Speaker 5: how big of a cluster we need. We're talking about
Speaker 5: one hundred kgpus in a cluster and possibly one million
Speaker 5: GPUs in a cluster. I think this puts into question
Speaker 5: mark how big of a cluster you need actually for
Speaker 5: training your LLM And look, all these LLM companies have
Speaker 5: to keep training their algorithms. You know, this is not
Speaker 5: a one and done thing, so you need compute capacity.
Speaker 5: But at the same time, and Video was accruing all
Speaker 5: the benefits in terms of pricing because of the advances
Speaker 5: in their chips. So if you can do more with
Speaker 5: even the you know, the older version of their chips
Speaker 5: and you don't need a cluster of one million GPUs
Speaker 5: connected together, then probably I think you can do more
Speaker 5: in terms of the distributed infrastructure. And I think that's
Speaker 5: what a lot of people are trying to figure out today.
Speaker 3: The guys Man Deep saying thank you. Let's bring in
Speaker 3: Tony Wong, portfolio manager of the Science and Technology Fund
Speaker 3: at t row Price and a key and video shareholder
Speaker 3: for more on this.
Speaker 6: Tony.
Speaker 3: We've got a big week and month of earnings coming up.
Speaker 3: How does this change the way you were looking at
Speaker 3: companies as they prepare to deliver their results.
Speaker 7: Yeah, I think it's a great question. And if you
Speaker 7: look at the kind of trends and technology generally, when
Speaker 7: things become more efficient, increases demand and there's more ubiquity.
Speaker 7: And so it wasn't that long ago, you know, a
Speaker 7: few months that we're all debating that, like the cost
Speaker 7: was too great to deliver and so where is the ROI?
Speaker 7: And so I actually feel like this is tam expansionary
Speaker 7: for the market long term. I think that Man Deep,
Speaker 7: you know, obviously has highlighted what the market is kind
Speaker 7: of talking about today.
Speaker 8: I think that's a very valid concern.
Speaker 7: But Javon's paradox essentially is that when things become more efficient,
Speaker 7: consumption goes up, demand goes up, and so I think
Speaker 7: that's that's necessary, that's healthy. I do think that there's
Speaker 7: a little bit of sensational reporting perhaps on Twitter and
Speaker 7: just in terms of how deep seek only took you know,
Speaker 7: six million dollars to train.
Speaker 8: I think that's a that's a that's a nice marketing number.
Speaker 7: But if you dig in that, you know, that doesn't
Speaker 7: include R and D costs, experimental runs, and the market.
Speaker 7: The model is a lot smaller than what chatchbt is
Speaker 7: and it's only tech based, so there's a lot of
Speaker 7: reasons to think that this is not exactly you know,
Speaker 7: you know, a kind of direct comparison. They do have
Speaker 7: a lot of great breakthroughs in the efficiency of the model, obviously,
Speaker 7: but I think it's good for the industry, and it's
Speaker 7: open source and the players will you know, the community
Speaker 7: will adopt the innovations and then further kind of pursue
Speaker 7: like kind of AI in a bigger way.
Speaker 4: I think to that point, let's just reconfirm to our
Speaker 4: audience what is that deep seek has done. Because Bloomberg
Speaker 4: Intelligence Bloomberg News has been reporting on deep Seek four months.
Speaker 4: Bloomberg Intelligence ranked it as the seventh most powerful LLM
Speaker 4: all the way back in June of last year. But
Speaker 4: now it gives us the fact that it's latest. Our
Speaker 4: one model is as sophisticated. Money would say on the
Speaker 4: internet and other experts out there is as sophisticated as
Speaker 4: that of anthropics latest model, or of open A's open
Speaker 4: AI's latest model. But they've done it at a fraction
Speaker 4: of the cost. But six million is what is reported
Speaker 4: to have been cost. We have been able to delve
Speaker 4: into the veracity of that number, Tony. When it comes
Speaker 4: to the rush to the bottom ever more cheap of
Speaker 4: applications of generative AI, do we therefore see Microsoft have
Speaker 4: to cut its prices.
Speaker 2: Do we see.
Speaker 4: Ultimately revenue and profitability of these LM providers having to
Speaker 4: become less?
Speaker 8: Yeah, I think that's a good question.
Speaker 7: I would say that, you know, for why we don't
Speaker 7: know why open ai in it Thropic are going to
Speaker 7: release next and a lot of times, like you know,
Speaker 7: there are so many innovations and marketing is moving very quickly,
Speaker 7: so you can very well that they've got something that's
Speaker 7: really exciting to be launched.
Speaker 8: So that's number one.
Speaker 7: I think like number two is that a lot of times,
Speaker 7: you know, this is a fast follower bress model that
Speaker 7: has a ceiling in terms of what it can do
Speaker 7: versus larger models, and it's you know, open ai is
Speaker 7: going to be multimodal with their model, and you know,
Speaker 7: I think.
Speaker 8: There's a lot of innovation that will happen.
Speaker 7: And then I think that like at the end of
Speaker 7: the day, like you know, there's a lot of kind
Speaker 7: of ecosystem building, enterprise aspects that that also factor into it.
Speaker 7: So I think that the market for oms can be
Speaker 7: more diverse than people are giving credit for.
Speaker 4: Is this a buying opportunity Tony to stack up on
Speaker 4: end video?
Speaker 2: Even more, I.
Speaker 7: Think long term, you know, you think about the technology trends,
Speaker 7: and I don't think that just because there's one model
Speaker 7: that is more efficient that people are going to say, Okay,
Speaker 7: we're just going to stop here. You know, at the
Speaker 7: end of the day, everybody's racing towards hopefully AGI and
Speaker 7: you know, looking to continue to invest.
Speaker 8: And I think that you saw Mark.
Speaker 7: Zuckerber, even though he knew about Deep Seek, you know,
Speaker 7: since it was released over Christmas, you saw that he
Speaker 7: actually increased CAPEC spend, and so, you know, I think
Speaker 7: that there's it's not just the model, it's also the
Speaker 7: compute as well, and so I think that as there's
Speaker 7: more demand of the app layer, that's actually good for
Speaker 7: filling up the compute capacity that we're building.
Speaker 3: Tony, you talked about Mark Zuckerberg and his announcement last
Speaker 3: week on capex. Is there any thought to the way
Speaker 3: these companies should revisit those spending plans?
Speaker 9: Are they going too big?
Speaker 3: Is it too big and maybe not efficient enough?
Speaker 6: Yeah?
Speaker 8: Well, naturally, absolutely.
Speaker 7: I think that everybody's going to the engineering teams and
Speaker 7: saying like, hey, what can we do? This is open
Speaker 7: source model, let's take it apart, let's figure out how
Speaker 7: we can incorporate the best and you know, as cost
Speaker 7: him down, Like, I think that actually increases the number
Speaker 7: of use cases and the people say like, oh wow,
Speaker 7: I wasn't able to afford perhaps the latest like equipment
Speaker 7: because of the cost of doing so, we're not sure
Speaker 7: about the ROI and so.
Speaker 8: This I do think that it's it's absolutely natural.
Speaker 7: But I don't think that companies are going to say like, oh, like,
Speaker 7: let's just stop here.
Speaker 8: And because there are so many like potential benefits, the
Speaker 8: kind of goal at the end of the day is
Speaker 8: pretty grand.
Speaker 6: Tony.
Speaker 3: I wanted to follow with a question about the potential
Speaker 3: policy responses from Washington. Given the hawkish mood towards China
Speaker 3: with the new administration. Do you see any risk of
Speaker 3: a response that would pose a you know, a challenge
Speaker 3: to the companies that you own and over and are
Speaker 3: taking a look at.
Speaker 7: Yeah, well, I think that definitely there might be some
Speaker 7: geopolitical aspects of what's going on this week. You know,
Speaker 7: I think President Trump announced the Stargate project and so
Speaker 7: this was perhaps you know, deep seek is a response
Speaker 7: to that, and that you know, the question is like
Speaker 7: can you build AI more cheaply and openly versus like
Speaker 7: building a bunch of AI infrastructure, And I think that,
Speaker 7: you know, my view is it probably you need both,
Speaker 7: and you know, each country will continue to race towards
Speaker 7: you know, AI capabilities, and I think there could be
Speaker 7: some export restrictions more more along the way, possibly, but
Speaker 7: it does show that you know, perhaps like restricting isn't
Speaker 7: particularly helpful because then you actually bore innovation out of scarcity.
Speaker 7: I think that what we've seen is that there is
Speaker 7: a lot of innovation we had and you know, I think,
Speaker 7: you know, competition is good, and you know, at the
Speaker 7: end of the day, like you want an open market.
Speaker 4: Who will win from your portfolio from that innovation or
Speaker 4: potentially from that shift from hardware more to the software side.
Speaker 7: Yeah, I think it's a it's a really exciting time
Speaker 7: because I do think that at the app layer this
Speaker 7: improves kind of the r oy obviously, and you know,
Speaker 7: anybody that has like a really taking customer base and
Speaker 7: large kind of kind apps that they have a lot
Speaker 7: of data from, I think that's good.
Speaker 8: You know, I do like you know, the.
Speaker 7: AI infrastructure still, I think that there's you know, still
Speaker 7: steady kind of consistent demand there and you know, history
Speaker 7: of technology would say that people take that innovation that
Speaker 7: improved performance and they put into good use for developing
Speaker 7: the next next here technologies.
Speaker 4: Turning on Portfolio Manager at t ro Price, one of
Speaker 4: the most significant in video shareholders, we so appreciate it.
Speaker 4: Coming up will be joined by former White House Chief
Speaker 4: Information Officer Theresa Paytent to discuss deepseeks, cybersecurity implications, and more.
Speaker 4: But there are rather earnings upon us keep us a
Speaker 4: float with AT and T. We'll bring you what AT
Speaker 4: and T is currently doing on the market. We're higher
Speaker 4: in that particular. Stop fourth quarter results came in better
Speaker 4: than had been expected, driven by seasonal promotions for AT
Speaker 4: and T and bundled product offerings.
Speaker 2: This is bloot technology.
Speaker 10: There's no question that this could be a potential game changer.
Speaker 9: It's a game changer for the Max seven stocks.
Speaker 10: Tech has to be okay simply because it's arch a
Speaker 10: large weight in the market, and if Tech is not okay,
Speaker 10: the entire market goes.
Speaker 3: We're all tied to these seven stocks, and in particular,
Speaker 3: we're all tied to video.
Speaker 10: It looks like the story is China is not as
Speaker 10: far back as what people thought.
Speaker 9: They are much closer now.
Speaker 11: China looks like a very viable competitor, and a competitor
Speaker 11: that perhaps might catch the eyre of.
Speaker 6: The Trump administration.
Speaker 9: This has got to.
Speaker 12: Be a core concern of not just the Trump administration,
Speaker 12: but all the tech universe that has moved into the
Speaker 12: West Way.
Speaker 10: The US China trade wars and the restrictions on chips
Speaker 10: and things like that could get even more heated.
Speaker 9: Which will bring more volatility to this market.
Speaker 3: That was what some of Bloomberg Television's guests had to
Speaker 3: say about the deep impact earlier. Today, this is Nvidia
Speaker 3: is hitting session lows now. Deepsek reminds us that technology
Speaker 3: lies at the heart of geopolitical tensions between the US
Speaker 3: and China, with disputes over AI TikTok and cybersecurity and
Speaker 3: for more, and that we're joined by Teresa Payton. She
Speaker 3: is the CEO of fort E Lee's Solutions and the
Speaker 3: former White House Chief Performation Officer during the George W.
Speaker 3: Bush administration. Teresa, thank you for joining us. Obviously this
Speaker 3: is going to cause a significant impact m Washington. How
Speaker 3: do you expect policy makers there we have taken a
Speaker 3: hawkish approach towards China, will.
Speaker 13: Respond, Yeah, I mean this tech route and massive market
Speaker 13: sell off, it's a wake up call. It is for me,
Speaker 13: and it underscores the urgent need for robust policies. We
Speaker 13: have got to safeguard the United States leadership in AI.
Speaker 13: I certainly don't want China setting the gold standard for
Speaker 13: the rest of the world for privacy, safety, secure resiliency
Speaker 13: and ethics around AI.
Speaker 8: I believe this is.
Speaker 13: Why you saw sort of the Technology Advisors Elon Musk included,
Speaker 13: and President Trump last week speaking very boldly about AI
Speaker 13: and the United States leadership position that is necessary. I mean,
Speaker 13: we didn't even have a full week before the Trump
Speaker 13: administration passed an executive order on AI, so this is
Speaker 13: very serious.
Speaker 3: They've set AI as a priority across Washington and including
Speaker 3: from the White House itself, and yet previous measures, including
Speaker 3: export controls by the Biden administration, don't appear to have worked.
Speaker 6: So what is the.
Speaker 3: Formula to achieve what Donald Trump is set as a
Speaker 3: policy goal, that is US leadership in AI.
Speaker 6: No, you're right about that.
Speaker 13: This sort of this open source method in which deep
Speaker 13: seek was released, it's now the top downloaded free app
Speaker 13: at the Apple Store definitely got around sort of the
Speaker 13: different protocols that were put in place by the US
Speaker 13: government over the last couple of years. And so it
Speaker 13: shows that although regulatory frameworks are incredibly helpful to set
Speaker 13: the right standard in the right tone, that sometimes regulatory
Speaker 13: frameworks don't service and they get in the way of innovation.
Speaker 13: So we're going to have to figure out how do
Speaker 13: we go back to the drawing board and look at
Speaker 13: how we engineer AI. In the United States today and
Speaker 13: ask ourselves what can we be doing differently? And it's
Speaker 13: a race right now, It's a long race. Right now
Speaker 13: we kind of lost one of the heats, so but
Speaker 13: you know, there's time to make up the difference.
Speaker 4: With your security expertise. We bring you this latest in
Speaker 4: terms of breaking news that deep seek says it's subject
Speaker 4: to a large scale malicious attack. If you've tried to
Speaker 4: download it, you can't. Currently it seems to be offline
Speaker 4: in many ways. How do you think this will be
Speaker 4: able to be responded to? Is it right that we
Speaker 4: can't access it here in the United States?
Speaker 13: Yeah, I think this is a real challenge. I saw
Speaker 13: that they were this is late breaking news that they
Speaker 13: were having some resiliency and recoverability issues, ostensibly because there
Speaker 13: was such heavy volume in traffic and interest. But if
Speaker 13: they are under some type of a cyber attack, I
Speaker 13: think that should give pause to everybody who's thinking about
Speaker 13: testing out the app, perhaps on company data, perhaps using
Speaker 13: your own personal data. This is an untested app. I
Speaker 13: would caution people not to put too much proprietary company
Speaker 13: information into it until there's been an opportunity to actually
Speaker 13: do something called ethical hacking or red teaming, pen testing
Speaker 13: of the actual app, and learning more about how is
Speaker 13: your data treated, where is it stored, how do the
Speaker 13: algorithms work. It is open source, but things do still
Speaker 13: need to be put through their paces and theresa.
Speaker 4: This comes at a time when an app that everyone
Speaker 4: in the United States from a bipartisan perspective thought was
Speaker 4: a national security threat that of TikTok doesn't get banned
Speaker 4: for US users. We see this ongoing post to drive
Speaker 4: in AI but actually perhaps pull away from some of
Speaker 4: the commitments when it comes to ethics, when it comes
Speaker 4: to safety.
Speaker 2: Is that something that you're reading between the lines right now?
Speaker 13: Yeah, I'm definitely watching this very closely and my interest
Speaker 13: is peaked here for starters. Where is Siphius on this right?
Speaker 13: So we're we've been upset about TikTok. We've demanded TikTok
Speaker 13: do a lot of architecture changes. They did a lot
Speaker 13: of architecture changes with Oracle. The United States still said
Speaker 13: that there was some concerns there. Where does Cyphias stand
Speaker 13: on this particular app. How do they feel about it?
Speaker 13: For both US citizen data as well as US corporation data.
Speaker 13: The origin story is China. It is headquartered in China,
Speaker 13: and so again a lot of questions remain. Are we
Speaker 13: going to allow this app to be downloaded in the
Speaker 13: United States? And is it allowed to be downloaded just
Speaker 13: because Siphius hasn't had the time to analyze it and
Speaker 13: give a ruling on it.
Speaker 3: Teresa Payden, CEO of for de Lee's Solutions and the
Speaker 3: former CIO in the Bush White House, thanks for joining us.
Speaker 3: Let's not bring in Bloomberg's Jackie Dabolos to discuss the
Speaker 3: impact of Deep Seek on Open AI and Stargate. Jackie,
Speaker 3: we worked on the coverage of this Stargate project unveiling
Speaker 3: last week at the White House. This is not the
Speaker 3: kind of moment that President Donald Trump and his administration
Speaker 3: wanted to start this week, so soon after that big announcement,
Speaker 3: where do they go from here?
Speaker 14: Well, from here, we really have to assess how powerful
Speaker 14: is Deep Seek? What makes these models so threatening to
Speaker 14: the ones that we are building here in the United States.
Speaker 2: One of the things that we can look to is.
Speaker 14: The fact that this are one model family that is
Speaker 14: really making a splash.
Speaker 2: They're open weights.
Speaker 14: What makes us so surprising is the fact that many
Speaker 14: open weight models have actually kind of been lagging their
Speaker 14: closed source peers like open AI, like and anthropics, and
Speaker 14: so what the United States government really now has to
Speaker 14: assess is what are we missing here? How are they
Speaker 14: able to get past these export controls?
Speaker 2: It might not even need them.
Speaker 14: It seems like these models are really efficiently run because
Speaker 14: they're far more computational in nature than what we might
Speaker 14: see from an open AI. So this kind of turns
Speaker 14: the whole premise that chips were really going to be
Speaker 14: the key here to getting ahead in the AI race.
Speaker 14: This really kind of flips.
Speaker 4: That necessity is a mother of all invention. They had
Speaker 4: to do it. They had lack of access to the
Speaker 4: most sophisticated chips coming from Nvidia. And we understand from
Speaker 4: Dooming Intelligence that this is about novel mixture of experts architecture, right.
Speaker 4: This is how they lower the cost, This is how
Speaker 4: they bring computational power is a different form of running
Speaker 4: the models, but others have been bringing it on too.
Speaker 2: Can you tell us a little.
Speaker 4: Bit about how they're managing can compete and when out
Speaker 4: when it comes to mass challenges, when it comes to
Speaker 4: reasoning versus the lightest out of Claude or indeed open Ai.
Speaker 15: You're absolutely rad, Caroline.
Speaker 14: It's no surprise that the computational framework here really has.
Speaker 2: Gone a long way.
Speaker 14: It's a startup that has its roots in a quantitative
Speaker 14: hedge fund, so this is really their bread and butter,
Speaker 14: at least it used to be. But when we look
Speaker 14: at what the numbers actually show their performance across several benchmarks,
Speaker 14: the ones that stand out to me are in mas encoding.
Speaker 14: These are the especially when you think about how widely
Speaker 14: used it is in the coding community. The fact that
Speaker 14: it outperformed Claude and open Ai on some benchmarks. Deep
Speaker 14: Seek here really is a player that is contending with
Speaker 14: these incumbents.
Speaker 2: But you know kind of past that.
Speaker 14: You're right, there is a difference here when it comes
Speaker 14: to is this general purpose? How big are these parameters?
Speaker 14: So far? The latest model has six hundred and seventy
Speaker 14: one billion parameters compared to open Eyes, so it has
Speaker 14: models that are smaller that they can handle customization, more
Speaker 14: specific things. Quicker can can also you know, give you
Speaker 14: how it's coming to that, similar to an open Eye's
Speaker 14: reasoning feature.
Speaker 4: Jackie davilos the detail on the technology. Welcome back to
Speaker 4: new bag technology. I'm Cauline Hide to New.
Speaker 3: York and I'm Mike Shepard in San Francisco.
Speaker 2: We must get to these markets.
Speaker 4: The Deep Seek impact royals across the board a clear
Speaker 4: present concern about the cheap offering coming from China. Generative
Speaker 4: AI are able to compare with that of Open AI
Speaker 4: or indeed of Anthropic but with just six million dollars
Speaker 4: spent on the latest model.
Speaker 2: That's what we question.
Speaker 4: Nas like one hundred off by three percent worse day
Speaker 4: in at least a month. But Bitcoin also following down
Speaker 4: risk assetsell off hard. Let's see what drags down the
Speaker 4: NASZAK one hundred. The benchmark crumbles as in video, loses
Speaker 4: sixteen percent. More than half a trillion dollars has been
Speaker 4: wiped off in terms of market cap. That is a
Speaker 4: record in terms of a suffering of a single name Apple.
Speaker 4: On the higher side, earnings of course going to come
Speaker 4: thick and fast this week the thirtieth or an Apple comes.
Speaker 2: But the most downloaded app on your app.
Speaker 4: Store right now is deep Seek, which is currently suffering.
Speaker 4: They are saying a attack. Bloomberg Intelligence analysts Ana rag
Speaker 4: Rana is here for more on the ripple effects.
Speaker 2: Did you see this coming.
Speaker 4: Deep Seek of course, has been written about plenty by
Speaker 4: your colleagues in China. They said it's one of the
Speaker 4: most powerful llms, and indeed have singled out how cost
Speaker 4: efficient it is. But should it have such an impact
Speaker 4: on the market capitalizations of US companies.
Speaker 16: Yeah, I've been surprised about the massive impact it's having
Speaker 16: on the chip guys. But at this point, I think
Speaker 16: everybody is questioning that how is it that they can
Speaker 16: run the model at such a cheap price while the
Speaker 16: US company needs so much infrastructure.
Speaker 15: So I think.
Speaker 16: That that's the big question mark today. And again, as
Speaker 16: you said, it is surprising. The follow three impact is
Speaker 16: if you look at some of the software names, they
Speaker 16: are actually responding positively to that because down the road
Speaker 16: it means that he had an adoption rate could actually accelerate.
Speaker 16: So lots going on, lots to digest today.
Speaker 3: So anaag will demand for AI products make this in
Speaker 3: the long run more of a uplip than anything else.
Speaker 16: Yeah, but that's I mean, that was eventually going to
Speaker 16: happen anyway, The question is are we actually at that
Speaker 16: faster pace today? So you look at it, you know,
Speaker 16: Microsoft's officeco Pilot product let's just take that as an example,
Speaker 16: thirty dollars per user per month. They did, you know,
Speaker 16: come up with some consumption related stuff as well, but
Speaker 16: the adoption rate for that product, in our view has
Speaker 16: not been at that same rate as it should have
Speaker 16: been if it was only let's say, you know, Teams
Speaker 16: Edition for five dollars a month or seven dollars a month.
Speaker 16: So it does have an impact on the adoption rate
Speaker 16: of people, you know, Adobe selling its Firefly services service. Now,
Speaker 16: I mean you look at all these companies that are
Speaker 16: you know, spending a lot of money to embed these features,
Speaker 16: and if they can do it cheaply, that means faster
Speaker 16: adoption you know in the long run.
Speaker 3: And Agrana of Bloomberg Intelligence, thank you. Let's now bring
Speaker 3: in Jordan client from the Zooho Americas for more Jordan,
Speaker 3: thank you for joining us. We have to ask is
Speaker 3: this the beginning of the end of the great AI
Speaker 3: trade or maybe not so much.
Speaker 12: Well, it's a beginning of probably a con solidation phase
Speaker 12: and some profit taking for sure, But I don't think
Speaker 12: it's the beginning of the end of the AI trade.
Speaker 12: I just think we're up a lot after two massive
Speaker 12: years about performance in both tech and these AI winners,
Speaker 12: and it's really only one month into the year. So
Speaker 12: I think the size and the scale of the pullback
Speaker 12: is that who wants to be a hero if your
Speaker 12: institutional money manager or a hedge fund, you know, and
Speaker 12: buy the dip on the first day, I mean catch
Speaker 12: the you know, proverbial falling knife, so to speak.
Speaker 15: So I think, you know, people will wait and hear
Speaker 15: from these companies.
Speaker 12: That's the That's the positive is that we're going into
Speaker 12: the meat of earning season where where you're going to
Speaker 12: get Microsoft and Meta and Apple and eventually others to
Speaker 12: talk about what they're seeing and what their CAPEX plans are.
Speaker 12: So I think we'll know a little bit more in
Speaker 12: the coming weeks, but for now, I think, yes, it's
Speaker 12: a It's probably a healthy and needed consolidation phase.
Speaker 4: A healthy consolidation phase that sees sixteen percent wipe to
Speaker 4: of Nvidia, more than half a trillion dollars loft the
Speaker 4: lowest it's trading app since October of last year, and
Speaker 4: we don't get its earnings until February the twenty sixth.
Speaker 4: How many cools have you had about in video Jordan,
Speaker 4: and what do you think it means for the popularity
Speaker 4: of it's very expensive chips.
Speaker 12: Well, look, people are very concerned obviously because it's probably
Speaker 12: the most owned stock in the market. I think you
Speaker 12: have a lot of people that were you know, they
Speaker 12: don't fully know what they own and they're just panicking
Speaker 12: and selling. I think the real institutional money managers, we're
Speaker 12: not seeing a wave of selling across our equity desk
Speaker 12: at Mizuho.
Speaker 15: I mean, we're seeing some profit taking.
Speaker 12: We're seeing some investors, you know, rotate some money out
Speaker 12: of all these tech names. That's to be expected, right,
Speaker 12: But I'm not hearing from people that it's game over
Speaker 12: for in Vidia, it's game over for Broadcom, Marvelle, Micron
Speaker 12: or the big cloud hyperscalers, And if anything, I think
Speaker 12: people are looking at that price point that deep seek
Speaker 12: throughout of six million in questioning if that's even real. Again,
Speaker 12: we need to I think the real money managers who
Speaker 12: are here for the long term and think more you know, months,
Speaker 12: not days, are going to wait and hear from the
Speaker 12: companies before they do anything.
Speaker 4: You echo what Tony u Wang of tro Price was
Speaker 4: saying at the start. We called you up immediately that
Speaker 4: we got these sorts of market sell off news on
Speaker 4: a hands Jordan, because we saw your note had a
Speaker 4: great title, of course, and the fact that we've got
Speaker 4: a freak out happening deep seat creates a deep freak
Speaker 4: across tech.
Speaker 2: I'm interested though, about the calls you're fielding and as.
Speaker 4: To whether or not you're starting to see a question
Speaker 4: of buying into Chinese names. Is that something you have
Speaker 4: access to, Is that something that people want to see
Speaker 4: as a winner.
Speaker 15: Hit Well, that's a great question.
Speaker 12: I mean, I'm not seeing people call me and say
Speaker 12: these are the list of Chinese names that I want
Speaker 12: to own. I think this will bring up a discussion
Speaker 12: point that's probably needed and was overlooked, as we can
Speaker 12: all own the same trade, right if everyone owns the
Speaker 12: same four or five six names, and then you get
Speaker 12: news like this which questions the longevity of this sustainability
Speaker 12: of this thesis, people just rush to sell and it's painful, right,
Speaker 12: it's escalator up, elevator down. But the real thing is
Speaker 12: is that people are getting a healthy wake up call.
Speaker 12: Is like, look, I have to have a diversified portfolio.
Speaker 12: The other thing that I'm really encouraged by is look
Speaker 12: at a lot of the green on your screen as
Speaker 12: it relates to software and some of these larger cap
Speaker 12: tech names, they're not all.
Speaker 15: Getting sold indiscriminately.
Speaker 12: You know, a lot of areas of software are up,
Speaker 12: and I think people that you've had on your show
Speaker 12: say this could only increase the adoption over time and
Speaker 12: make people want to deploy and invest more to catch
Speaker 12: up with China or deploy some of these cost saving
Speaker 12: measures to build out their own models.
Speaker 15: So I think it's just too early to know, Sjordan.
Speaker 3: We're going to hear a lot from companies over the
Speaker 3: next several days and coming weeks about cap X. Does
Speaker 3: is this news on deep seek unravel the argument that
Speaker 3: Manhattan Project like spending is needed to maintain an edge
Speaker 3: in AI?
Speaker 15: I mean yes and no.
Speaker 12: I think it raises a lot of questions that were
Speaker 12: already there. So most of the meetings I have with investors,
Speaker 12: the question comes up is are they going to ever
Speaker 12: see a return on these tens of billions of CAPEC
Speaker 12: spending that they're deploying. Will it ever monetize, what will
Speaker 12: the returns be? Or is this just you know, throwing
Speaker 12: money down a hole. I think that is going to
Speaker 12: be an ongoing question and until we see these companies,
Speaker 12: for example, Facebook or Meta and Microsoft this week talk
Speaker 12: about what they're seeing in terms of monetizing AI, there's
Speaker 12: going to be some questions and doubts. But again, I
Speaker 12: don't think this is going to create We're cutting Capex,
Speaker 12: we're you know, we're scaling back because they're all in
Speaker 12: an arms race with one another, and and China's you know,
Speaker 12: deep Seak initiative is going to change that.
Speaker 15: That's why I think.
Speaker 12: Microsoft talked eighty billion, Mark Zuckerberg at Facebook talk sixty
Speaker 12: to sixty five billion, the stargate of one hundred dollars
Speaker 12: five hundred billion. I don't think that Again, one new
Speaker 12: Chinese app that makes some aggressive, audacious claims is going
Speaker 12: to all of a sudden create this pullback effect. If
Speaker 12: they start to see real savings and they can do
Speaker 12: this faster, yeah, they might do that, but that that's
Speaker 12: going to take time and we haven't seen that yet.
Speaker 4: Jordan Klein, So good to have your voice in the
Speaker 4: show The Missoho America's TMT analysts.
Speaker 2: We appreciate it.
Speaker 4: Coming up much more on China AI set up deep seats,
Speaker 4: breakthrough model, what it means for the United States in
Speaker 4: terms of supply chain. Former Congressman Ken Buck joins us. Next,
Speaker 4: this is blue bag technology.
Speaker 3: As Deep seeks AI potential continues to you at the
Speaker 3: tech sector today. What does this mean for geopolitics and
Speaker 3: President Donald Trump's agenda for AI dominance. Joining us now
Speaker 3: to discuss all of this is Ken Buck, former congressman
Speaker 3: from Colorado's fourth district. Congressman, we have to ask you
Speaker 3: when it comes to AI, is Deep Seeks breakthrough a
Speaker 3: sput Nick moment for Washington?
Speaker 6: You know?
Speaker 9: I think time will tell on that. I'm not sure.
Speaker 11: I think that the critical factor is that America develops
Speaker 11: its own ship manufacturing here. We don't rely on Taiwan's semiconductor.
Speaker 11: We don't rely on others in this world marketplace. We
Speaker 11: certainly could be behind. We recognized a few years ago
Speaker 11: that we needed to incentivize chip manufacturing in the US.
Speaker 11: We passed the Chips Act in Congress. It has been
Speaker 11: a failure. Throwing a lot of money at a lot
Speaker 11: of different companies has not worked. I think that Donald
Speaker 11: Trump's policies involving a combination of tax incentives and perhaps tariffs,
Speaker 11: will be more effective in trying to raise America's productivity
Speaker 11: in this area.
Speaker 3: Congressman, you brought up the Chips Act and your misgivings
Speaker 3: and concerns there. How should the President adjust maybe the
Speaker 3: implementation of this law and maybe the doling out of
Speaker 3: some of the money that still remains in a way
Speaker 3: that could meet the challenge that companies like Deep seek
Speaker 3: opposing from abroad.
Speaker 11: Well, one of the biggest benefactors of the Chips Act
Speaker 11: has been the Taiwan Semiconductor and that's a mistake. They
Speaker 11: are not producing chips in the US. They have a
Speaker 11: plan to produce some in the future. We don't know
Speaker 11: if those will be the high end.
Speaker 9: Chips or not.
Speaker 11: We don't know if Taiwan sim and Conductor will actually
Speaker 11: mesh with the workforce here in the US. And so
Speaker 11: I think what we've got to do, and what President Trump,
Speaker 11: I'm sure his advisors are telling them right now, is
Speaker 11: find those companies in the US that can produce the
Speaker 11: high end chips that Taiwan semi Conductor.
Speaker 9: Has a monopoly on. Look into the monopoly.
Speaker 11: First of all, can we certainly have anti trust laws
Speaker 11: in this country that prohibit a company from having a
Speaker 11: ninety five percent market share like Taiwan Semiconductor does, but
Speaker 11: find the US companies and make sure that we have
Speaker 11: the tax structure in place and other incentives to make
Speaker 11: high end ships in the US.
Speaker 9: This whole issue of deep seek.
Speaker 11: We don't know exactly whether someone violated our export controls to.
Speaker 9: China or not.
Speaker 4: I'm looking at Nvidia down almost seventeen percent, massive wipe
Speaker 4: out of market capitalization by six hundred pillion dollars, Congressmen.
Speaker 4: But to that point, did perhaps China circumvent some of
Speaker 4: the limitations on Nvidia's exports. Is that something you're thinking
Speaker 4: through rather than perhaps this was innovation because they couldn't
Speaker 4: get the hands on the latest and greatest.
Speaker 11: Well, this wouldn't be the first time that China stole
Speaker 11: technology from the US or other countries, and then, with
Speaker 11: their labor market and with their other production advantages, got
Speaker 11: ahead of the curve on US.
Speaker 9: And so I think that's certainly.
Speaker 11: One of the issues that we've got to look at,
Speaker 11: is whether they did violate export.
Speaker 9: Controls or not.
Speaker 11: But more importantly, what do we do in this country
Speaker 11: that cat is out of the bag right now? What
Speaker 11: do we do in this country to make sure and
Speaker 11: Western Europe, frankly, to make sure that we stay ahead
Speaker 11: of the AI race.
Speaker 2: But the answer to thus far has been money.
Speaker 4: Five hundred billion dollars unveiled by potentially Oracle, Open AI
Speaker 4: and soft Bank into the future for AI infrastructure in
Speaker 4: the United States, the creation of more three trillion dollar companies.
Speaker 4: But ultimately that amount of money perhaps has slowed innovation
Speaker 4: here in the US.
Speaker 2: Would that be a concern.
Speaker 9: I think it's a big concern.
Speaker 6: Again.
Speaker 9: I don't think we just throw money at an issue.
Speaker 11: I think we've got to be very precise in how
Speaker 11: in our strategy and how we develop AI. We all
Speaker 11: recognize AI has these tremendous potential, wonderful benefits, positive benefits,
Speaker 11: but when you're talking about a tatal's arean country like China,
Speaker 11: you've also got to think about what that country can
Speaker 11: do with AI advances that will put us at risk,
Speaker 11: in our allies at risk.
Speaker 4: Former Congressman Ken Buck, thank you very much for joining
Speaker 4: the show today. SOFI shares, like the rest of the market,
Speaker 4: slumping today, in fact, having its worst day since March
Speaker 4: of last year. The fintech lender publishing perhaps a forecast
Speaker 4: that seems to be below where the marketer wanted to see.
Speaker 4: We've got a broad tech route, of course, linked to
Speaker 4: deep seat more broadly in general, to AI over in China.
Speaker 4: But here to discuss the earning, SOFI CEO Anthony Noto
Speaker 4: a tough day to report earnings.
Speaker 2: Anthony, and I ask you about.
Speaker 4: The forecast, because look, your revenue was at record rate,
Speaker 4: suggested revenue up twenty four percent for the fourth quarter.
Speaker 4: But you're pushing us forward in a forecast that isn't
Speaker 4: as high as the market wanted.
Speaker 6: Why well, I think two things.
Speaker 8: One.
Speaker 17: Twenty twenty four, we took a pretty conservative approach to
Speaker 17: the year in terms of our growth and our profitability.
Speaker 17: We really wanted to make sure that we were able
Speaker 17: to drive strong profitability in twenty four to achieve gap profitability,
Speaker 17: to ensure we reinforced our balance sheet and a capital cushion,
Speaker 17: and we did just that. Prior to twenty twenty four,
Speaker 17: we had committed to a balanced approach to growth and
Speaker 17: profitability where we would reinvest seventy cents of every incremental
Speaker 17: revenue dollar, and we call that thirty percent incrementallybadam margins.
Speaker 17: So we took our revenue forecast for twenty five up.
Speaker 17: We're in the best position we've been since I've been
Speaker 17: here at so far for the last seven years. We're
Speaker 17: calling for twenty five percent revenue growth, strong margins at
Speaker 17: twenty six percent, just not an expansion in the margins
Speaker 17: because we want to invest in the massive opportunity that
Speaker 17: still sits in front of us. And so we took
Speaker 17: revenue guidance up and it's about ten percent higher than
Speaker 17: the street, but that will require more investment and it
Speaker 17: will help us ensure we have growth beyond twenty five.
Speaker 17: And we also took our revenue guidance for twenty twenty
Speaker 17: three at twenty twenty six on a compound and a
Speaker 17: growth rate basis higher as well.
Speaker 6: So the profitability of the business is there.
Speaker 17: We could drive more to the bottom line, but we
Speaker 17: think that's not the prudent thing to do because we
Speaker 17: just see massive growth in front of us and the
Speaker 17: ability for us to keep driving member growth and product
Speaker 17: growth of more than thirty percent, which we've done, and
Speaker 17: revenue growth of more than twenty five percent. Is you
Speaker 17: know what we're calling for through twenty twenty.
Speaker 6: Six, Anthony.
Speaker 3: The investment that you just describe, what portion of it
Speaker 3: will you be putting toward artificial intelligence. It's the topic
Speaker 3: at the top of everybody's minds, and people are watching
Speaker 3: how companies are deploying it. Do you see, for instance,
Speaker 3: in agent driven service Perhaps at so far At some point.
Speaker 17: The vast majority of our investment going into twenty twenty
Speaker 17: five and twenty six, we'll be in building unaided brand awareness,
Speaker 17: becoming a trusted household brand name.
Speaker 6: We have great products.
Speaker 17: The reason why we're driving such strong product and member
Speaker 17: growth is because the products are very differentiated, and when
Speaker 17: we make people aware of them and they use the products,
Speaker 17: they not just use the first one and they gain
Speaker 17: trust with us, they use the second and third one.
Speaker 6: Thirty percent of our product.
Speaker 17: Growth in the quarter of thirty four percent was from
Speaker 17: our existing members. About forty percent of our members take
Speaker 17: out a second product within thirty days. So we'll continue
Speaker 17: to invest in differentiating the product. So FE money is
Speaker 17: a great product that has a high apy. You can
Speaker 17: do person to person payments.
Speaker 6: You could do.
Speaker 17: Zell auto pay, two day early paycheck, and so we'll
Speaker 17: be investing in that. We'll be investing in our invest
Speaker 17: product to expand the selection for invest in addition to
Speaker 17: other product categories, like insurance and credit card and small
Speaker 17: medium business lending.
Speaker 4: You want to be able to offer crypto again, and
Speaker 4: that's something that the administration has talked a lot about.
Speaker 4: Look on a day where we see such volatility that
Speaker 4: engulfs crypto too because of deep seek, is.
Speaker 2: That really a product placement that you want to get
Speaker 2: into again?
Speaker 17: If the regulations changed so that cryptocurrency is permissible by
Speaker 17: bank holding companies, we would absolutely provide not just what
Speaker 17: we used to provide, which was the ability to safely
Speaker 17: and securely trade bitcoin and other cryptocurrencies, but we'll also
Speaker 17: go into other areas like custing and clearing in addition
Speaker 17: to asset back lending, etc. But that will all be
Speaker 17: gated by the regulators, which we think should be coming
Speaker 17: over the next twenty four months, and we'll be ready.
Speaker 6: When it does.
Speaker 4: Ultimately, are you feeling more risk on in this environment
Speaker 4: the new administration or way in which to develop your business?
Speaker 2: Maybe M and A because it doesn't feel like a
Speaker 2: risk on day to day.
Speaker 17: We are definitely leaning into twenty twenty five. Twenty twenty
Speaker 17: four was a record breaking year. We had record revenue, profits, returns,
Speaker 17: member growth, Product growth couldn't be happier the year that
Speaker 17: we had the most product've been of the company since
Speaker 17: I've been here, but I think twenty twenty five will
Speaker 17: be even better. We think the outlook is the best
Speaker 17: environment we've operated in over the last seven years. Our
Speaker 17: business is bigger, stronger, and more well known than it's
Speaker 17: ever been, and we have more resources to go after
Speaker 17: the opportunities. So we love our competitive positioning. We like
Speaker 17: the macro backdrop. It's a very different outlook than when
Speaker 17: we came in too twenty twenty four, and we're definitely
Speaker 17: being more aggressive in innovation and driving durable growth and
Speaker 17: strong returns.
Speaker 3: Anthony, back to the regulatory side of things, What is
Speaker 3: the one thing, one hurdle that you would like to
Speaker 3: see the new administration and Congress clear for you?
Speaker 17: The biggest question is what what will bank holding companies
Speaker 17: be allowed to do with cryptocurrency? What will be permissible?
Speaker 17: And that clarity is really critically important. The interest rate
Speaker 17: cycle I think has pretty good visibility and transparency to that.
Speaker 9: I think the.
Speaker 17: Economy also has really strong economic indicators.
Speaker 6: The big question is how much can we innovate?
Speaker 17: How much can we invest in these different asset classes
Speaker 17: that our members want to reinforce their ability to not
Speaker 17: just borrow better and save better and protect better, but
Speaker 17: to invest better. Investing is critical to reaching their long
Speaker 17: term financial goals. We want to be there for every
Speaker 17: one of the major financial decisions our members making their
Speaker 17: lives in all the days in between. The key is
Speaker 17: spending less than you make in investing the rest. So
Speaker 17: the more opportunities we can give our members to invest,
Speaker 17: the faster they'll get to their financial outcomes.
Speaker 4: An can I notice so fi see you in the
Speaker 4: day of your earnings. Great to have you on, Thank
Speaker 4: you so much. Let's return to the story of the day, though,
Speaker 4: which is of course Deep Seek and generative AI being
Speaker 4: powered in China for much smaller amounts of money, managing
Speaker 4: to circumvent perhaps in limitations on compute power MIC. We
Speaker 4: see a whopping sixteen percent market cap erosion on Nvidia.
Speaker 2: But we all thought we're going to be talking about
Speaker 2: earnings this week.
Speaker 4: We're looking towards Meta Microsoft coming in the twenty ninth,
Speaker 4: Apple which is actually in the green coming on the thirtieth.
Speaker 3: This is rewriting the narrative for earnings later this week
Speaker 3: and through the rest of this month, and there is
Speaker 3: also a wild card and that is the new president
Speaker 3: in Washington and how he will react. We still have
Speaker 3: not heard from him, and he does look at the
Speaker 3: market as a benchmark of us success.
Speaker 4: Also, we see how people try to continue to download
Speaker 4: Deep Seek as of course an app. It was the
Speaker 4: number one app on Apple and currently unavailable. They say
Speaker 4: they are currently being afflicted by some sort of attack,
Speaker 4: But that does it. From this edition of BLUEBG Technology, Mike,
Speaker 4: do not forget to check out our podcast. You can
Speaker 4: find it on the terminal as well as online on Apple, Spotify, Aniheart.
Speaker 2: This is Blue meg Technology