Speaker 1: Bloomberg Audio Studios, podcasts, radio news from Mahard where Innovation,
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Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed Loudlove.
Speaker 3: I Meed Ludlow in San Francisco. Caroline hides off. This
Speaker 3: is Bloomberg Technology.
Speaker 4: Coming up. We'll bring you latest on the TikTok ban
Speaker 4: as the.
Speaker 3: Company argues the US disregarded its national security plans. Plus
Speaker 3: Masseoshi's Sun announces his vision for an era of artificial
Speaker 3: super intelligence.
Speaker 4: Will bring you the details.
Speaker 3: And cardialer chaos continues amid a debilitating cyber attack that's
Speaker 3: upending the one point two trillion dollar market. It's full
Speaker 3: coverage coming up. Happy Friday to those of you around
Speaker 3: the world. This is what markets look like over the
Speaker 3: course of the week. But remember we had a market
Speaker 3: holiday here in the United States on Wednesday. This Friday,
Speaker 3: the market is facing five point five trillion dollars of
Speaker 3: derivatives that are due to expire, the so called triple witching.
Speaker 3: That's having an impact on markets. But right now there's
Speaker 3: this conversation around valuations, particularly in some of the megacaps
Speaker 3: that have seen a really AI driven rally. Later in
Speaker 3: the show, we're going to go over some charts and
Speaker 3: have a brief conversation about one name in particular, Apple.
Speaker 3: But i'd note this Friday that Nvidia is down a
Speaker 3: couple of percentage points coming off what's been an astonishing
Speaker 3: rally in that stock, and that is having a factor
Speaker 3: in the markets.
Speaker 4: So we're also going to talk about Bitcoin.
Speaker 3: That it's near a one month low right now, there's
Speaker 3: a lot going in the market. Will go in house
Speaker 3: to Bloomberg Intelligence to ask some key questions about what's
Speaker 3: going on with bitcoin. Let's get to our top technology story.
Speaker 3: TikTok and It's Andy's parent Byte Dancer, arguing the US
Speaker 3: government could have put more options on the table and
Speaker 3: taken less restrictive action than simply banning the Act to
Speaker 3: address national security concerns. In a court finding Thursday, TikTok
Speaker 3: said that Congress disregarded a ninety page national security agreement
Speaker 3: that was made with the federal government, in which TikTok
Speaker 3: argues it offered multi layered safeguards. Let's get out to
Speaker 3: DC and Bloomberg's Mike Shepard, might you lead the intersection
Speaker 3: of tech and politics for US. Basically, what they're saying is,
Speaker 3: we offered lots of options. We offered you technological solutions
Speaker 3: that we think would have safeguarded US user data, and
Speaker 3: the only option Congress gave in return was an outright ban.
Speaker 1: Well, that's right ered, and let's step back for a minute.
Speaker 5: This TikTok saga has just become such a focus of
Speaker 5: attention here in Washington because of all it'd symbolized.
Speaker 1: It's not just about the app.
Speaker 5: It's also about this geopolitical tension between the world's two
Speaker 5: largest economies and their visions for how governance should be
Speaker 5: should be handled, and the concern here in Washington that
Speaker 5: the Chinese government ultimately could have access the US user
Speaker 5: data through TikTok's Chinese parent company, now TikTok and bike Dance.
Speaker 1: The Chinese parents.
Speaker 5: Have claimed that they're set up this so called Project Texas,
Speaker 5: where they invested almost two billion dollars in work with
Speaker 5: Oracle to try to set up some sort of a
Speaker 5: shield and firewall that would keep US data secure and
Speaker 5: away from any purported buying eyes in Beijing. That was
Speaker 5: not enough to satisfy US lawmakers. They were aware of
Speaker 5: the proposal, they were aware of the project, and Senator
Speaker 5: Mark Warner, who heads the Intelligence Committee, expressed skepticism from
Speaker 5: the start that that would be an adequate safeguard to
Speaker 5: satisfy lawmakers' concerns.
Speaker 3: It's difficult for users of TikTok, and in this country
Speaker 3: there are one hundred and seventy million or so of them,
Speaker 3: and for the public to kind of get a sense
Speaker 3: of where we're at. So, after this legislation made its
Speaker 3: way through Congress, legal challenges were bought by TikTok, Byte
Speaker 3: Dance's parent company, but also the users themselves. When the
Speaker 3: court filing hit last night, the DOJ came out with
Speaker 3: statement and said, you know, the legislation accounts for a
Speaker 3: lot of the issues we were worried about. A long
Speaker 3: preamble to ask Mike, where do we stand? What happens next?
Speaker 5: Well, right now we are in that kind of tennis
Speaker 5: match of court five. So it was TikTok's volley yesterday
Speaker 5: and now we're waiting for the Justice Department to return
Speaker 5: the serve the face a July twenty sixth deadline to
Speaker 5: respond with their own brief papers, and then in early
Speaker 5: September we're expecting the Appeals Court here in Washington to
Speaker 5: hear this case, and the company is asking for a
Speaker 5: ruling by December sixteenth or so so that, if need be,
Speaker 5: it can go straight to the US Preme Court for
Speaker 5: an emergency injunction if it doesn't get relief here at
Speaker 5: the appeals court level. So it's moving fast, but it's
Speaker 5: so much of it is happening in court, and it
Speaker 5: will really come down to a handful of judges to
Speaker 5: decide whether the national security concerns raised by Congress override
Speaker 5: and overwhelm any free speech concerns and considerations that the
Speaker 5: company is raising as part of its bids o returnal law.
Speaker 3: Bloomberg's Mike Shepherd, Washington, DC, Thank you so much. Let's
Speaker 3: get to another story in the realm with social media,
Speaker 3: New York has become the first state in the nation
Speaker 3: to place curbs on how social media platforms present content
Speaker 3: to miners. Under a measure signed by Governor Kathe Hokel yesterday,
Speaker 3: platforms such as TikTok and Instagram will now need parental
Speaker 3: consent to use algorithmic feeds or notify underage users between
Speaker 3: midnight and six am. According to the language and the bill,
Speaker 3: I want to break that down with the Chamber Progress
Speaker 3: CEE Adam Canvacuvates.
Speaker 4: I was interested, Adam.
Speaker 3: To read through not just the content of the bill
Speaker 3: and what it will provide for, but also the idea
Speaker 3: that New York did this first.
Speaker 4: What do you make of it?
Speaker 6: Well, what I make of it is we know there's
Speaker 6: concern among parents about kids and teens in social media,
Speaker 6: and I think that's understandable. Unfortunately, I think that in
Speaker 6: this case they went after the wrong target, which was algorithms.
Speaker 6: I think they got into their head and a variety
Speaker 6: of critics have focused on algorithmic feeds as being kind
Speaker 6: of a problem here. And so the bill, as you said,
Speaker 6: bans algorithmic feeds and services like TikTok and Instagram YouTube
Speaker 6: by default for teenagers unless their parents opt them into
Speaker 6: those algorithmic feeds. And just the problem with this is
Speaker 6: that I think that chronological feeds are actually going to
Speaker 6: be a worse experience for teenagers.
Speaker 1: They're more likely to.
Speaker 6: Surface, you know, the last post that might be spammy, clickbait,
Speaker 6: hate harassment, and algorithm algorithms are actually providing a pretty
Speaker 6: important role and making these feeds better for teenagers. Usually
Speaker 6: they're allowing them to curate their experiences. And Common Sense Media,
Speaker 6: which actually ironically is the support of this will, actually
Speaker 6: had a survey of teenagers about two weeks ago where
Speaker 6: they said, team, most teenagers are liking you know, or
Speaker 6: actually use curation in their feeds, and unfortunately this bill
Speaker 6: kind of we'll do away with that completely by default.
Speaker 6: So unfortunately it's well intentioned, but it goes after the
Speaker 6: wrong target in my view, and I think is likely
Speaker 6: to make feeds worse for teens.
Speaker 3: And the Chamber of Progress of which you lead is
Speaker 3: basically an industry group, but your work is to look
Speaker 3: at public policy and make sure that it is impactful
Speaker 3: to society in a fair way. So you think that
Speaker 3: they went about this in the wrong way, how would
Speaker 3: you have done it differently?
Speaker 6: Well, you know, I think what we're starting to see is,
Speaker 6: for example, this week in California the governor, Governor Newsom
Speaker 6: talked about, well, maybe schools should have a blanket rule
Speaker 6: against phones in school.
Speaker 1: They're proving to be a distraction.
Speaker 6: I think there's pros and cons of a policy of
Speaker 6: like that, but one thing about those policies is they're
Speaker 6: not getting involved in regulating platforms at the speech level.
Speaker 1: One of the things we've seen, and again New York's.
Speaker 6: Not the first state to do a bill related to
Speaker 6: social media and kind of content. They've gone about a
Speaker 6: little bit differently. But one of the problems that all
Speaker 6: these laws have faced, and now this has happened in
Speaker 6: California and Arkansas, in Ohio, every single time state legislators say, well, no,
Speaker 6: we're not We're not regulating the content of these services.
Speaker 6: We're regulating their design, right, and that's different that therefore
Speaker 6: it doesn't run a foul of the First Amendment. Every
Speaker 6: single time so far, courts have said, no, that's actually
Speaker 6: not true. You are regulating the platform speech, and I
Speaker 6: expect the same will be true here.
Speaker 1: So I think we're in that we have.
Speaker 6: The kind of the dynamic where this bill feels really
Speaker 6: great to Governor Hochle and policymakers have pushed it, but
Speaker 6: it will it might inevitably be struck down in court,
Speaker 6: and then I think, you know, be right back where
Speaker 6: we started from. So unfortunately, I don't see a lot
Speaker 6: of legislators saying, look, how can we approach us in
Speaker 6: a way that is really like constitution proof, legally sound
Speaker 6: they've asserted that it is, but I don't think this
Speaker 6: will be in the.
Speaker 4: End, Adam.
Speaker 3: I want to go back to the latest on TikTok
Speaker 3: that our editor Mike Shephard was giving us from DC
Speaker 3: a few minutes ago.
Speaker 4: This is not a new conversation for you or I.
Speaker 4: The idea that you know.
Speaker 3: TikTok and its users have frustrations that they feel they
Speaker 3: put forward technological and policy solutions that would have allowed
Speaker 3: TikTok to continue to operate in this country, and they
Speaker 3: feel the only option that they were given by Congress
Speaker 3: was a ban. What did you make of them court
Speaker 3: filing which hit last night.
Speaker 6: Well, I think what TikTok is trying to do in
Speaker 6: their court filing is they're trying to address what's called
Speaker 6: sort of the least restrictive means, right, which to say that,
Speaker 6: if you're concerned about TikTok and Chinese connections, for example,
Speaker 6: is there some other way the government could have gone
Speaker 6: about addressing that concern short of pass in the law
Speaker 6: that did. And that's what their Project Texas is all about.
Speaker 6: And that is legally relevant at this stage because that
Speaker 6: is an actual principle under the law, and so I
Speaker 6: completely understand what TikTok was doing. I have a concern
Speaker 6: about TikTok and Chinese control, but I understand that, and
Speaker 6: ultimately I actually think it's kind of a jump ball.
Speaker 6: I think whether or not TikTok succeeds in this in
Speaker 6: its legal challenge is truly a legal jump ball, and
Speaker 6: so I don't it's completely understandable to me that they
Speaker 6: would make that argument.
Speaker 3: But what is the Chamber of Progress is position on
Speaker 3: whether TikTok should be able to operate in the United States.
Speaker 1: We haven't taken an organizational position on it.
Speaker 6: I think that I share a lot of concern that, like,
Speaker 6: this is an really unprecedented situation where an app that
Speaker 6: is so popular, you know, frankly has this nexus and
Speaker 6: really is obligated to advance the Chinese government's interests. That's
Speaker 6: always been a concern for me, more than that data concern,
Speaker 6: more just kind of like look at the idea that like,
Speaker 6: look after Russian and raided Ukraine, we look back and said,
Speaker 6: why do we allow our tea Russia's propaganda network on
Speaker 6: our cable systems?
Speaker 1: And I think, I know I feel the same way about.
Speaker 3: This Chamber of Progress CEO Adam Kavakovitch, thank you an
Speaker 3: intense start actually to this Friday's bienveig technology. Okay, you're
Speaker 3: about to be looking at the US listed shares or
Speaker 3: ADR's of soft Bank, the Japanese tech conglomerate, kind of
Speaker 3: like Japanese trading Overnight down the most in about three months.
Speaker 3: Overnight founder Masaoshi's son pledged to help create AI that's
Speaker 3: thousands of times smarter than any human. A SoftBank's annual meeting,
Speaker 3: he outlined a future that's built on SoftBank's investment in
Speaker 3: the chit design firm ARM, and argued that ARMS technology
Speaker 3: will go into a thriving ecosystem of robots and powerful
Speaker 3: data centers, and at times, Sun was visibly emotional talking
Speaker 3: about his goal of realizing artificial super intelligence.
Speaker 7: It may sound strange, but I think I was born
Speaker 7: to realize ASI.
Speaker 1: I am super serious about it. Thought we'll go up do.
Speaker 7: I think ASI will continue in the next ten years.
Speaker 1: It will be ten times smarter than humans.
Speaker 3: So soft banks japan listed shares are up almost sixty
Speaker 3: percent this year, and the net asset value of its
Speaker 3: holdings has hit two hundred and fourteen billion dollars largely
Speaker 3: on arms performance and a turnaround in some of its
Speaker 3: startup bets. But activists are circling Elliott Investment Management has
Speaker 3: built a stake in soft Bank of more than two
Speaker 3: billion dollars and is calling for buybacks. Some brushed off
Speaker 3: questions and pleaded with investors to quote root for him
Speaker 3: as he chases his dream of artificial super inteentgence. Joining
Speaker 3: me mout to discuss the markets and a bit about
Speaker 3: soft Bank is Fiona Senkota from City Index. I mean,
Speaker 3: what was so interesting about this kind of spectacle almost
Speaker 3: in soft Bank's annual meeting is Massiosci's son wanted to
Speaker 3: talk about the big picture ASI, but investors wanted what
Speaker 3: investors always want, dividend, buy back, stock split.
Speaker 4: What did you make of that?
Speaker 8: Yeah?
Speaker 9: Completely, you know, I think it's quite an interesting because
Speaker 9: it sort of almost brings up about.
Speaker 8: A change of strategy for.
Speaker 9: Soft Bank from this sort of defensive position that I
Speaker 9: think it has had over the past few years for
Speaker 9: much more offensive position, as we have this really ambitious
Speaker 9: vision from some about ASI and the future of AI
Speaker 9: and what that means to some bank for soft Bank.
Speaker 9: But I think you can't get away from the fact
Speaker 9: that at the end of the day, investors do want
Speaker 9: to have returns. They have seen strong gains on the
Speaker 9: share price, you know, as you pointed out, we've seen
Speaker 9: a sixty percent rally in the share price so far
Speaker 9: this year. That obviously comes on the back of one
Speaker 9: hundred and twenty four percent rally in arm holdings. But
Speaker 9: you know, at the end of the day, yet, investors
Speaker 9: want to see what those numbers are bringing back, and
Speaker 9: they want to see you.
Speaker 8: Know, share buyo bike, share buy back. That's going to
Speaker 8: be useful for them as well.
Speaker 9: Although as we said, you know, the share price growth
Speaker 9: has been strong.
Speaker 3: It's hard to pick out what the prevailing factor is.
Speaker 4: In the market right now.
Speaker 3: You know, at the top of the program, we talked
Speaker 3: about the concern with valuations in videos trading it forty
Speaker 3: five times twelve month forward earning. So we're going to
Speaker 3: look at Apple's valuation later in the program. And then
Speaker 3: if you take the soft bank example, like many investors
Speaker 3: to summarize, there just seems to be a wholehearted belief
Speaker 3: that you have to be in AI at all layers
Speaker 3: of the stack, and if you're not, you'll be left behind.
Speaker 4: So which comes out on top.
Speaker 9: Yeah, you know, I think we can't get away from this.
Speaker 9: I that AI has really driven such a strong rally
Speaker 9: in AI stocks, and obviously that's sort of bled out
Speaker 9: into or transferred out into record highs in the s
Speaker 9: and P.
Speaker 8: Five hundred and on the Nasdak this week as well.
Speaker 9: So you know, I think at the end of the day,
Speaker 9: there might be this sense that perhaps the AI try
Speaker 9: trade right now is a little bit over hyped, but
Speaker 9: I think over the long term that's just not the case,
Speaker 9: and that's the sense that investors are having.
Speaker 8: You know, we're just really opening the.
Speaker 9: Door to the realization and the understanding of what the
Speaker 9: real world applications of AI actually are, and that's what's
Speaker 9: really supporting.
Speaker 8: The rally that we have seen.
Speaker 9: So, you know, although as you mentioned, there are some
Speaker 9: suggestions that there could be some level of lofty valuations
Speaker 9: involved here, I think at the end of the day,
Speaker 9: the long term case is very bullish as far as
Speaker 9: AI is concerned, and that's really supporting the share price.
Speaker 8: Obviously, we're going to have some pullbacks.
Speaker 9: No, no, rally is just one hundred percent higher, sure,
Speaker 9: but I think you.
Speaker 8: Know, investors are in, they're in on this case.
Speaker 3: We just showed in video it's down two percent in
Speaker 3: the session, but over the course of a week where
Speaker 3: it became the world's most valuable company, it's down a
Speaker 3: percentage point.
Speaker 4: Is this rally over?
Speaker 1: Do you know?
Speaker 9: You know, it's just a very small move lower after
Speaker 9: some very strong moves higher, you know, this month so far,
Speaker 9: and the video is up around sixteen percent, had impressive
Speaker 9: games last week. I mean, I don't think that the
Speaker 9: rally can necessarily maintain the speed that it's had, because
Speaker 9: it has been a really impressive speed that we've seen
Speaker 9: this share price rocket.
Speaker 8: You know, it's up one hundred and seventy.
Speaker 9: Percent so far this year, and that's not maintainable. It's
Speaker 9: not going to be maintainable. But I don't think that's
Speaker 9: to say that the rally's over. I think we could
Speaker 9: just perhaps potentially expect to slow for a more sustainable
Speaker 9: pace going forward.
Speaker 3: Piero Sua City Index, Happy Friday, have a fantastic weekend,
Speaker 3: and thank you for joining us on the show. Coming up,
Speaker 3: open Ai makes its first big and genuine acquisition. We're
Speaker 3: going to bring you the details next be right back.
Speaker 3: This is Bloomberg time for talking tech and first start.
Speaker 3: Former President Donald Trump finally appeared on the All In podcast.
Speaker 4: After a month of teasing.
Speaker 3: The podcast, co hosted by David sachsh Jamath Palihapatia, covered
Speaker 3: a range of topics, including real estate, the war in Ukraine,
Speaker 3: and artificial intelligence. Trump defended his tariff proposal, saying it
Speaker 3: would be crucial to keeping the dollar, the world's reserve currency.
Speaker 3: Plus Huawei Near's one billion active devices, The Chinese tech
Speaker 3: company saw sales of its smartphones climbed seventy two percent
Speaker 3: in the first five months of twenty twenty four, growing
Speaker 3: the number of Huawei's gadgets, which also use its operating system,
Speaker 3: to over nine hundred million. The latest figures underscore how
Speaker 3: the US sanctioned company is taking on the likes of
Speaker 3: Apple in the Chinese market and Indian groceries. Livery startup
Speaker 3: Zepto is preparing to go public this after the company
Speaker 3: more than doubled its valuation to three point six billion
Speaker 3: dollars from a financing round that was led by US
Speaker 3: and local investors. The company says it's on track to
Speaker 3: handle more than one billion dollars in goods a year
Speaker 3: and plans to double its warehouses to more than seven
Speaker 3: hundred by twenty twenty five. Also, car dealers aren't the
Speaker 3: only ones to be hit by recent attacks.
Speaker 4: The data of Quote Wizard.
Speaker 3: Consumers, a lending Tree subsidiary, are being sold off by hackers.
Speaker 3: Unauthorized access was detected on a cloud database hosted by Snowflake.
Speaker 3: Lending Tree shares are down as the company continues to
Speaker 3: investigate the size and scope of the hack. All right,
Speaker 3: let's get some m and a. Open ai has bought
Speaker 3: rock Set, an enterprise search analytics startup, marking the most
Speaker 3: significant acquisition to date for the high profile artificial intelligence
Speaker 3: company joining US now Bloomberg Sharing Gafari.
Speaker 4: So this is kind of interesting.
Speaker 3: The terms won't disclose, we don't know how much money
Speaker 3: was involved, basically, but it's kind of new and novel
Speaker 3: for open ai.
Speaker 10: Give me the details, right, So, this is the first
Speaker 10: time that open ai is acquiring a company where they're
Speaker 10: not just taking in the talent or doing what's called
Speaker 10: an aqua hier, but they're actually going to integrate the
Speaker 10: technology as well, which makes this a good Guinness.
Speaker 3: What I understand is, why is open ai need a
Speaker 3: company like rock Set, Like, what's the point?
Speaker 4: Well, if you think about it.
Speaker 11: Open Ai is really right now trying to grow not
Speaker 11: just their consumer but their enterprise business. And this is
Speaker 11: a company that has experience working with major customers across
Speaker 11: industries from finance to gaming. One big one that I
Speaker 11: saw on previous reports was jet Blue, for example, and
Speaker 11: what they do is actually work with customer data to
Speaker 11: help those customers index and search through that data. So
Speaker 11: you know, if you kind of put you and two
Speaker 11: together and think about where open Eye is trying to
Speaker 11: grow their business, it might make sense that they would
Speaker 11: go acquire a company that's specialized in dealing with this
Speaker 11: kind of more detailed business data to help them build
Speaker 11: that out.
Speaker 4: Bloomberg shrin Gufari.
Speaker 3: I have to say it's been a tremendously busy week
Speaker 3: for you all across the AIB, from Anthropic to open Ai,
Speaker 3: and a lot going on in the enterprise as well.
Speaker 4: Happy Friday to you.
Speaker 3: Welcome back to Bloomberg Technology ed Lovelow in San Francisco.
Speaker 3: So I've been talking about valuations and there's one chart
Speaker 3: that I saw this morning on the terminal and Bloomberg
Speaker 3: dot Com that I wanted to share with you, and
Speaker 3: this is it. Apple trading at around thirty times forward earnings,
Speaker 3: and there's been an a rally and Apple shares driven
Speaker 3: largely by artificial intelligence. It's the idea that we now
Speaker 3: have a clearer understanding of Apple's AI strategy. A lot
Speaker 3: of concern from both the byside and sell side is well,
Speaker 3: when does that strategy pay off? If you look at
Speaker 3: Bloomberg estimates for top line growth, there is some recovery
Speaker 3: in the second half twenty twenty four later in the year,
Speaker 3: but as the chart behind me shows pretty clearly, when
Speaker 3: Apple gets to a level of trading at thirty times
Speaker 3: forward earnings, it historically finds it really hard to sustain
Speaker 3: that level. And this is a conversation that's happening quite
Speaker 3: a lot across the megacaps where we're trading. We keep
Speaker 3: referencing in video trading at forty to five times forward earnings.
Speaker 3: So there's we loads of you out there. Contact meon
Speaker 3: x LinkedIn Instagram. You're going to say, oh, well, look
Speaker 3: at top line growth of the two you can't compare.
Speaker 3: But I'm just saying this is a chart that's got
Speaker 3: a lot of investors talking. We're happy to share it
Speaker 3: with you on Bloomberg technology. Okay, let's get back to
Speaker 3: cyber security and hacks. Checking in on shares of all
Speaker 3: the automotive companies, lots of the car dealers, lots of
Speaker 3: the retailer, and you can see some downward pressure. Sustained
Speaker 3: AutoNation down four tenth to foe percent, Route one automotive
Speaker 3: down half of a cent. Penske kind of stabilize and
Speaker 3: there's a warning. CDK is the company that basically operates
Speaker 3: the software platform, and they've warned their customers that their
Speaker 3: platforms can be down for several more days. It's crippling
Speaker 3: car dealers across the United States amid a cyber attack
Speaker 3: on the company, the second round of which was spelt
Speaker 3: on Thursday. Joining us out of London is Bloomberg's Craig Trudell,
Speaker 3: who's our Global Auto's editor.
Speaker 4: In Craig, you're joining us from London.
Speaker 3: This attack was in the US and Canada, but you've
Speaker 3: kind of been leading the team that's been covering this
Speaker 3: around the clock, and the impact on this industry has
Speaker 3: been very big. We've got a new story out in
Speaker 3: the turn of this morning. Just summarize it for us.
Speaker 12: Yeah, I mean this came at a really inopportune time
Speaker 12: on the juneteenth, Holladay. You know, for car dealers, you know,
Speaker 12: a day when a lot of their customers or would
Speaker 12: be customers, you know, have more time to go through
Speaker 12: the rigamarole of of buying a new car or getting
Speaker 12: their their current vehicle service. For their software system to
Speaker 12: go down has been extremely disruptive. We also have you know,
Speaker 12: an end of quarter push that we're in the midst of,
Speaker 12: which you know, retailers do want to sort of close
Speaker 12: deals before the end of the month, before the end
Speaker 12: of the quarter. So this has been a really disruptive
Speaker 12: attack because there's only a handful of these companies that
Speaker 12: provide these dealership management systems that CDK is one of
Speaker 12: the leading providers of, So for them to go down
Speaker 12: and not be able to sort of provide those services
Speaker 12: for their many customers really has thrown a wrench in thing.
Speaker 12: So we're hearing from dealers about you know, having to
Speaker 12: gasp close deals with pen and paper as opposed to
Speaker 12: you know, going through their computer system. And you know
Speaker 12: it all right, it takes time to close deals, as
Speaker 12: we know, it's not even in the year twenty twenty
Speaker 12: four a seamless process. This is only throwing sort of
Speaker 12: more of a wrench.
Speaker 4: In things pen and paper. I don't even know what
Speaker 4: that is anymore.
Speaker 3: There is a serious side of this that you know
Speaker 3: in the US and Canada. If I'm a consumer and
Speaker 3: I'm participating in this end of court to sprint to
Speaker 3: get myself a new vehicle, what are the brand names
Speaker 3: involved those impacted? If I think I read Subaru and
Speaker 3: maybe Toyota.
Speaker 12: Yeah, Superu and Toyota at this point, at least out
Speaker 12: of Japan have sort of downplayed this for US, and
Speaker 12: we are touching base with them in the US and
Speaker 12: have heard from the likes of Ford and Volkswagen, Mercedes, BMW,
Speaker 12: all of those last few companies I mentioned have confirmed
Speaker 12: that their dealers u CDK. They're not necessarily being particularly
Speaker 12: forthcoming at this juncture about how many of their dealers
Speaker 12: are affected, but this is a substantial number because again,
Speaker 12: you know, this is a space, you know, a sort
Speaker 12: of sliver of the auto retailing industry where there's been
Speaker 12: a lot of consolidation over the years. So you only
Speaker 12: have a handful of companies that aren't necessarily household names
Speaker 12: that provide this really important sort of you know, piping
Speaker 12: that that makes everything work. So you know, we've heard
Speaker 12: again from from dealers also talking about challenges with lining
Speaker 12: up credit, having to sort of, you know, themselves make
Speaker 12: judgments as to whether or not, you know, somebody is
Speaker 12: worthy of a loan by sort of cobbling together what
Speaker 12: information they can you know, parts repairs and not being
Speaker 12: able to sort of confirm whether or not a part
Speaker 12: is available for a customer who has a you know,
Speaker 12: jeep say in the shop. So this is is just
Speaker 12: causing a mess. And so if you're a consumer, uh,
Speaker 12: you know, I guess you know. The general sort of
Speaker 12: takeaway here is if you're planning to go to a
Speaker 12: dealership this weekend, maybe hold off on it and wait
Speaker 12: until this storm passes.
Speaker 3: Bloombag's global Calar d It said, Craigs, you down great
Speaker 3: to have you on the program.
Speaker 4: Thank you.
Speaker 3: Let's bring in somebody who knows the automotive space very well.
Speaker 3: Diana Lee is the CEO and co founder of Constellation,
Speaker 3: the leading marketing, technology and data intelligence company in the
Speaker 3: automotive space. Personally have three decades of experience in the
Speaker 3: world of cars, and you know, I think what our
Speaker 3: editor Creag Trudell set out is that the timing of
Speaker 3: this hack is bad because the industry.
Speaker 4: Is under so much pressure.
Speaker 3: What are you hearing from clients, customers, and those who
Speaker 3: work alongside.
Speaker 2: Absolutely, it's just mass chaos at this point. I've been
Speaker 2: in the auto industry since nineteen eighty nine and also
Speaker 2: in retail automotive. In all of those years, I've never
Speaker 2: seen a DMS operating system down. The dealer requires to
Speaker 2: actually run a DMS for sales, service parts, for every
Speaker 2: single functionality, even stocking in a vehicle, you can't do
Speaker 2: without the DMS system. So it is a disaster. I
Speaker 2: feel like it's even worse than COVID when it first
Speaker 2: hit the dealerships because you're not functioning at this point.
Speaker 3: So what you just said really jumps out of me,
Speaker 3: worse than COVID the impact because I remember covering that.
Speaker 3: That was my beat March twenty twenty working for Craig,
Speaker 3: who is my editor. Let me ask you this, if
Speaker 3: you're advising CDK and telling them what to do to
Speaker 3: manage this fallout, what would you suggest.
Speaker 2: I think it's printing services at this point. I know
Speaker 2: that sounds so crazy, but at this point, nobody can
Speaker 2: actually just have a DMS pop up overnight. So there's
Speaker 2: only two other DMS providers that are really known in
Speaker 2: the automotive industry, and it's Techion and Reynolds and Rentals.
Speaker 2: So there is no way that either one of those
Speaker 2: companies could start uploading any type of DMS system for
Speaker 2: any dealers that are down. But printing services is what
Speaker 2: basically anybody can do right now, right which is loading
Speaker 2: up the printing services to allow dealers to be able
Speaker 2: to hand print contracts as well as all the ROS
Speaker 2: repair orders that need to happen right now. So we're
Speaker 2: going back to ancient stages right now, where this is
Speaker 2: what we need to do is print.
Speaker 3: We joked with Craig about the use of pen and paper,
Speaker 3: something we will do a lot less in this day
Speaker 3: and age. There's a serious side of it though, right
Speaker 3: which is the consumer and the consumer psychology. You have
Speaker 3: very high interest rates buying a vehicle, even leasing a
Speaker 3: vehicle is your biggest financial consideration after your home normally,
Speaker 3: and we have what nine days left of June. Do
Speaker 3: you think this is going to have a really big
Speaker 3: impact on sales in the sprint to the finish of
Speaker 3: the quarter.
Speaker 2: It's absolutely going to and I think the only way
Speaker 2: that a lot of these dealers can actually survive right
Speaker 2: now is if they have friends of theirs that already
Speaker 2: have a Renolds or a teching on system where they
Speaker 2: could tell them what the deal structure needs to be,
Speaker 2: so they could actually put something together at least fax
Speaker 2: it to them, email it to them, and then you're
Speaker 2: going to have to handwrite every single contract at this point,
Speaker 2: right But the only way, and I think dealers that
Speaker 2: are super innovative they've called me and they said, I'm
Speaker 2: limping right now.
Speaker 1: Limping.
Speaker 2: I mean, this is some of the biggest dealerships in
Speaker 2: the country that sell fifteen hundred units a month. Their
Speaker 2: service departments are limping at this point. But obviously they
Speaker 2: are like fighters. And I love that about dealers because
Speaker 2: in many ways, think of all the employees that basically
Speaker 2: are also under fire. But if the auto business goes down,
Speaker 2: and this is why I really fighte for dealerships out
Speaker 2: there all the way across, it's all the Americans that
Speaker 2: would also be out of jobs if we always go
Speaker 2: direct to consumer plans and so just discuss modernizing.
Speaker 3: Then the de model, right, I just leased the model.
Speaker 3: Why a couple of months ago. I did it through
Speaker 3: the Tesla app. My credit was approved through the Tesla App.
Speaker 4: I took the wing mirror off.
Speaker 3: After two weeks it was fixed through the Tesla app.
Speaker 3: Is that something that the industry needs to move toward.
Speaker 2: I am not actually a fan of the Tesla model
Speaker 2: in the sense that basically I understand this is a
Speaker 2: direct to consumer model that makes it easier for customers
Speaker 2: to buy a vehicle. But on the other hand, I
Speaker 2: think that the traditional automakers have to improve the customer process.
Speaker 2: But within it, there's so many people that actually support
Speaker 2: the automotive market. Think of all of the families and
Speaker 2: the communities as well as the little leagues and all
Speaker 2: of the different types of charities within every community that
Speaker 2: gets supported by a local dealer. All of that goes
Speaker 2: down if basically we all decide, hey, we want to
Speaker 2: direct a consumer model. What happens the Americans that will
Speaker 2: be out of jobs right now if everything went straight
Speaker 2: direct to consumer? And for me, I really do believe
Speaker 2: in that community atmosphere where we come in. We get
Speaker 2: to know each other, we get to actually service our vehicles,
Speaker 2: but get to know the people within the organization that
Speaker 2: support those communities. So I think there's different types of
Speaker 2: people out there that purchase vehicles, but there's many types
Speaker 2: of customers out there. They must test drive the vehicle,
Speaker 2: look at the vehicle, know the color and the exact
Speaker 2: model that they want before they actually make a purchase,
Speaker 2: and those are not ideal for customers that are direct
Speaker 2: to consumers.
Speaker 3: Diana Lee from Consolation Agency, just great to have you
Speaker 3: back on the program.
Speaker 4: Thank you so much.
Speaker 3: Okay, coming up on the big technology, we're going to
Speaker 3: talk about investing in artificial intelligence with Shedule Shat of
Speaker 3: Index Ventures that's come out next in our VC Spotlight
Speaker 3: and private market focused from minute, this has been back technology.
Speaker 13: One of the things I really get excited about because
Speaker 13: I'm a labor economist by training, and I think a
Speaker 13: lot about the distribution of opportunities across the nation and
Speaker 13: the world, and I think of AI as potentially being
Speaker 13: a great leveler, leveling the playing field, democratizing the expertise
Speaker 13: by giving people a hand up or a leg up
Speaker 13: in terms of starting.
Speaker 3: That was San Francisco FED President Mary Daily weighing in
Speaker 3: with her thoughts on the impacts of our official intelligence
Speaker 3: and I want to get more on that space with
Speaker 3: our VC Spotlight and bringing shad Or Sharp, a partner
Speaker 3: at Index Ventures and Shuttle. It is June twenty first,
Speaker 3: as I've just learned on Google and Wikipedia, Summer Solstice
Speaker 3: the official start of summer. And I'm going to start
Speaker 3: this conversation by asking you, are we in the private
Speaker 3: markets in an AI winter, an AI spring, or an
Speaker 3: AI summer.
Speaker 14: First that thanks very much for having me. That's my pleasure.
Speaker 14: It definitely feels like summer. The sun is shining in ventureland,
Speaker 14: not only in AI but outside. AI is definitely bringing
Speaker 14: a draft in a windfall to different industries, including cloud
Speaker 14: and cyber and it's led by public market companies.
Speaker 1: If you look at a cloud.
Speaker 14: Derivative like Data Dog, which I've served on the board
Speaker 14: of for ten years, they're definitely seeing acceleration and underlying
Speaker 14: markets thanks to the cloud and use of AI driving
Speaker 14: increased compute and increased use of data. Second, in private markets,
Speaker 14: we're definitely seeing market leading companies like Whiz and Data
Speaker 14: Bricks see acceleration in their business thanks to AI. So
Speaker 14: definitely the VC environment is talking about AI.
Speaker 3: I want to look at deal activity in the private markets.
Speaker 3: You just mentioned that the AI summer that we're in
Speaker 3: is kind of led by public names and throughout the
Speaker 3: how we've talked about the concern around valuations, but deal
Speaker 3: activity in the private markets is really interesting to me
Speaker 3: globally in all stages, Like I'm seeing quite a lot
Speaker 3: the growth.
Speaker 4: Stage as well. Do you see that and what do
Speaker 4: you make of it?
Speaker 14: You're right, we're seeing increased activity this year across geographies,
Speaker 14: across stages. Again, outside of AI. Half of the investments
Speaker 14: that we've considered at Index in this year are in
Speaker 14: categories including gaming, infintech, and cybersecurity. So the sun is
Speaker 14: definitely shining outside of AI. Second to your point, it's
Speaker 14: at every stage. We've seen seed investments, early stage Series
Speaker 14: A investments, as well as growth stage opportunities in and
Speaker 14: outside of AI. So deal activity has definitely picked up
Speaker 14: this year.
Speaker 3: You've put a lot of emphasis on security, cybersecurity names.
Speaker 3: Whiz is one of your port photo companies. You are
Speaker 3: significant on the cap table of that company. Why why
Speaker 3: is cybersecurity such a focus? Loads of people come on
Speaker 3: this show actually at the moment and put forward cybersecurity
Speaker 3: is the area that they're most excited about getting a
Speaker 3: boost from AI.
Speaker 14: Yeah, cybersecurity is one of the hottest sectors in tech,
Speaker 14: so it's no surprise that you've had many guests come
Speaker 14: on and talk about it. If you step back, there's
Speaker 14: about two hundred and fifty billion dollars of market cap
Speaker 14: amongst the top four security publicly traded companies. This is CrowdStrike,
Speaker 14: Pelton Network, c Scaler, and cloud Flare. Ten years ago,
Speaker 14: the top four probably represented less than fifty billion dollars
Speaker 14: of market cap. There are four drivers over the last
Speaker 14: decade that have driven this growth. First, we're seeing every
Speaker 14: single day a new global attack. I think on your
Speaker 14: show you've been talking quite a bit today about CDK Global,
Speaker 14: which is just the most recent example. The SEC now
Speaker 14: has disclosure requirements for publicly traded companies. Third, chief security
Speaker 14: officers are under scrutiny and are being held accountable for fraud.
Speaker 14: And fourth, we're seeing hackers actually tell the SEC when
Speaker 14: they've created a material breach. As a consequence, we're seeing
Speaker 14: an enormous amount of activity in private markets. We've seen
Speaker 14: an explosion of startups. There's now over ten thousand companies
Speaker 14: that are trying to build new businesses to meet the
Speaker 14: needs of customers. At Index we focused on kind of
Speaker 14: two primary themes. One are founders that are obsessed with
Speaker 14: the problems of their customers and second, founders that are
Speaker 14: looking to build coherent platforms to meet the needs of organizations.
Speaker 14: Just as one example to your point on Summer, I
Speaker 14: feel like every small and medium business in the world
Speaker 14: should have insurance. Without insurance, it's like going to the
Speaker 14: beach without sunscreen. You're bound to get burned with enough exposure,
Speaker 14: and so we invested in the category leading cyber insurance
Speaker 14: Company Coalition, which is addressing the needs of small and
Speaker 14: medium companies. On the other hand, enterprises have been served
Speaker 14: by large and growing security companies for over a decade.
Speaker 14: What's different now is the requirement for a coherent platform
Speaker 14: versus kind of a frankensteign that acquires their way to
Speaker 14: creating a collection of solutions and their in laws Whiz,
Speaker 14: which to your point, just started four years ago but
Speaker 14: has become the fastest growing software company of all time
Speaker 14: because of a strong point of view on a product
Speaker 14: that meets the needs of customers.
Speaker 3: A lack of cyberse security is like going to the
Speaker 3: beach without sunscreen. Which on this the official Summer Solstice
Speaker 3: and the aisum are in is an interesting point of view.
Speaker 3: Shout or sharp index beens is great to have you
Speaker 3: on the program. Bitcoin slump to are more than one
Speaker 3: month low with this year's record breaking rally showing signs
Speaker 3: of fatigue in the absence of Frankly fresh Market Cassis says,
Speaker 3: break it all down with Bloomberg Bloomberg Intelligence on this. Sorry,
Speaker 3: Jane Seafert, Sorry, it's been a long short week for me.
Speaker 3: I'm trying to think about what's going on, like in
Speaker 3: the markets generally speaking, maybe some risk appetites come off
Speaker 3: the table triple witching, but there is this kind of
Speaker 3: close or opposite correlation with the equity markets. That's what
Speaker 3: I've read. What's your analysis.
Speaker 7: Yeah, I mean, no matter how you look at it,
Speaker 7: the I don't even know what the word of the
Speaker 7: appetite for bitcoin exposure has slumped a lot.
Speaker 1: Of people were talking about trying to understand.
Speaker 7: So the last few weeks we saw billions file into
Speaker 7: those bitcoin ETFs and the price really wasn't moving. A
Speaker 7: lot of that we think had to do with like
Speaker 7: potentially futures trading and basically arbitrage trading with the futures market.
Speaker 7: But the last week, the last seven ish trading days,
Speaker 7: we've seen a total of about a billion dollars flow
Speaker 7: out at the ETFs. Risk appetite on the crypto markets
Speaker 7: has kind of slumped off. I mean, if you look
Speaker 7: at all the all coins and all the stuff that
Speaker 7: we don't really tend to talk about, those have been
Speaker 7: far worse than the likes of ethereum and bitcoin. But
Speaker 7: what we're paying attention to right now is we're expecting
Speaker 7: those Ethereum ETFs to get approval at some point from
Speaker 7: the SEC over the final approval to launch at some
Speaker 7: point in the next couple of weeks. I think there's
Speaker 7: just kind of a malaise going on in the market
Speaker 7: right now, and it's pretty standard. I mean, honestly, everyone's
Speaker 7: used to these massive run ups, but also there's there's
Speaker 7: corrections and run and turnbacks at different times.
Speaker 3: That's the functioning of the market. I still follow the
Speaker 3: headlines a lot. One that hit last night was that
Speaker 3: micro Strategy had used the proceeds from a convert to
Speaker 3: buy seven hundred and eighty six million dollars of bitcoin.
Speaker 3: And we've reflected a lot in the last few weeks,
Speaker 3: like it's quite a liquid market and correct me if
Speaker 3: I'm wrong, But does a headline like that have impact
Speaker 3: on the market at large?
Speaker 1: I mean it used to.
Speaker 7: I mean you when you when Michael Saler was announcing
Speaker 7: and micro Strategy was announcing these massive, multi one hundred
Speaker 7: million dollar buys of bitcoin, it was impacting the markets.
Speaker 7: I think it kind of almost shows the maturity of
Speaker 7: the market that this they just took. They finished this
Speaker 7: closing of those converts and then just dumped seven hundred
Speaker 7: and eighty million dollars or whatever, I don't know the
Speaker 7: exact number you said into the market over the last
Speaker 7: week or so, and the market is still down decently
Speaker 7: off it's it's all time highs, almost ten thousand dollars off.
Speaker 7: It's all time highs. And I think that just shows
Speaker 7: the liquidity and depth of this market at this point.
Speaker 7: Is as far as I'm concerned.
Speaker 3: Seven hundred and eighty six million dollars was the number
Speaker 3: that I said. Bloomberg Intelligence Handlist James Seth, Happy Friday.
Speaker 3: Thank you appreciate the breakdown that does it for this
Speaker 3: edition of Bloomberg Technology.
Speaker 4: It was a short week in the US.
Speaker 3: Wednesday was a holiday, but a busy week all the
Speaker 3: same recap. The podcasts get involved in the pod it
Speaker 3: on Apple, Spotify, iHeart and the Tech pod is also
Speaker 3: of course on all the Bloomberg platforms. It's good to
Speaker 3: be back here in San Francisco with you. A big
Speaker 3: week coming up next week, AI Bitcoin Space, all of
Speaker 3: that's to come. There's beautiful San Francisco, Happy Friday. This
Speaker 3: is Bloombo Technology