WEBVTT - Bloomberg Businessweek Weekend - March 8th, 2024 0:00:02.600 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:08.160 --> 0:00:16.639 This is the podcast Spotlight Hour on Bloomberg Radio. This 0:00:17.280 --> 0:00:21.400 is Bloomberg business Week inside from the reporters and editors 0:00:21.440 --> 0:00:25.119 who bring you America's most trusted business magazine plus global 0:00:25.239 --> 0:00:29.520 business finance and tech news. The Bloomberg Business Week Podcast 0:00:29.800 --> 0:00:33.840 with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:34.920 --> 0:00:38.040 Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. Well, 0:00:38.120 --> 0:00:41.519 we got another round of closely watched US economic reports 0:00:41.520 --> 0:00:45.000 this week on inflation, retail sales, and consumer sentiment to 0:00:45.080 --> 0:00:48.720 name a few. Bottom line tim the data really continuing 0:00:48.720 --> 0:00:52.760 to come in mixed, also showing persisting inflation and a 0:00:52.840 --> 0:00:55.760 miss on retail sales. So with that is our backdrop, 0:00:55.840 --> 0:00:59.200 Julie Van Allen, chief Revenue Officer over at Rakatin, stop 0:00:59.200 --> 0:01:01.720 by with some thoughts on the US consumer. 0:01:01.560 --> 0:01:04.120 Plus Boeing in the news again this week as many 0:01:04.240 --> 0:01:07.200 questions remain and it continues to face a fallout over 0:01:07.200 --> 0:01:10.319 a January accident in which the panel covering on an 0:01:10.400 --> 0:01:13.520 unused door on a Boeing seven thirty seven Max nine 0:01:13.680 --> 0:01:17.679 blew open during a flight. Those Boeing struggles giving Airbus 0:01:17.720 --> 0:01:19.440 a chance at aviation dominance. 0:01:19.520 --> 0:01:22.280 Yeah, headlines right, just continuing to cross. All right. The 0:01:22.360 --> 0:01:25.360 Chip War also on, as you know, as tensions escalate 0:01:25.400 --> 0:01:28.000 between the US and China. Chris Miller, New York Times 0:01:28.080 --> 0:01:30.240 bestselling author of Chip War, The Fight for the World's 0:01:30.240 --> 0:01:33.640 Most Critical Technology, will be with us later this hour. 0:01:33.840 --> 0:01:35.679 All of that to come. We begin with a quick 0:01:35.760 --> 0:01:38.680 check on the US consumer courtesy of the free app 0:01:38.720 --> 0:01:41.800 and a browser that provides coupons and discounts where shoppers 0:01:41.800 --> 0:01:45.000 are in cash back on purchases. More with Julie Van Ollen, 0:01:45.200 --> 0:01:48.160 chief revenue officer at Rakkaton, who we got up with 0:01:48.480 --> 0:01:51.400 just before this week's weaker than expected retail sales report. 0:01:52.360 --> 0:01:54.600 I mean, the trend continues where we got to wake 0:01:54.680 --> 0:01:57.520 up every day and see what's going on. It is 0:01:57.600 --> 0:02:01.000 still our moment is still that of pivoting and understanding 0:02:01.000 --> 0:02:04.040 what is the consumer doing today? And what I can 0:02:04.120 --> 0:02:07.320 say is that inflation continues to increase, as we all know, 0:02:07.920 --> 0:02:12.919 particularly in areas that impact the consumer gas, energy rent prices, 0:02:13.400 --> 0:02:16.880 and that really highlights a potentially negative impact on retailers 0:02:17.000 --> 0:02:22.000 as these consumers effectively look to save money. Now, saving 0:02:22.080 --> 0:02:24.919 money can come in all sorts of different forms. As 0:02:24.960 --> 0:02:30.680 we know, Raqutan offers a really valuable offering to our 0:02:30.800 --> 0:02:35.440 retailers and brands by way of giving value to consumers 0:02:35.520 --> 0:02:39.080 as cash back. Right, so we're very well positioned for 0:02:39.120 --> 0:02:43.400 a moment like this that we're calling cautiously out shopping 0:02:43.680 --> 0:02:47.160 last year is what we're seeing on our platform, largely 0:02:47.240 --> 0:02:50.360 driven by the fact that consumers do still seem to 0:02:50.400 --> 0:02:53.400 be interested in spending and from what we see actually 0:02:53.440 --> 0:02:58.680 out spending last year, but very much associated with categories 0:02:58.720 --> 0:03:01.079 and brands who are offering them the value that they're 0:03:01.080 --> 0:03:01.560 looking for. 0:03:01.760 --> 0:03:03.480 What are some of those categories, What are some of 0:03:03.480 --> 0:03:06.040 those brands if you can dig a little deeper into 0:03:06.080 --> 0:03:06.639 the data. 0:03:06.440 --> 0:03:11.000 Here, So the categories who have really leaned in heavily 0:03:11.160 --> 0:03:15.000 understanding that the consumer of today is looking for value 0:03:15.040 --> 0:03:18.360 and who have increased cash back rates over last year. 0:03:18.440 --> 0:03:22.760 We see the pets category doing extremely well, having grown 0:03:22.919 --> 0:03:26.920 over one hundred percent in trips year over year. We 0:03:27.000 --> 0:03:31.400 also see appliances in hardware, they're seeing an increase of 0:03:31.720 --> 0:03:37.920 twelve percent in average order value. Marketplaces also doing extremely well. 0:03:38.560 --> 0:03:42.840 Home and garden and travel is a real standout because 0:03:42.880 --> 0:03:46.000 typically Q one is a very promotional period for travel, 0:03:46.040 --> 0:03:49.480 and they spend quite a lot to lower consumers their 0:03:49.520 --> 0:03:52.480 way in Q one anyway, and this Q one has 0:03:52.560 --> 0:03:56.000 kind of not been too different, except there's even more 0:03:56.120 --> 0:04:01.280 leaning into those higher cash back rates to achieve the 0:04:01.360 --> 0:04:04.560 high price point purchases that they're looking for. And the 0:04:04.600 --> 0:04:07.480 travel has increased twenty two percent year over year for 0:04:07.600 --> 0:04:08.680 US in terms of trips. 0:04:08.880 --> 0:04:10.839 So when you say they're leaning in more to get 0:04:10.880 --> 0:04:14.560 that spend, I guess in their basket to get the 0:04:14.600 --> 0:04:18.160 cash back. So does that mean the retailer who's ever 0:04:18.240 --> 0:04:20.359 offering up the deal is in the driver's seat or 0:04:20.400 --> 0:04:22.880 is the consumer in the driver's seat because they're pushing 0:04:23.000 --> 0:04:26.039 for a better and better deal because they kind of 0:04:26.120 --> 0:04:26.480 need to. 0:04:27.120 --> 0:04:29.240 Well, it's a great question, and it's two sides of 0:04:29.279 --> 0:04:31.960 the same coin, you know. I think the consumers are 0:04:32.120 --> 0:04:34.839 if you look at this data, they're very clearly saying 0:04:35.360 --> 0:04:38.680 I have the money, and I will buy from retailers 0:04:38.680 --> 0:04:41.760 and brands who are willing to deliver me value. And 0:04:41.960 --> 0:04:45.120 I think the categories and brands who are doing well 0:04:45.160 --> 0:04:47.280 like the data we just reviewed, are the ones who 0:04:47.279 --> 0:04:50.920 are listening to that message and are reacting by offering 0:04:51.279 --> 0:04:55.600 higher cash back rates because it really is within their power, 0:04:55.640 --> 0:04:59.120 the brand and the retailer's power to use Racketin to 0:04:59.200 --> 0:05:01.400 offer more back to their shoppers. 0:05:02.200 --> 0:05:06.360 What typically proceeds a slowdown in consumer spending? Like, what 0:05:06.360 --> 0:05:08.800 are the signals that you could be looking for right 0:05:08.839 --> 0:05:11.080 now in the data that you have that would say, okay, well, 0:05:11.320 --> 0:05:13.040 the economy is indeed slowing down. 0:05:14.320 --> 0:05:16.880 I would say, which is something that we're not seeing today, 0:05:17.120 --> 0:05:19.720 is that if you are in a challenged economic moment 0:05:19.760 --> 0:05:23.000 where inflation continues, and you have a brand like Racketon, 0:05:23.080 --> 0:05:27.440 who has an offering that allows retailers to provide the 0:05:27.560 --> 0:05:29.680 value to the shoppers that they're looking for and that 0:05:29.760 --> 0:05:33.160 isn't working, that would probably be a sign that consumers 0:05:33.240 --> 0:05:36.280 really are pulling back. But we see the exact opposite 0:05:36.320 --> 0:05:39.680 that versus last year, brands are investing and shoppers are 0:05:39.720 --> 0:05:41.160 responding and outspending. 0:05:41.839 --> 0:05:44.760 Julie Van Allen, chief revenue officer at Racketin. 0:05:44.520 --> 0:05:46.320 All right now to a week that was also chuck 0:05:46.360 --> 0:05:48.839 full of news on Boeing. The full rundown, of course, 0:05:48.839 --> 0:05:50.960 can be found at Bloomberg dot com. Of note, though, 0:05:51.320 --> 0:05:54.200 the US Federal Trade Commission Chair Lena Kahan saying in 0:05:54.240 --> 0:05:56.839 a speech that Boeing became too big to fail after 0:05:56.920 --> 0:06:00.480 bought up domestic competitors and became the country's largest commercial 0:06:00.520 --> 0:06:04.760 aerospace maker. Meantime, Bloomberg News reported the Justice Department this 0:06:04.839 --> 0:06:07.359 week convened a grand jury as part of a criminal 0:06:07.400 --> 0:06:09.640 investigation into that mid air blowout. 0:06:09.800 --> 0:06:12.760 The controversy has become an opportunity for the company's loan 0:06:12.839 --> 0:06:15.840 major competitor, air Bus, and this is the topic of 0:06:15.880 --> 0:06:18.839 a story in the current issue with Bloomberg BusinessWeek. BusinessWeek 0:06:18.880 --> 0:06:21.679 Assistant managing editor Jim Ellis joins us with more. 0:06:22.040 --> 0:06:26.080 To change aircraft makers is a big deal for the airline, 0:06:26.440 --> 0:06:29.200 But we've gotten to a moment now where there's so 0:06:29.400 --> 0:06:32.880 much bad news. There's a lot of questioning about the 0:06:33.000 --> 0:06:36.760 quality of Boeing's equipment right now. That it comes at 0:06:36.760 --> 0:06:40.000 a particularly bad time for Boeing simply because a lot 0:06:40.040 --> 0:06:41.719 of people are starting to think of a lot of 0:06:41.720 --> 0:06:45.360 airlines are starting to think about the next generation of aircraft, 0:06:45.720 --> 0:06:48.159 and you know, a lot of people say, well, you 0:06:48.160 --> 0:06:50.680 know things are happening now, everybody's going to jump and 0:06:50.800 --> 0:06:53.760 run to Boeing. It's very run away from Boying. It's 0:06:53.839 --> 0:06:56.280 very difficult to do simply because you know, as you said, 0:06:56.560 --> 0:06:58.800 your crews are trained on that, and you've made these 0:06:58.960 --> 0:07:03.360 multi billion dollar investments. But what's at stake here is 0:07:03.400 --> 0:07:07.360 the next generation of planes. What happens is that because 0:07:07.560 --> 0:07:10.080 in the airline business you can use a piece of 0:07:10.120 --> 0:07:15.320 aircraft for decades, you don't make these decisions to change lightly. 0:07:15.400 --> 0:07:18.680 So instead it's time to think about the next generation. 0:07:18.800 --> 0:07:21.920 And so what Airbus is doing now is they're going 0:07:22.000 --> 0:07:26.240 to have some room to go ahead and say, I'm 0:07:26.240 --> 0:07:27.800 going to come up with a new plane at a 0:07:27.840 --> 0:07:31.800 time when Boeing is so, you know, sort of troubled, 0:07:32.080 --> 0:07:35.120 and so can consumed with thinking about how can it 0:07:35.200 --> 0:07:38.520 deal with its quality problems? How can it also deal 0:07:38.560 --> 0:07:40.640 with its balance sheet problems. I mean, Boeing is in 0:07:40.720 --> 0:07:42.600 the point right now where it doesn't have a lot 0:07:42.600 --> 0:07:46.480 of financial flexibility to build a new plane. And so Airbus, however, 0:07:46.840 --> 0:07:50.120 is probably about a fifty billion dollars advantage over it 0:07:50.160 --> 0:07:52.640 from a dead standpoint, and so they can move ahead 0:07:52.880 --> 0:07:55.800 and start planning for the next generation and sort of 0:07:55.840 --> 0:07:58.400 seal this dominance that they're probably going to have with 0:07:58.480 --> 0:07:59.320 the aircraft business. 0:07:59.360 --> 0:08:01.200 Jim tell us how fortunes can change, and I love 0:08:01.200 --> 0:08:03.040 how the story starts and you guys go back to 0:08:03.120 --> 0:08:05.280 nineteen eighty seven. If we can all remember back then, 0:08:05.400 --> 0:08:08.960 it's a while. It's a while, but talk about what 0:08:09.240 --> 0:08:11.480 happened and how that may be set the stage for 0:08:11.520 --> 0:08:12.679 where Airbus is today. 0:08:12.720 --> 0:08:15.200 Yeah, I mean what happened is a lot of people 0:08:15.280 --> 0:08:18.240 thought when Airbus decided to bring out it's a three 0:08:18.360 --> 0:08:22.960 twenty narrow body airline airliner. The people thought, oh, we're 0:08:22.960 --> 0:08:24.920 gonna do that. I mean, we've got the seven thirty seven. 0:08:24.960 --> 0:08:28.360 The seven thirty seven was rules the skies, and they 0:08:28.360 --> 0:08:30.920 come out with this A three twenty. They have a 0:08:30.960 --> 0:08:33.480 great party, they have, you know, sort of Prince Charles 0:08:33.559 --> 0:08:36.000 at that time with Lady Diana. I mean, it's big, 0:08:36.040 --> 0:08:39.440 big deal, fireworks and everything, and everybody says that's not 0:08:39.480 --> 0:08:42.360 going anywhere. You cannot beat them. They and at that 0:08:42.480 --> 0:08:46.240 time Boeing had ten times as many seven thirty sevens 0:08:46.240 --> 0:08:49.520 popping out than A three twenties. Fast forward to today 0:08:50.040 --> 0:08:53.240 and the A three twenty has become the best selling 0:08:53.440 --> 0:08:57.360 commercial aircraft of all time. I mean, that's that's a 0:08:57.400 --> 0:09:01.400 big deal, given that Bowe had commanded that market for 0:09:01.440 --> 0:09:04.200 so long, and the seven thirty seven has been a 0:09:04.400 --> 0:09:07.240 major player in aircraft for almost a half century. 0:09:07.440 --> 0:09:10.240 How much of that is the mistakes and problems that 0:09:10.280 --> 0:09:12.319 Boeing has had. How much of is it just folks 0:09:12.360 --> 0:09:14.800 started to kind of really like the A three twenty 0:09:14.960 --> 0:09:16.240 and shit their ordering books. 0:09:16.320 --> 0:09:18.360 A lot of it is that the A three twenty 0:09:18.520 --> 0:09:21.680 just sort of came in with a lot of innovations 0:09:21.720 --> 0:09:25.120 that you know, customers connected with what they call fly 0:09:25.200 --> 0:09:29.080 by wire, that sort of joystick, sort of all electronic cockpit, 0:09:29.400 --> 0:09:32.280 the idea that it was a slightly larger plane, which 0:09:32.320 --> 0:09:35.360 then set off this whole thing of continually making these 0:09:35.400 --> 0:09:37.280 planes bigger and bigger and bigger and bigger. 0:09:37.400 --> 0:09:38.599 I'm measure how big my seed is. 0:09:38.600 --> 0:09:40.600 I don't know about you guys that I know it 0:09:40.720 --> 0:09:43.200 turned out that they were in the right place at 0:09:43.200 --> 0:09:46.360 the right time. But they were also extremely you know, 0:09:46.400 --> 0:09:49.040 because they didn't have an older model that they were 0:09:49.080 --> 0:09:52.760 basically just retrofitting, they could think differently. They sort of 0:09:52.800 --> 0:09:54.960 took it and they ran with it, and now they're 0:09:55.000 --> 0:09:57.840 in a position to think about the next generation of 0:09:57.880 --> 0:10:02.440 airplanes that can find on sustainable fuel, that can do 0:10:02.559 --> 0:10:06.240 all sorts of you know, sort of electronic things in 0:10:06.280 --> 0:10:09.280 the cockpit. But also can take structures of airliners in 0:10:09.320 --> 0:10:11.880 a different way. They're planning a plane now for this 0:10:11.960 --> 0:10:14.880 next generation that has a wing that's shaped like a 0:10:14.920 --> 0:10:18.480 bird's wing that can actually change its shape and flight. 0:10:18.880 --> 0:10:22.280 And also because airports weren't built for these new giant 0:10:22.320 --> 0:10:25.800 planes that we're building now, they're going to have aircraft 0:10:25.840 --> 0:10:28.000 with the wing tips that fold up so you can 0:10:28.040 --> 0:10:30.000 still put it in the same place. But you know, 0:10:30.040 --> 0:10:32.760 and then we pulled away from the onto the Tormac 0:10:33.000 --> 0:10:36.000 flip the wings out. It's I mean, they are basically 0:10:36.040 --> 0:10:39.440 taking advantage of what they have right now, wh's a 0:10:39.480 --> 0:10:43.120 lot of money as well as not the look of 0:10:44.280 --> 0:10:46.079 all the stock markets saying, oh my god, you're a 0:10:46.160 --> 0:10:48.320 terrible company, you know, which is what Boeing has to 0:10:48.360 --> 0:10:49.000 deal with right now. 0:10:49.040 --> 0:10:51.120 Well, just like in the late nineteen eighties when Airbus 0:10:51.160 --> 0:10:54.439 was the upstart against Boeing, now there's another upstart out 0:10:54.480 --> 0:10:58.480 there that should have what, for practical purposes is a 0:10:58.559 --> 0:11:01.800 duopoly between Airbus and boone right but may not be forever. 0:11:02.440 --> 0:11:04.160 Enter what China has. 0:11:04.080 --> 0:11:08.120 Komac, China's aircraft company, which a lot of people in 0:11:08.160 --> 0:11:11.200 the West don't know because it has only so far 0:11:11.320 --> 0:11:15.199 built planes for Chinese carriers. But the thing to remember 0:11:15.480 --> 0:11:20.199 is that Chinese carriers have become major purchasers of Western aircraft. 0:11:20.480 --> 0:11:24.040 Most of the aircraft flown by the big three Chinese 0:11:24.080 --> 0:11:27.840 airlines are you know, Boeing or air Bus, and however 0:11:28.040 --> 0:11:31.440 a big percentage of the order books for these American 0:11:31.559 --> 0:11:35.199 and European companies come from Chinese airlines. Now China has 0:11:35.200 --> 0:11:38.600 decided it wants to be a player in the aircraft business. 0:11:38.679 --> 0:11:40.640 It feels like, why are they giving all this money 0:11:40.640 --> 0:11:42.720 to the West. They want to take that doopoly and 0:11:42.760 --> 0:11:46.440 make it into a triopoly, and that has got to 0:11:46.440 --> 0:11:49.319 be a frightening thing for Boeing especially. 0:11:49.440 --> 0:11:52.480 Can they pull that off outside of China in that 0:11:52.920 --> 0:11:57.480 wood regulators in the US and Europe well foreseeably approve. 0:11:57.880 --> 0:12:01.320 That's the question. And part of that is, you know, 0:12:01.480 --> 0:12:03.720 safety issue. Part of that is just engineering issue, and 0:12:03.720 --> 0:12:06.360 part of that is a political issue, you know, in 0:12:06.360 --> 0:12:09.719 the sense that you know, can China build an aircraft 0:12:09.720 --> 0:12:11.480 that flies? I mean they're doing it now, I mean 0:12:11.480 --> 0:12:14.880 the doing it for Chinese airlines, and they finally have 0:12:15.760 --> 0:12:19.400 gotten non Chinese airline though it's to bed air you know. 0:12:19.520 --> 0:12:22.480 That's but then they are also marketing it now to 0:12:22.559 --> 0:12:26.280 Western aircraft and they will find some sales there, but 0:12:26.360 --> 0:12:30.120 the issue becomes one of whether they want to take 0:12:30.240 --> 0:12:33.320 more of their own cares and sort of persuade them 0:12:33.400 --> 0:12:36.760 to buy Chinese and if they do that, that takes 0:12:36.800 --> 0:12:39.840 away a lot of the sort of extra stuff in 0:12:39.960 --> 0:12:43.520 the art books of the Western aircraft makers. 0:12:43.400 --> 0:12:46.640 Are Thanks to Bloomberg businesswek Assistant Managing editor Jim Alis. 0:12:46.800 --> 0:12:49.240 You can read this story and more out on newsstands now, 0:12:49.320 --> 0:12:51.520 on the Bloomberg terminal or at Bloomberg dot com. 0:12:51.520 --> 0:12:54.440 Slash BusinessWeek coming up, how global companies are fighting for 0:12:54.480 --> 0:12:57.880 the world's most critical technology, Navigating the chip boards with 0:12:57.960 --> 0:13:00.439 Chris Miller, author of a book by the same name. 0:13:00.720 --> 0:13:03.959 You're listening to Bloomberg Business Week. This is Bloomberg. 0:13:05.640 --> 0:13:09.160 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:09.200 --> 0:13:12.439 live weekday afternoons from two to five pm. Easter Listen 0:13:12.480 --> 0:13:14.640 on Apple card Play and then brout Auto with a 0:13:14.679 --> 0:13:17.719 Bloomberg Business Act or watch us live on YouTube. 0:13:19.160 --> 0:13:21.439 All Right news this past week, the Pentagon pulling out 0:13:21.440 --> 0:13:22.839 of a plan to spend as much as two and 0:13:22.840 --> 0:13:25.120 a half billion dollars on a chip grant to Intel. 0:13:25.280 --> 0:13:28.079 This is Chinese Premier Lee Chiong made the rounds of 0:13:28.160 --> 0:13:30.960 China's top AI and chip equipment firms over in China, 0:13:31.480 --> 0:13:35.040 calling for accelerating investments in those areas. The back and 0:13:35.080 --> 0:13:38.080 forth continued. We should point out Intel still gets money 0:13:38.080 --> 0:13:40.520 from the government under the Chips Act. But things are 0:13:40.760 --> 0:13:41.480 changing a little bit. 0:13:41.600 --> 0:13:43.719 Yeah, they certainly are. And then last week the US 0:13:43.800 --> 0:13:47.200 government pressed allies to further titan restrictions on China's access 0:13:47.240 --> 0:13:50.600 to semiconductor technology. Always a lot going on in the 0:13:50.600 --> 0:13:53.160 semiconductor space, you can count on that. And so we 0:13:53.240 --> 0:13:56.240 recently caught up again with Chris Miller, Associate Professor of 0:13:56.280 --> 0:13:58.439 International History at Tufts University. 0:13:58.600 --> 0:14:00.640 Timmy always remind us Chris was way ahead of the 0:14:00.640 --> 0:14:02.240 curve when it comes to the global battle in the 0:14:02.320 --> 0:14:04.439 chip space. He is the author of the New York 0:14:04.480 --> 0:14:07.240 Times bestseller Chip War, The Fight for the World's Most 0:14:07.240 --> 0:14:10.240 Critical Technology. The book came out in twenty twenty two. 0:14:10.920 --> 0:14:14.600 We began our conversation with Chris, like most do these days, 0:14:14.720 --> 0:14:18.920 on the growth of artificial intelligence and why chips semiconductors 0:14:19.000 --> 0:14:20.280 serve such a critical role. 0:14:21.000 --> 0:14:24.400 AI has really transformed the ship industry. It's the key 0:14:24.520 --> 0:14:29.080 demand driver going forward, and the big question hanging over 0:14:29.200 --> 0:14:33.280 AI is when will we start to see large scale modernization, 0:14:33.640 --> 0:14:37.280 How soon will that happen, and at what's scaled? Because ultimately, 0:14:37.320 --> 0:14:40.760 the reason why all the hyperscalers are investing tens of 0:14:40.760 --> 0:14:44.520 billions of dollars and building up AI infrastructure and buying 0:14:44.920 --> 0:14:47.720 lots of video GPUs is because they believe there's money 0:14:47.760 --> 0:14:50.040 that will be made at the end of this process. 0:14:50.080 --> 0:14:53.680 And that's why questions like well, how much does Microsoft 0:14:53.720 --> 0:14:57.200 makeoff copilot or what does open AI's revenue look like? 0:14:57.280 --> 0:14:59.880 These are the key indicators that investors are looking at 0:15:00.040 --> 0:15:02.920 to assess what will be the implication of AI for 0:15:03.080 --> 0:15:03.920 corporate profits. 0:15:04.080 --> 0:15:06.240 Well, Chris, how do you distinguish between the names and 0:15:06.280 --> 0:15:08.800 the space? You've got the once giants or leaders. I'm 0:15:08.800 --> 0:15:12.240 thinking of Intel, Texas Instruments, the new leaders, Nvidia, AMD 0:15:12.360 --> 0:15:16.040 has come so far, the company that seems to stand alone, TSMC, 0:15:17.320 --> 0:15:19.840 the semic and depwork companies, the equipment makers, Like, how 0:15:19.880 --> 0:15:22.560 do you distinguish How should the Bloomberg audience be thinking 0:15:22.600 --> 0:15:24.800 about a space that's got a lot of different names 0:15:24.800 --> 0:15:25.440 in them. 0:15:26.120 --> 0:15:29.200 Well, the good news is that as AI advances you 0:15:29.240 --> 0:15:32.960 actually need more types of chips in larger quantities to 0:15:33.000 --> 0:15:35.640 take advantage. It's not just the AI processors that you 0:15:35.760 --> 0:15:39.200 need that in Vidia produces. It's also more memory, especially 0:15:39.280 --> 0:15:42.200 the high bandwidth memory produced by companies like Skahi x 0:15:42.360 --> 0:15:45.320 or Examsung. And you also end up needing more mixed 0:15:45.320 --> 0:15:47.640 signal and analog chips because these are the chips that 0:15:47.760 --> 0:15:52.200 collect the data that's then being processed by AI systems 0:15:52.200 --> 0:15:55.280 and semi autonomous cars, for example. So that's why the 0:15:55.840 --> 0:15:58.720 boom and AI has benefited most companies in the industry, 0:15:58.760 --> 0:16:01.600 even if they're not directly producing the GPUs that are 0:16:01.880 --> 0:16:04.800 at the center of AI. And it's also why it's 0:16:04.840 --> 0:16:07.320 not just the chip designers themselves, it's also the tool 0:16:07.360 --> 0:16:10.800 makers from ASML to apply materials that are benefiting as 0:16:10.920 --> 0:16:14.240 chip making companies buy even more tools. But ultimately all 0:16:14.320 --> 0:16:16.600 of these do depend on their end customers continuing to 0:16:16.640 --> 0:16:19.120 invest in more and more semi conductors, and that's where 0:16:19.480 --> 0:16:23.640 the capital expenditure decisions of the big tech firms Microsoft, Google, 0:16:23.680 --> 0:16:27.160 Amazon and others will be e to sustaining this level 0:16:27.200 --> 0:16:28.280 of investment going forward. 0:16:28.680 --> 0:16:30.520 Chris, I want to go back to monetization and I'm 0:16:30.520 --> 0:16:32.080 so glad you brought it up, because it's something that 0:16:32.520 --> 0:16:35.280 we talk about a lot. We understand the beneficiaries on 0:16:35.280 --> 0:16:37.920 the chip side of AI, but at the same time, 0:16:37.960 --> 0:16:40.640 we do see company stocks near all time highs for 0:16:40.680 --> 0:16:44.000 companies investing in this type of technology, including meta platforms, 0:16:44.200 --> 0:16:47.840 Microsoft on the private side, Open ai, and others. What 0:16:47.880 --> 0:16:50.680 are the indications to you that we are seeing monetization 0:16:50.720 --> 0:16:53.800 at this point and when, in your opinion, do you 0:16:53.840 --> 0:16:56.760 think we're going to start seeing real efficiencies as the 0:16:56.800 --> 0:16:58.040 result of AI. 0:16:59.280 --> 0:17:01.080 Well, I think the news is that if you look 0:17:01.080 --> 0:17:03.920 across a much broader cross section of companies take the 0:17:03.920 --> 0:17:07.199 four to five hundred in aggregate, most companies on that 0:17:07.320 --> 0:17:10.600 list are at least exploring ways that they can use AI, 0:17:10.800 --> 0:17:14.200 either to refine their products or to drive down costs. 0:17:14.240 --> 0:17:15.800 And so the key it's not going to be I 0:17:15.800 --> 0:17:18.840 don't think any individual company or even any individual sector 0:17:18.880 --> 0:17:21.800 it's going to be and many different sectors learn to 0:17:21.880 --> 0:17:25.280 apply AI for many different use cases and that makes 0:17:25.280 --> 0:17:28.560 it harder to measure, but it also makes AI probably 0:17:28.600 --> 0:17:30.960 more sustainable in the long run if it's not one 0:17:31.040 --> 0:17:34.240 or two killer applications, but rather a lot of uses 0:17:34.280 --> 0:17:38.040 that end up being a creative either to company's profits 0:17:38.119 --> 0:17:41.800 or to driving down their costs. But for investors looking 0:17:41.840 --> 0:17:44.040 at this base trying to understand how real is this 0:17:44.200 --> 0:17:47.000 and how sustainable is the investment, it means you've got 0:17:47.000 --> 0:17:49.520 to look at a much broader cross section of companies 0:17:49.600 --> 0:17:53.760 to ascertain where is AI actually gaining traction and how. 0:17:53.600 --> 0:17:57.040 Do you roll into something like you know, Apple's making tips, 0:17:57.080 --> 0:18:01.280 Microsoft alphabet Google. Right, I think it's just kind of 0:18:01.280 --> 0:18:03.880 getting crowded, you know, more crowded if you will. I mean, 0:18:03.880 --> 0:18:08.159 how do you roll those guys into the already established players. 0:18:08.160 --> 0:18:10.840 Do you see them in the near future or in 0:18:10.880 --> 0:18:14.440 the longer term as being really pretty formidable in this industry? 0:18:15.240 --> 0:18:17.400 Well, I think they are in some ways already competitors 0:18:17.440 --> 0:18:21.920 to companies like AMD or in Vidia and companies that 0:18:21.960 --> 0:18:24.600 are big enough to have scale. The data center business 0:18:24.720 --> 0:18:27.520 like those that you mentioned, have a strong incentive to 0:18:27.560 --> 0:18:30.560 design their own ships, both because they can own their 0:18:30.560 --> 0:18:33.800 design so that they specifically match the workloads that those 0:18:33.840 --> 0:18:37.479 companies are running the data centers, but also because the 0:18:37.520 --> 0:18:40.320 more choice they have both in house design ships and 0:18:40.400 --> 0:18:43.520 externally designed ships, the more pricing power they hope they 0:18:43.520 --> 0:18:46.520 can win Visa be their biggest suppliers companies like in 0:18:46.600 --> 0:18:49.480 Nvidia for example, and so there's a market rationale as 0:18:49.520 --> 0:18:52.320 well as the technical rationale for companies to design their 0:18:52.359 --> 0:18:54.840 own in house ships. And what we've seen that, as 0:18:54.880 --> 0:18:57.120 you said, as a trend where almost every big tech 0:18:57.119 --> 0:19:00.760 company is now designing not just often once for themselves, 0:19:00.760 --> 0:19:03.200 but multiple different types of chips for their own data 0:19:03.240 --> 0:19:03.880 center efforts. 0:19:03.920 --> 0:19:05.960 We want to move on to the actual chip war, 0:19:06.000 --> 0:19:07.560 which is what your book was all about, because we 0:19:07.560 --> 0:19:09.520 feel like it just is picking up tensions. But before 0:19:09.560 --> 0:19:12.520 we do, which among the semiconductor companies that are out 0:19:12.560 --> 0:19:15.479 there do you find most interesting that you think we 0:19:15.640 --> 0:19:19.560 must I think about the investing audience. Bloombrick must always 0:19:19.640 --> 0:19:20.439 keep on your radar. 0:19:20.960 --> 0:19:23.960 We know a lot of people who are only paying 0:19:23.960 --> 0:19:26.560 attention to the space and alongside the rest of the 0:19:26.560 --> 0:19:30.159 tech sector, don't often focus enough on the tool makers, 0:19:30.200 --> 0:19:33.160 the companies that make the tools that make the chips possible. 0:19:33.280 --> 0:19:36.800 But if you look at the extraordinary growth and the 0:19:36.840 --> 0:19:39.119 industry over the past several years, it's not just the 0:19:39.200 --> 0:19:41.840 chip designers like in Video or AMD, it's also the 0:19:41.880 --> 0:19:45.399 companies that produce the tools, ASML or Land research or 0:19:45.400 --> 0:19:50.320 applied materials that are benefiting just as much from a 0:19:50.359 --> 0:19:51.840 lot of the growth in this industry. 0:19:52.200 --> 0:19:55.600 The US China battle for tech supremacy, chips are certainly 0:19:55.800 --> 0:19:58.680 at the top of the list AMD hitting roadblock because 0:19:58.720 --> 0:20:02.760 of US rules. Take a step back and just give 0:20:02.840 --> 0:20:06.680 us your impression about why the US is now pressing 0:20:06.760 --> 0:20:09.880 allies to make sure that China doesn't get its hands 0:20:10.119 --> 0:20:12.920 on certain types of chips, Like big picture, what's worst 0:20:12.960 --> 0:20:14.800 case scenario here? Like why does the US and its 0:20:14.800 --> 0:20:16.919 allies want to keep China from getting this technology? 0:20:17.400 --> 0:20:19.960 The US strategy, I think is pretty straightforward, and the 0:20:20.000 --> 0:20:23.159 dilemma of the US faces is this, by any metric, 0:20:23.400 --> 0:20:27.840 China will quantitatively outproduce the US in terms of military systems, 0:20:27.880 --> 0:20:31.320 whether it's ships or missiles or drones. China already has 0:20:31.440 --> 0:20:34.159 more and it will have even more of a quantitative 0:20:34.240 --> 0:20:36.000 edge in the future. And so the US is hoping 0:20:36.000 --> 0:20:38.840 it can retain its qualitative edge in terms of defense 0:20:39.240 --> 0:20:43.520 and intelligence systems by applying advanced computing and AI to defense, 0:20:44.000 --> 0:20:47.040 and doing so requires having better advanced computing and better 0:20:47.119 --> 0:20:49.919 AI than China. And that's at the core of what 0:20:49.960 --> 0:20:52.560