Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: You allocation, right, we've been obsessed about GPUs and AI
Speaker 2: accelerated cards, but you need to have an equivalent, if
Speaker 2: not greater number of CPU in the design of the server.
Speaker 2: And that's an area that into on amb have done
Speaker 2: well to some market share where videas trying to dominate
Speaker 2: the whole system. And clearly two big moves our size
Speaker 2: moves almost carrot for an analyst upgrade, but Intel in
Speaker 2: particular soaring high at the moment.
Speaker 1: Yeah, wants to watch big points contributors, and let's just
Speaker 1: flip gears a little bit and talk about, well, where's
Speaker 1: one out on some of their investments of late hedge
Speaker 1: fund investors, Well, they haven't had it this good since
Speaker 1: the aftermath of the financial crisis. Data compiled by industry
Speaker 1: tracker Hedge Fund Research showing them back in twenty twenty five,
Speaker 1: the industry posted its best year since two thousand and nine.
Speaker 1: Gains are about top point six percent on average, but
Speaker 1: some scrowing much higher than that. Bloomberg hedge fund reporter
Speaker 1: Hemma Palmer joins us now, and we like to think
Speaker 1: about the way in which they've all embraced AI and
Speaker 1: the quant funds doing well. But who really shone in
Speaker 1: twenty five and why Yes?
Speaker 3: So you know, it's such an interesting year because funds
Speaker 3: across strategies, across sizes generally did very, very well. And
Speaker 3: when you look at the big winners, you're looking at
Speaker 3: some of the tech focus firms.
Speaker 1: If you look a.
Speaker 3: Whale Walk, they did quite well. If you look at
Speaker 3: light Street, they got over their high watermark from the
Speaker 3: really difficult twenty two to twenty three period. You're seeing
Speaker 3: some of the best returns over at Bridgewater. If we
Speaker 3: look at Macro MAI percents exactly excellent numbers. So kind
Speaker 3: of across strategies, you're seeing winners across pretty much every strategy.
Speaker 3: D E Shaw over twenty percent and the multi strat strategy.
Speaker 3: So pretty interesting and good news for investors and hedge funds.
Speaker 4: Yeah, Hammer, when I was growing up in the Bloomberg
Speaker 4: school of hedge funds ten years ago on the TV desk,
Speaker 4: that's what hedge funds do, make cash out of chaos.
Speaker 2: Isn't that the whole point? Is there anything unique in
Speaker 2: this bucket of data that we've got about what they're
Speaker 2: doing different diferently AI playing a role talent stepping up
Speaker 2: and delivering big performance.
Speaker 3: Yes, So what makes the year interesting is the volatility
Speaker 3: that we're seeing is the kind that goes in and
Speaker 3: out pretty frequently and provides great times to get in
Speaker 3: on different types of trading opportunities. So AI has been
Speaker 3: a great lifter for a lot of the tech focused funds.
Speaker 3: But if you look, for example, at Viking Global, which
Speaker 3: Viking doesn't do as much tech and AI as say
Speaker 3: other funds like other Tiger cubs CO two for example,
Speaker 3: they didn't do as well. They were only up about
Speaker 3: eight point six percent, putting them lower in the pack
Speaker 3: of tech funds. Tiger Global, which we typically think of
Speaker 3: as a tech investor, they did well in their long book,
Speaker 3: but their short positions eight into those gains, putting them
Speaker 3: also lower in the pack more than seven percent gains.
Speaker 3: So you know, everyone made money, but the real question
Speaker 3: is who made the double digita games?
Speaker 1: And you see would.
Speaker 3: Likes to read good return from a lot of those
Speaker 3: sort of popular names.
Speaker 2: Bloomberg's Tamma Palmer with the hedge fund breakdown, Thank you
Speaker 2: very much now. JP Morgan kicked off a week of
Speaker 2: big bank earnings today. One area of focus the impact
Speaker 2: AI could have on spending at those banks. CEO Jamie
Speaker 2: Diamond insisting the bank will be spending on AI to
Speaker 2: drive efficiencies but also keep up with competitors. There was
Speaker 2: a surprise in the expenses number for JP Morgan of
Speaker 2: the year, nine billion, above what the streets saw, and
Speaker 2: they wanted to know if AI was to blame. Let's
Speaker 2: bring in Alexandra and miss Visita. She's co CEO and
Speaker 2: co founder of Evident, a platform that benchmarks and tracks
Speaker 2: AI adoption across the financial services sector.
Speaker 5: Was really interesting earnings call.
Speaker 2: Often it's with Jamie Diamond, but this was Wells Fargo's
Speaker 2: Mike Mayo basically saying like, hey, those expenses seem very high,
Speaker 2: and you've been talking up AI a lot of JP Morgan.
Speaker 2: Is that directly correlated? And Jamie Diamond's point was kind
Speaker 2: of like, we will be spending, it's just not as
Speaker 2: much as you think we have to because everyone is.
Speaker 2: Is JP Morgan ahead in this AI implementation race in
Speaker 2: the banks?
Speaker 6: Yeah, well, thank you, thank you.
Speaker 5: Yeah.
Speaker 7: It was interesting to see the discussions today, but sort
Speaker 7: of stepping back and overall, as you know, we map
Speaker 7: the biggest banks in North America and Europe on their
Speaker 7: AI deployment, and JP Morgan is very much leading.
Speaker 6: They're out number one.
Speaker 7: Three and a half years in a row, so they
Speaker 7: are leading on AI deployment.
Speaker 6: They are leading on.
Speaker 7: Deploying and embedding AI throughout the bank. They do also
Speaker 7: spend a lot on tech and a growing proportion of
Speaker 7: that is on AI precisely to be able to take
Speaker 7: over time some of.
Speaker 6: These costs out.
Speaker 7: A lot of the deployment we do see is in
Speaker 7: those are in those internal processes and to create the
Speaker 7: efficiency gains but also someone revenue uplift.
Speaker 1: Alexandra, A lot of this question is about when those
Speaker 1: efficiency gains come, Have they come, Are they coming in
Speaker 1: twenty six or is it more still longer term from
Speaker 1: your perspective.
Speaker 7: Yeah, I mean it's interesting right because we're three years
Speaker 7: into the GENAI journey and that was a journey with
Speaker 7: that started with a lot of excitement and testing and
Speaker 7: now use cases moving into production. But there seems to
Speaker 7: be a real sort of shift in the tectonic plates
Speaker 7: now where it's looking at fully embedding it across the
Speaker 7: banks and every across the bank in every function and
Speaker 7: line of business, and with that you need to have
Speaker 7: platform architecture that's built for scale. And what we are
Speaker 7: definitely seeing is some return on investment coming through on
Speaker 7: the efficiency side, so automation of KYC processes and you know,
Speaker 7: going into the asset management side, the investment banking and
Speaker 7: so on and so forth, so really across the entirety
Speaker 7: of the bank. So it's still early days in terms
Speaker 7: of the actual sort of return and the ROI. I
Speaker 7: still think that there's some years to it will take
Speaker 7: with us to really fully come through. And then we've
Speaker 7: also got a gentic Ai use cases coming, you know
Speaker 7: and going into production, and that's where I believe we're
Speaker 7: going to see the real impact. But it is going
Speaker 7: to take another three to four years for Argentic and
Speaker 7: fully autonomous Urgentic use cases to be fully embedded and
Speaker 7: to see that you know, really fundamental and sizable ROI
Speaker 7: that we know is coming, but it is going to
Speaker 7: take a couple of years for the gen AI to
Speaker 7: fully come through and maybe three to four years for
Speaker 7: gentic Ai impact to fully come through.
Speaker 1: It was interesting that basically that question about AI from
Speaker 1: Mike Mayo was at the tail end of the call.
Speaker 1: Before that there was Myriada questions for Jamie Diamond around
Speaker 1: the Apple onboarding with the credit cards there, but are
Speaker 1: also talking more broadly about their investment banking this and
Speaker 1: indeed credit cards by Alexandra and push us forward. We've
Speaker 1: got a whole host of other earnings coming thick and fast.
Speaker 1: Where will they be talking about AI most abundantly?
Speaker 7: Well, so you know, it's it's a time with a
Speaker 7: lot of things going on, so AI might not be
Speaker 7: front and centered this time. It has been over the
Speaker 7: years some of the questions that have been asked in
Speaker 7: the earning schools. There's a lot of shareholder pressure to
Speaker 7: understand where the bank is. We've definitely seen a shift
Speaker 7: in terms of banks being much more clear that it
Speaker 7: is a high priority, that it is part of the
Speaker 7: senior leadership team and the CEOs. Are you fully understanding
Speaker 7: that it has to be embedded across the bank and has.
Speaker 6: To be core.
Speaker 7: So I expect that there will continue to be not
Speaker 7: only in the earning scores, but as we've seen throughout
Speaker 7: the year and investment days and investor days and and
Speaker 7: you know, press releases when partnerships and so on are
Speaker 7: getting produced by the banks. The discussion on AI is.
Speaker 6: An ongoing one and throughout the.
Speaker 7: Year, but we've got some earning scores coming through from
Speaker 7: the big banks, you know. Goldmesas has also made a
Speaker 7: big announcement late last year about their one GS three
Speaker 7: point three point zero program, which is really about fully
Speaker 7: transforming the bank end to end, top down, bottom up
Speaker 7: for fully embedding AI. So it's going to be really
Speaker 7: exciting to see what numbers might be associated with that
Speaker 7: the leading banks are going to be talking about ROI.
Speaker 7: I believe there has been a lot of talk with
Speaker 7: numbers associated with within the last year. I think that
Speaker 7: these numbers are probably tip of the iceberg, and we're
Speaker 7: going to see these being updated and upgraded in twenty twenty.
Speaker 5: Six, Alesandra, we just have thirty seconds.
Speaker 2: But how competitive is JP Morgan in attracting and paying
Speaker 2: top talent in AI?
Speaker 7: Very Yeah, it's very good at getting top talent. It
Speaker 7: is a place that is known for putting AI first.
Speaker 7: Jamie Diamond was very clear about that all the way
Speaker 7: back in twenty seventeen where he said we're going to
Speaker 7: be an AI first enterprise. They are able to attract
Speaker 7: top talent. They're in competition with the tech sector. Everyone's
Speaker 7: looking for that top talent that really do the difficult
Speaker 7: systems wethink everyone's thinking about the shark tanking taking talent
Speaker 7: from tech companies that can rethink the processes end to
Speaker 7: end and completely change the system. Remember, the technology here
Speaker 7: is just ten percent of the problem. Ninety percent of
Speaker 7: the problem lies in the sort of rethinking of the
Speaker 7: processes entirely. You almost have to build a digital twin.
Speaker 7: We think the process and put it back in. That
Speaker 7: talent is what JP Morgan can attract.
Speaker 1: Thanks was a visit A always great to catch up
Speaker 1: with you, co CEO, co founder of Evident. We thank
Speaker 1: you coming up and bringing room mags exclusive conversation with
Speaker 1: a bid CFO Henry Hay on the US China race
Speaker 1: from New York for San Francisco. It's a room ed Tech.
Speaker 1: Defense Secretary Pete Hegseth lamented the defense industry's risk averse
Speaker 1: culture and praised Enol Musk during a visit to the
Speaker 1: SpaceX Star based launch site that was last night. Hexath
Speaker 1: announced plans to integrate Musk's Groqui platform into the Defense
Speaker 1: departments system and to make the US military a quote
Speaker 1: AI first war fighting force. Take a listen we need to.
Speaker 5: Be blind here.
Speaker 8: We can no longer afford to wait a decade for
Speaker 8: our legacy prime contractors to deliver the next perfect system,
Speaker 8: only to find that it's delivered years behind schedule and
Speaker 8: cost ten times what it should. Winning requires a new playbook.
Speaker 8: Elon wrote it with his algorithm, question every requirement, delete
Speaker 8: the dumb ones, and accelerate like hell.
Speaker 2: No care of people saying why is Hegseth at SpaceX
Speaker 2: or SpaceX has four billion dollars in government contracts alone
Speaker 2: just for development, but one of few carriers, Falcon nine
Speaker 2: Falcon he that's authorized to take Pentagon's sensitive satellites to orbit.
Speaker 1: It's also interesting timing regarding GROC, right. I mean, already
Speaker 1: Google AI is integrated with the Defense Department, but to
Speaker 1: add GROC at this moment when there has been a
Speaker 1: lot of concern about what it has been producing in
Speaker 1: terms of imagery, and they're like a notable step forward
Speaker 1: in that respect, in that relationship and deepening.
Speaker 5: At least a.
Speaker 2: Week ago, the President put on true social that he
Speaker 2: wanted to cap salaries of defense companies who weren't performing
Speaker 2: for their CEOs. Today we have news that the government
Speaker 2: is taking a significant stake in a top five defense
Speaker 2: contractor EL three Harris.
Speaker 5: What do we need to know?
Speaker 1: Yeah, and the idea that they're going to be spinning
Speaker 1: off an IPO of the unit, the missile solutions business
Speaker 1: they're going to and REL three Horris is going to
Speaker 1: train control in the missile solutions business. But second half
Speaker 1: of twenty twenty six they're looking at spinning it off.
Speaker 1: And we understand the Department of Defense is set to
Speaker 1: invest one billion dollars in convertible preferred security. I mean
Speaker 1: it's lifted the shares up two percent up to six
Speaker 1: percent at one point end.
Speaker 2: Meanwhile, in Asia, by do CFO Henry Hir spoke with
Speaker 2: Bloomberg Steven Angle about that company's AI spending of over
Speaker 2: fourteen billion dollars listen to listen.
Speaker 5: To view.
Speaker 9: In the November earning call last year, we actually disclosed
Speaker 9: one numbers. Since earning came out back in twenty twenty three,
Speaker 9: we have invested over one hundred billion R and B
Speaker 9: in terms of AI investment, which is a huge investment
Speaker 9: just on the web site.
Speaker 5: On the end, we do see a great return on that.
Speaker 9: For example, right now, our cloud revenue increasing about twenty
Speaker 9: eight percent on a wildlire basis in Q three for
Speaker 9: the AI cloud. And also we are seeing over kind
Speaker 9: of two hundred percent growth.
Speaker 5: On the AI search transformation.
Speaker 9: So for example, last year we only have three percent
Speaker 9: of the contents are generating for the AI for traditional search,
Speaker 9: but right now this number is increasing about eighteen percent,
Speaker 9: and we're seeing kind of three digits increasing on the
Speaker 9: traditional search to the AI news search. And also for
Speaker 9: the robot taxi, as I mentioned, it's actually delivered over
Speaker 9: a quarter million drives every week and we're seeing that
Speaker 9: number is on accelerated at gross pass. So I think
Speaker 9: the investment, we are seeing the good trends of the
Speaker 9: Montadasia and the company on the return, how do.
Speaker 10: You see the difference between how AI is evolving in
Speaker 10: China versus you know what we've all been following very
Speaker 10: closely in the MAGS seven and what's happening Open AI
Speaker 10: and others in the United States. Essentially, there are concerns
Speaker 10: about this allocation of capital and not getting the kinds
Speaker 10: of return, so there could be potentially a bubble China.
Speaker 10: There bubble concerns as well, but there's a bifurcated AI
Speaker 10: space in China as well the big boys like you
Speaker 10: and Tencent and Bite Dance in Ali Baba. And then
Speaker 10: there are new up and comers that are hitting the
Speaker 10: market in Hong Kong like Mini Max and others, those
Speaker 10: lms that are starting to make a dent. But you
Speaker 10: guys have the capital base. Is there a bubble forming
Speaker 10: as well in the investment in China because of the
Speaker 10: over investment.
Speaker 9: I want to call it two tails of the city. Usually,
Speaker 9: I think if you want to decompose the drivers, I
Speaker 9: think there are four things, right, the data model, computing power.
Speaker 5: As well as applications.
Speaker 9: Right, So I think if you analyze these four different things,
Speaker 9: US China does have a lot of different contexts.
Speaker 11: Right.
Speaker 9: For example, right now in the US as a lot
Speaker 9: of investment on infrastructures. But today if you look at electricity,
Speaker 9: cable network in China's already being built in the past
Speaker 9: few years. So if you really want to compare on
Speaker 9: IOI or IRO or on infrastructure, site that's in China
Speaker 9: does have certain advantage on that. And also in the
Speaker 9: past ten years of the mobile internet age in China,
Speaker 9: there's a huge accumulation of data and data become important
Speaker 9: for today's influences because a few years ago everyone is
Speaker 9: competing for foundation model, right, So true question.
Speaker 5: I think in my view, any company.
Speaker 9: Have a close loop or full stack of the computing power,
Speaker 9: data and ownership of application user cases will be sustainable
Speaker 9: on AI.
Speaker 1: I do CFO Henry Hay there talking a full stack.
Speaker 1: We're going to talk about alphabet next. Coming up, Dan
Speaker 1: Ives and Webbush joining us to talk about that deal,
Speaker 1: the impact of Apple choosing Google's AI to power Serri.
Speaker 1: That's next. This is bluebg Tech new research out today
Speaker 1: on Apple's plan to use Google's AI to power Serie
Speaker 1: voice assistant and much more from meg Intelligence, writing that
Speaker 1: the deal highlights the cost advantages of Google's tens of
Speaker 1: chips of arrivals. Analysts also welcome confirmation in the news
Speaker 1: which Blomberg reported late last year. Remember now, when Bush
Speaker 1: reaffirmed its three hundred fifty dollars price target. It's the
Speaker 1: highest on the street for Apple after the deal the
Speaker 1: price to welcome Dan Ives, manager director senior equity analyst
Speaker 1: at Webush who has that number. So let's talk about
Speaker 1: the benefits for Apple first, Why the reinformation of three
Speaker 1: hundred and fifty? Why is this good? For them in
Speaker 1: Apple Intelligence.
Speaker 11: Look, they've had an invisible AI strategy. I mean, if
Speaker 11: you go back to the last wwdc's you felt, like
Speaker 11: Michael J. Fox back to the future, there was really
Speaker 11: nothing there talking about AI. Finally, this is a huge
Speaker 11: step forward and it's not going to happen internally. Had
Speaker 11: to happen from Google Gemini. Looking, it comes down to like,
Speaker 11: if they never win the adjsuit, this doesn't happen. So
Speaker 11: it speaks to just brick by brick, they're finally building it,
Speaker 11: and I think this is going to be instrumental to
Speaker 11: the valuation for Apple this year.
Speaker 1: If you look at the statement that was put out,
Speaker 1: it was very much for the time being, this is
Speaker 1: going to be embedded in Apple foundation models. The idea
Speaker 1: is that they pull away, they are able to get
Speaker 1: a grip on their own foundational models and indeed Siri
Speaker 1: becoming actually useful. Do you think they will distance themselves
Speaker 1: from Google over time?
Speaker 11: Look, I think there's a better chance in me playing
Speaker 11: NFL playoffs than Apple doing something internally. At this point.
Speaker 11: The reality is this is also a game of a
Speaker 11: high stakes poker negotiation that's going on too. In terms
Speaker 11: of a broader deal with Google that I think they're
Speaker 11: ultimately going to have to do. I think this will
Speaker 11: be exclusive, and because my view is that there's gonna
Speaker 11: be some sort of subscription service freemium, you also need
Speaker 11: a platform for developers. And it comes down to, like
Speaker 11: the AI revolution, like Apple's watching from the sidelines. From
Speaker 11: the stands, they need to get into the game. And
Speaker 11: that's why we talked about seventy five hundred dollars per share,
Speaker 11: that this adds to the story as they execute on
Speaker 11: the consumer AI revolution. Finally, going through Koupertino.
Speaker 2: Dan, you you had advocated on more than one occasion
Speaker 2: that Apple bi perplexity. With this confirmation of Gemini being
Speaker 2: the underpinning of Sirie, is such a transaction still necessary
Speaker 2: to your mind?
Speaker 11: Yeah, and Ed it's a great point. But a lot
Speaker 11: of that was based on as the dog suit was
Speaker 11: going on with Google. There was a sort of period
Speaker 11: there where Apple needed to do something. Now, obviously perplexity
Speaker 11: came and went they're clearly not going to do that.
Speaker 11: But once Google won the dog suit, that was sort
Speaker 11: of I green light lights on and now it's sort
Speaker 11: of good time for big tech. And I think that
Speaker 11: speaks why Apple did this deal. And look, you look
Speaker 11: at Google Gemini, what they've done, you go back a
Speaker 11: year ago, it's phenomenal. And I think Apple is making
Speaker 11: that bet. It's gonna be a much different twenty twenty
Speaker 11: six and twenty twenty five relative to Apple when it comes.
Speaker 5: To AI again.
Speaker 2: Charriage just made the point that Apple was very careful
Speaker 2: in the statement to explain which parts of series functionality
Speaker 2: would be underpinned by by Gemini. The other way looking
Speaker 2: at is to say, have they still got a lot
Speaker 2: of work to do to make serious sort of all
Speaker 2: encompassing AI assistant.
Speaker 11: I mean, look, it's a it's an Everest like our
Speaker 11: pill battle, because the reality is they've lost so many developers,
Speaker 11: they've lost so much talent. You've seen a odd changing
Speaker 11: look and you know it as well as anyone like
Speaker 11: the DNA of Cooper Tino. Why that is supposed to
Speaker 11: come internally, and I think Cook recognized look riding on
Speaker 11: the wall. It speaks to my point that like Cook
Speaker 11: is not going to leave his CEO and leave this
Speaker 11: sort of in transition, he has to get the AI
Speaker 11: strategy sorted out. It's going to be a work in progress,
Speaker 11: but two point four billion iOS vices, one point five
Speaker 11: billion iPhones. It's my view that the consumer AI revolution
Speaker 11: ultimately comes through Cooper Tino, and this is a first
Speaker 11: step in that direction. We'll obviously see more about it
Speaker 11: in the spring, and of course more WWDC.
Speaker 1: Some might say it's incredibly savvy to be AI liked
Speaker 1: to not have to make all the investments in the
Speaker 1: data centers, to be able to say, look, privacy first,
Speaker 1: we're going to lean much more on EDGAI. Is that
Speaker 1: actually going to be a winning formula for Apple in
Speaker 1: the future and as models and sophistication develops.
Speaker 2: Yeah.
Speaker 11: Look, but also Apple is in a much different situation
Speaker 11: because of the unrivaled install base, because of where they
Speaker 11: play in the consumer That's why, like from a CAPEX perspective,
Speaker 11: they're not Microsoft, Google, you know many other big tech plays.
Speaker 11: But I think they finally hit the point Ruber met
Speaker 11: the road. They need to do something. They're going to
Speaker 11: have to incrementally spend, but they're basically going to rely
Speaker 11: on Google as a partner because you cannot have the
Speaker 11: Fourth Industrial Revolution, biggest tech transition in the last forty years,
Speaker 11: come and go and they don't monetize. And I think
Speaker 11: that's something that they recognize front and center, and it's
Speaker 11: key to the stock. I mean realistically, like a year
Speaker 11: from now stocks three fifty or lower from here. It's
Speaker 11: all based on AI and them monetizing it.
Speaker 2: Dan, I'm spanishing director at Webbush. We have the street
Speaker 2: high price target three fifty on Apple. So that does
Speaker 2: it for this edition of Bloomberg Tech Era and one
Speaker 2: edition it was it.
Speaker 1: Was I mean, we started when that's the techn that's
Speaker 1: told us about how this really shows Alphabet's prowess. Then
Speaker 1: we finished on how it's Apple's future. Don't forget to
Speaker 1: check out our podcast. You can find it on the
Speaker 1: terminal as well as online on Apple and who, Spotify
Speaker 1: and I have listen Blomberg. Bloomberg Tech is a live
Speaker 1: from Coast to coast with Caroline Hide in New York
Speaker 1: and ever Low in sentrances.
Speaker 2: Go this is Bloomberg Tech coming up, Meta and esslor
Speaker 2: Luxorika cub double production capacity for AI powered smart glasses
Speaker 2: by the end of this year based on growing demand.
Speaker 1: Plus, Microsoft seeks to quell consumer anxiety of a power
Speaker 1: price impact of data centers, pledging to pay utility rates
Speaker 1: that will cover the company's costs we discuss.
Speaker 2: And Clana CEO Sebastian Schomakowski weighs in on President Trump's
Speaker 2: call for a ten percent interest rate cap on credit
Speaker 2: cards for the year.
Speaker 1: First, we turn our attention to the markets that despite
Speaker 1: that coler inflation prints CPI coming in with two point
Speaker 1: six percent. We're looking at markets under pressure at naturally
Speaker 1: erasing yesterday's games. We're off by two percent on the
Speaker 1: Nasdaq one hundred. These aren't massive moves when we are
Speaker 1: still seeing some risk aversion amid the geopolitical turmil and
Speaker 1: whether or not we do indeed get any sort of
Speaker 1: fed pause with seems as though the rate cut has
Speaker 1: been put to the back burner by the markets at
Speaker 1: the moment.
Speaker 5: Ed a lot of meta news this morning.
Speaker 2: The latest from Bloomberg is that talks with Esselo Luxodica
Speaker 2: are around doubling capacity for RayBan Metas to twenty to
Speaker 2: out million units from ten million units current in stall capacity.
Speaker 5: If demand's good.
Speaker 2: They're talking about maybe, according to our sources, thirty million
Speaker 2: units in the year now. That drove shares of essel
Speaker 2: Or Luxotica up in Paris. Meta to the downside. With
Speaker 2: other news, the confirmation of recent reporting that they're going
Speaker 2: to be trimming headcount from the metaverse Carrow. Then there's
Speaker 2: the Microsoft piece of news. Microsoft has a five point
Speaker 2: plan to basically take responsibility for the cost of electricity
Speaker 2: associated with data centers. The main one is to cover
Speaker 2: its costs, but other parts of that are pieces of
Speaker 2: transparency with the communities where those data centers might impact pricing.
Speaker 2: And we've done so much reporting that here at Bloomberg.
Speaker 2: Let's get out to Bloomberg's Tech an industrial policy reporter
Speaker 2: Maggie Easton, who's in DC. You were there at the
Speaker 2: Microsoft presentation. What do they have to say and what
Speaker 2: are those five points in the plan?
Speaker 12: Yes, so Brad Smith of Microsoft was in Washington this
Speaker 12: morning talking about this five point plan. So I think
Speaker 12: the largest piece of this is, of course, the electricity costs.
Speaker 1: So they've said that.
Speaker 12: They're going to work with these local power utilities to
Speaker 12: ensure that Microsoft is paying for any increase in costs
Speaker 12: that they're responsible for. Now, of course, the caveat there
Speaker 12: is they're not ensuring bills won't go up due to.
Speaker 1: Inflation or other causes.
Speaker 5: But what they're.
Speaker 12: Saying in accordance with what President Trump asked for yesterday
Speaker 12: is that if the cost is due to Microsoft coming
Speaker 12: in with the data center, they're going to ensure that
Speaker 12: they're paying for that.
Speaker 1: Yeah, President Trump, and as Truy's social saying that they
Speaker 1: don't want consumers to pick up the tab. Where else
Speaker 1: is the tab potentially going to fall because this isn't
Speaker 1: just all about electricity prices. There's other resources that are
Speaker 1: likely to be stretched, definitely.
Speaker 12: So another thing that Microsoft was talking about just this
Speaker 12: morning is the local tax space. So historically, when these
Speaker 12: data center projects come in, Microsoft and other hyperscalers have
Speaker 12: received some sort of local incentive, and Microsoft is now
Speaker 12: saying they're moving away from that and they want to
Speaker 12: make sure that they're increasing the tax space in these
Speaker 12: local communities.
Speaker 5: To support the schools.
Speaker 12: And yeah, just making sure that they're not accepting local
Speaker 12: incentives in some cases, even though they are still open
Speaker 12: to state and federal incentives.
Speaker 1: Maggie's and with the latest from that Microsoft event, we
Speaker 1: so appreciate it. Now let's turn to the business side
Speaker 1: of the equation. That's the tangles with our ceocio of
Speaker 1: lafentangle their investments and look, when you're thinking about the exposure,
Speaker 1: you have to Microsoft and these data send to build outs.
Speaker 1: More broadly, how much they need to factor in the voter,
Speaker 1: the consumer right now.
Speaker 13: Well, I think it's super smart for them to get
Speaker 13: ahead of this. I'm sure they let the president announce
Speaker 13: it first, but Microsoft has always and good at anticipating
Speaker 13: under Nadella. And I think being a good citizen in
Speaker 13: the community is important.
Speaker 6: But it's not the first time we've heard resistance.
Speaker 13: Tesla got a lot of pushback when they moved to Texas.
Speaker 13: They took over a city, you know, they bought people's homes.
Speaker 6: It was It was disruptive, and I think we're seeing
Speaker 6: the same thing.
Speaker 13: I would argue to a lesser extent with data centers,
Speaker 13: but importantly, you know, this is what happens.
Speaker 6: In the transformative economy.
Speaker 13: We saw it also with the clean energy push windmills,
Speaker 13: you know, solar panels.
Speaker 6: People don't like that in their backyard.
Speaker 13: So the fact that they're getting ahead of it, having
Speaker 13: a good will tour, taking on some of the costs,
Speaker 13: helping the community, I think that's very important.
Speaker 1: It's interesting that it comes the day after Meta went
Speaker 1: all in with metacompute, hiring new talent. Thinking about the
Speaker 1: way in which they're going to navigate the need for
Speaker 1: compute from a sober perspective, from a need perspective. But Nancy,
Speaker 1: how much do you think that we are seeing companies
Speaker 1: dive in on this opportunity? Enough for all we in
Speaker 1: some sort of bubble territory and it can thinks about
Speaker 1: the buildout I don't think.
Speaker 6: We are in bubble Caroline.
Speaker 13: I mean, if you just look at technology stocks in
Speaker 13: general in nineteen ninety nine, it was something between seventy
Speaker 13: and ninety percent lived above the two hundred day moving average.
Speaker 13: And I know you're asking about the build out stocks
Speaker 13: as well, but in this environment, we're at sixty two percent,
Speaker 13: which is below the S and P and certainly below
Speaker 13: bubble territory.
Speaker 6: So there's still a lot of skepticism.
Speaker 13: We own a lot of the nuclear names, the build
Speaker 13: out names, and we think there's I mean, the backlogs
Speaker 13: are incredible, so I don't think that we're in a
Speaker 13: bubble in that regard.
Speaker 2: Yeah, the big story that we're tracking, Nancy, is meta
Speaker 2: and before I give the details, I just transparency, as
Speaker 2: you know, as important to the program. You have a
Speaker 2: very very small meta position. But it's fair to say
Speaker 2: you've been bearish or Meta and in particular Mark Zrockerberg
Speaker 2: relative to the other tech companies that you're focused on.
Speaker 2: But they're cutting jobs a portion of the Metaverse team
Speaker 2: and then shifting the focus to data center, but also
Speaker 2: to the Raybam metaglasses right, which is the modus Operandivo,
Speaker 2: which many now interact with Meta's voice based AI.
Speaker 5: Your thoughts on.
Speaker 6: That, well, I think it's the sooner.
Speaker 13: Zuckerberg gets Metaverse out of the vocabulary in the headlines,
Speaker 13: the better off it is for the company. So I
Speaker 13: think it's a good move overall. I am not probably
Speaker 13: the target market for the glasses. Maybe I'm wrong about that.
Speaker 13: I used to say, why would anyone want a camera
Speaker 13: in their cell phone? So that was about thirty years ago,
Speaker 13: so I could be wrong about that. But I do
Speaker 13: think they've obviously identified a market. The demand is there,
Speaker 13: that's where they should be focused. I never really understood
Speaker 13: the pivot to the Metaverse, and that was, frankly one
Speaker 13: of the reasons we exited the stock because it seemed
Speaker 13: highly distracting.
Speaker 6: And I couldn't you know, the commercial value was not clear.
Speaker 13: So I think he's doing the right things, and he
Speaker 13: should he should pull the band aid off and be
Speaker 13: done with it, because the metaverse, I don't think is
Speaker 13: the future of the company.
Speaker 2: The details which Bloomberg reported are that Esselo Luxotica, who
Speaker 2: make the rayvan metters, have installed capacity of ten million
Speaker 2: units and they're in talks to double that twenty million
Speaker 2: units and if the demand is there this year, thirty
Speaker 2: million units. But again it's these things. These are just
Speaker 2: normal glasses or these things. You know, as an investor
Speaker 2: that wants to leverage what's coming out of AI development,
Speaker 2: do you have a clearer sense now of how more
Speaker 2: widespread human beings actually use an either voice based or
Speaker 2: text based AI assistant.
Speaker 6: Yeah, it's hard to measure ed.
Speaker 13: You know, one of the things that we don't capture
Speaker 13: in GDP is free stuff, and for a lot of consumers,
Speaker 13: AI is free if you're using Google. So what we're
Speaker 13: looking at is the commercial cases. I think the adaption
Speaker 13: is much quicker than most people understand. I think we'll
Speaker 13: start to hear about that in earnings. You know, I've
Speaker 13: hung my hat on productivity growth. We got it again
Speaker 13: last quarter at four point nine percent, which was above
Speaker 13: GDP at four point three So we are seeing improvements
Speaker 13: in productivity, which will allow a sort of tepid job
Speaker 13: market to still be I think a disinflationary force, but
Speaker 13: also will not put further stress on the consumer. Remember too,
Speaker 13: nobody's talking about the fact that new job applications, new business, sorry,
Speaker 13: applications have skyrocketed. So if I'm a coder that's now
Speaker 13: out of business and I start a company that has
Speaker 13: exponential value, it's different than when we gutted the industrial
Speaker 13: belt of the Midwest. So I'm really optimistic on what
Speaker 13: these gadgets. And the announcement from Apple with Google, I
Speaker 13: think that's super important.
Speaker 6: It validates Google as the leader.
Speaker 13: Google's one of our twelve best ideas, so we've owned
Speaker 13: it for a long time. We added it to our
Speaker 13: value portfolio in August of twenty twenty four. It was
Speaker 13: a value stock if you remember, and now it's probably
Speaker 13: the leader in AI.
Speaker 1: I like that you go there because we've got a
Speaker 1: new four trillion dollar player to add to the pack
Speaker 1: that is Alphabet Nancy. But I love the way that
Speaker 1: you push us forward to six best ideas. For example,
Speaker 1: the twenty twenty six Walmart among them, they're entering the
Speaker 1: NASZAC and of course they're going all in on AI.
Speaker 1: What are some of the other key bets you're making.
Speaker 1: We're looking at them now.
Speaker 13: Oh, thanks for bringing that up, Caroline. So Walmart's been
Speaker 13: a winner so far. AMD is another one of our members, CrowdStrike.
Speaker 13: We think AI tailwinds are going to drive growth in
Speaker 13: that company even and the Signal acquisition was important. Tesla's
Speaker 13: in that group. Brother Dr Horton. We made a bet
Speaker 13: on Housing, which has worked so far this year because
Speaker 13: we thought the administration would jump in. And then Quanta,
Speaker 13: which is building out the grid and has an involvement
Speaker 13: in data centers. So we like all those names for
Speaker 13: this year. Last year's portfolio was up about twenty three percent,
Speaker 13: even with Service now in the portfolio, which was down
Speaker 13: twenty seven percent.
Speaker 2: So Nancy Tegler Lafetanglo Investments going through the news of
Speaker 2: the day with us.
Speaker 5: Thank you very much.
Speaker 2: Now coming up, the Trump administration is sent to near
Speaker 2: a trade deal with Taiwan, a move that could boost
Speaker 2: its US chips production.
Speaker 5: More on that next, This is Bloomberg Tech.
Speaker 1: The Trump administration, well, it's said to be close to
Speaker 1: a trade deal with Taiwan, move that could lower tariff
Speaker 1: on goods and expand to t SMC's plan investments in
Speaker 1: chip production by here in the United States. It's all
Speaker 1: according to sources here are The latest is Bloomberg Senior
Speaker 1: Tech editor Mike Sheppard, who can fill in the dots
Speaker 1: because this is part of a geopolitical puzzle that we
Speaker 1: continue to try and solve.
Speaker 14: What really is in Carol, Let's start with some of
Speaker 14: those dots and what the deal taking shape looks like.
Speaker 14: And it is an important copyright to put in there
Speaker 14: that it is not yet a done deal. But what
Speaker 14: we know so far is that tariffs and goods from
Speaker 14: Taiwan to the US would drop to fifteen percent from
Speaker 14: the current twenty percent level, and that would put the
Speaker 14: shipments from Taiwan on par with goods from South Korea
Speaker 14: and Japan, which are similar trading partners in areas of
Speaker 14: things like electronics, which are of such close interest to US.
Speaker 14: What we would also see importantly as an increase in
Speaker 14: investment by TSMC on US soil. TSMC would agree to
Speaker 14: build four additional manufacturing plants in Arizona sometime by the
Speaker 14: twenty thirties, and that would come on top of this
Speaker 14: six manufacturing plants and two advanced packaging facilities that they
Speaker 14: have already agreed to build. And this is significant because
Speaker 14: TSMC is such a focus for the US. It's the
Speaker 14: world's leading maker of AI chips, the world's leading chip
Speaker 14: maker overall when you think about it, with all the
Speaker 14: work it does for AMD and Nvidia in producing those
Speaker 14: AI chips. But it's also been a focus of geopolitics
Speaker 14: because of the risk of China that is looming over
Speaker 14: the Taiwan Strait and it's threatened to take the island
Speaker 14: back by force if needed.
Speaker 2: So we have details of a US Taiwan trade deal,
Speaker 2: but you're exactly right, shep. You also have what the
Speaker 2: US is doing with Venezuela and then a US interaction
Speaker 2: or threat with Iran. Different countries, but it actually comes
Speaker 2: right back to America's relationship with China.
Speaker 14: And it really does. In a trade deal with Taiwan
Speaker 14: would risk antagonizing China and upsetting the very delicate trade
Speaker 14: trups that took months to reach. That was the one
Speaker 14: that reopened the spigot of rare Earth's minerals and rare
Speaker 14: roots magnets to the US and to other trading partners
Speaker 14: around the world. Those are such key components and inputs
Speaker 14: for consumer electronics, for military hardware, and for the auto industry,
Speaker 14: and the threat of a shutoff had really upset the
Speaker 14: global economy and really threatened to hurt supply chains around
Speaker 14: the world. Now you add in the US moving to
Speaker 14: take over the oil supply in Venezuela, you add in
Speaker 14: the threat of US intervention in Iran, the threat of
Speaker 14: tariffs on Iranian goods against countries that are taking in
Speaker 14: those Iranian goods. That really is something, especially considering how
Speaker 14: Iran is a top buyer of Iranian and Venezuela and oil.
Speaker 14: Would certainly strain relations with Beijing at a crucial moment.
Speaker 2: Ed Bloombergs Mike Shephard, who leads our coverage at the
Speaker 2: intersection of politics and technology in DC, Thank you very much, Carrie.
Speaker 2: Plenty more news headlines out there today, and.
Speaker 1: There's a time for talking tech and on that intersection.
Speaker 1: First up, President Trump is calling on Elo Musk's Starling
Speaker 1: to help restore communications in Iran as protests continue and
Speaker 1: a nationwide internet shutdown enters its fifth day. Nwaronian authorities
Speaker 1: have declared starlink terminals illegal for the military, actively jamming
Speaker 1: signals and pursuing users. Plus, Malaysia is taking legal action
Speaker 1: against Enlo Musk's x and Xai, accusing them of failing
Speaker 1: to protect users now. The move comes days after the
Speaker 1: country banned grock of as sexually explicit content, including AI
Speaker 1: generated images of women and children. Meanwhile, sk Heinez says
Speaker 1: it plans to spend twelve point nine billion dollars to
Speaker 1: build an advanced chip packaging facility amid rising amount AI
Speaker 1: and high performance semiconductors.
Speaker 5: Now.
Speaker 1: The South Korean company is set to begin construction in
Speaker 1: April and aims to finish by twenty twenty seven.
Speaker 2: Okay, coming up, we're going to speak with klan a
Speaker 2: CEO Sebastian Schimiolkowski. As President Trump calls for a proposed
Speaker 2: ten percent interest rate cat on credit cards for one year.
Speaker 5: That's next. This is Blueberg Tech.
Speaker 2: President Trump's proposed one year ten percent cap on credit
Speaker 2: card interest rates has sparked pushback from the financial industry,
Speaker 2: but Klana's CEO says the plan could level the playing field.
Speaker 2: In a post on x, Sebastian Schimikowski defended by now
Speaker 2: pay Later Lending, saying it delivers lower losses and zero
Speaker 2: interest credit compared with traditional cards, He joins us. Now,
Speaker 2: thank you for your times passion. It's great to have
Speaker 2: you back on Bloomberg Tech. Let's just start simply with
Speaker 2: your general reaction on the proposal a ten percent one
Speaker 2: year cap on credit card interest.
Speaker 5: Please.
Speaker 15: Yeah, well, look, I think the President is right. You know,
Speaker 15: the Americans are being ripped off. I mean one hundred
Speaker 15: and sixty billion dollars in INTERSHA interest charges last year,
Speaker 15: thirty one billion in fees. That is not a financial
Speaker 15: service industry. It's an extraction machine. So we've seen in
Speaker 15: the Europe that putting interchange regulation and interest rate caps
Speaker 15: in place work work really well.
Speaker 2: Right, especially in Klana has a credit card. That credit
Speaker 2: card has an APR of twenty nine percent outside of
Speaker 2: the purchases that are made in pay for plans will
Speaker 2: buy now, pay later plans. So you do have a
Speaker 2: credit card that is at the levels the president's talking about, right,
Speaker 2: are you going to reduce the APR therefore, based on
Speaker 2: what the President has directed or proposed.
Speaker 5: Absolutely.
Speaker 15: And the thing is, obviously we need to follow regulation
Speaker 15: as everyone else. But the truth is, if you look
Speaker 15: at Clana's business model, those rates are very uncommon, and
Speaker 15: the majority of our business is built around the buy now,
Speaker 15: pay later model, which actually charges only immerchant fees and
Speaker 15: offers interest free credit for consumers, and that is in
Speaker 15: huge demand in the US. I mean, I think it's
Speaker 15: it's quite interesting. If you look at fed's own data,
Speaker 15: it shows that credit card rewards redistribute fifteen billion dollars
Speaker 15: annually from the poor to the wealthy, and that high
Speaker 15: fycle consumers gained two hundred dollars a year. Subrank consumers
Speaker 15: lose fifty five dollars. That isn't financial product, it's a
Speaker 15: regressive tax with airline miles, right, So I think that
Speaker 15: this is something that's starting to become apparent in the US,
Speaker 15: and I think that all regulation that makes it for
Speaker 15: better competition, but more fairer competition is good.
Speaker 1: Why have that credit card at all with that sort
Speaker 1: of level of interest rate, then, Sebastian, most people are
Speaker 1: using your other offerings.
Speaker 15: Well, we you know, that's exactly the challenge for us, right,
Speaker 15: We're competing with an industry that, basically, by charging so
Speaker 15: high interest rates, is offering very attractive reward systems and
Speaker 15: so forth, and so we obviously need to adopt to
Speaker 15: the market, and we're you know, we're adopting offerings to
Speaker 15: that market as well. But what we have seen is
Speaker 15: that we also have a debit card that offers premium benefits,
Speaker 15: and so we have afore our products and the majority
Speaker 15: of our products our interest free and much more of
Speaker 15: egg favorable with the customer, more you know, appreciated by
Speaker 15: the customer.
Speaker 6: Sorry.
Speaker 1: What's interesting is you reference the Fed Zone data when
Speaker 1: you're looking at some of the other areas of data.
Speaker 1: I'm looking at the World Bank, Fed Bank of Illinois.
Speaker 1: There's academics in Oregon or Arkansas who have looked into
Speaker 1: if you cut down interest rate levels, the argument goes,
Speaker 1: you cut off access to finance, writ large, you get
Speaker 1: loan sharks doing better. So Astian, how much do you
Speaker 1: think people would turn instead to buy now, pay later
Speaker 1: if they can't have that sort of credit card availability,
Speaker 1: if it was shut down because they didn't have thirty
Speaker 1: percent levels anymore.
Speaker 15: Well, the thing is right if you I mean, if
Speaker 15: you look at our average outstanding balance for US, it's
Speaker 15: about one hundred dollars, while on a credit card is
Speaker 15: five three hundred. And the whole credit card was constructed
Speaker 15: in a way that it's trying to get you to
Speaker 15: revolve every month. That's what all of your spending is
Speaker 15: on credit, and then it's trying to get you to
Speaker 15: revolve at that thirty percent interest. We don't offer a
Speaker 15: revolving We do installment based because it's safer and better
Speaker 15: for the consumer.
Speaker 5: So the point is that if you have a whole.
Speaker 15: Industry built on the idea of maximizing out depth, that's
Speaker 15: also where the majority of that revenue flows from. And
Speaker 15: what we've proven is that if you offer credit that
Speaker 15: is more affordable, that's better for the consumer. Losses are
Speaker 15: actually significantly lower as well. Our charge of rate is
Speaker 15: zero point four percent. You know banks are four point two,
Speaker 15: so this is quite obviously their devastation is maybe they're
Speaker 15: worried about isn't for the consumers They need those high
Speaker 15: interest rates to be able to lend that kind of
Speaker 15: money if they're having those kind of losses. So our
Speaker 15: experiences that no, if you're willing to be an affordable lender,
Speaker 15: there is a huge market opportunity there, and consumers show
Speaker 15: appreciation for that model. So that doesn't have to lend,
Speaker 15: you know, it doesn't have to mean that you can't
Speaker 15: offer credit to everyone, but at some point of time,
Speaker 15: when you start moving above the thirty percent interest, question
Speaker 15: is should anyone borrow at that rate? And I'm not
Speaker 15: sure the answer.
Speaker 5: Is yes, Sebastian.
Speaker 2: Who you speak speaking to within the Trump administration, if
Speaker 2: anyone at all, who do you hope to speak to
Speaker 2: to understand the plan from this point? From the administration's perspective.
Speaker 15: Well, we're as curious as everyone else on how the
Speaker 15: implementation of this is going to do due to generally speaking,
Speaker 15: those caps have been implemented on state level in the
Speaker 15: US right, so we're reading eagerly to find out how
Speaker 15: exactly this is going to go about. But again, I
Speaker 15: think that our experience from Europe is that interchange regulation
Speaker 15: as well as inter rased caps are actually a quite
Speaker 15: quite effective way and feels like a fairer way for
Speaker 15: the American population.
Speaker 2: Paige Smith, who covers you, guys, our colleague and the newsroom,
Speaker 2: made a really interesting point yesterday, which is how many
Speaker 2: people actually know what the APR and their credit card is?
Speaker 2: Could you reflect on any data that's crossed your desk
Speaker 2: this morning on inquiries that you've had, has the reaction
Speaker 2: from the consumer to this been. I had no idea
Speaker 2: I was paying thirty percent on a credit card.
Speaker 15: Well, I think that's the whole construct of the product, right,
Speaker 15: I mean, they're attracting you with high rewards, they're attracting
Speaker 15: you with low interest rate, and then it changes over time.
Speaker 15: The point is in the US, there was a McKinsey
Speaker 15: study in twenty fifteen and identified a group of Americans
Speaker 15: called the self aware of voids that are about twenty
Speaker 15: percent of the population. Those are people that have been
Speaker 15: tricked by the credit cards. They found themselves in more
Speaker 15: depth than they wanted, but they paid it back. Their
Speaker 15: annual household income is twenty percent long higher than the
Speaker 15: low income households. Actually, and this is the group that's
Speaker 15: using Klana primarily. This is a group that is again
Speaker 15: self aware of voids. I sorry to recommend something else,
Speaker 15: but I would actually go and go to Netflix and
Speaker 15: what credit cards explain and you see all the tricks
Speaker 15: that banks have applied to trick people to borrow more
Speaker 15: than they need to smash.
Speaker 1: Briefly, your global perspective, where in Europe have they put
Speaker 1: caps on and how has it worked?
Speaker 15: Briefly, So it's different across different different jurisdictions, but basically
Speaker 15: Germany as among the lowest cap France has caps, So
Speaker 15: the German cap, if I remember correct, is around fourteen
Speaker 15: fifteen percent. In France it's a cross to eighteen nineteen is.
Speaker 15: So those are caps that are quite effective. There's also
Speaker 15: other things that people do. It's real time pooling of
Speaker 15: loan to kind of look at your total exposure to
Speaker 15: all banks. So there's a number of I would argue,
Speaker 15: pretty effective ways to help people avoid the most negative
Speaker 15: type of borrowing.
Speaker 1: Sebastian. Great to have you back on the show. Thank you, Bastian.
Speaker 1: Shimi and Kowski, co founder CEO of Klana, coming up
Speaker 1: and talk a bit more about banks but their earnings
Speaker 1: what it means for that AI adoption as a bluebg Tech.
Speaker 5: Welcome back to Bloomberg Tech.
Speaker 2: There are two big movies in the markets this morning,
Speaker 2: and it's in the chip space. To take a look
Speaker 2: at Intel, which is now trading at its highest level
Speaker 2: since January twenty twenty four, highest level in about two years,
Speaker 2: and AMD also up five percent, both on the same
Speaker 2: analyst update. Keybank basically pointing out that in the data
Speaker 2: center context, both are sold out of their CPU