Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Vla Loow in sentences go.
Speaker 2: This is Bloomberg Tech. I'm Caroline Hyde in New York
Speaker 2: and let's go straight to our top story today, the
Speaker 2: war with Iran. The conflict continues to reverberate across the
Speaker 2: Middle East. Today. This is President Trump says the bombing
Speaker 2: campaign against Iran could last for weeks. We are awaiting
Speaker 2: more updates from the President this hour, but we want
Speaker 2: to bring you the latest of Bloomberg's Danie Williams, who
Speaker 2: is in Jerusalem on the ground there in Israel. Dan,
Speaker 2: what is it like?
Speaker 3: Well, as you can see, the sun is set on
Speaker 3: what has been the third day of this extraordinary war,
Speaker 3: war that appears to be widening, engulfing not just some
Speaker 3: at least now, but even lapping up against Southern Europe,
Speaker 3: with Cyprus saying that a British air base on its
Speaker 3: soil was apparently targeted by a Hesbala drone. Hesbola being
Speaker 3: the Lebanese militia ally of Iran, in fact, an ally
Speaker 3: of Iran in Lebanon, which opened a front from Lebanon
Speaker 3: with Israel reopened that front overnight, and now these really
Speaker 3: are saying they're bombing targets in Lebanon a pace as
Speaker 3: they continue their bombing of Iran alongside US forces. So
Speaker 3: we have several fronts opening up, a number of Gulf
Speaker 3: Arab countries that also have found themselves in the firing
Speaker 3: line being struck by Iranian missiles and drones, and not
Speaker 3: just US bases on their turf, but also hotels and
Speaker 3: the like. This is imposing a good deal of economic
Speaker 3: pain on the region, and it would appear that what
Speaker 3: the Iranian regime is trying to do, even though it's
Speaker 3: massively outgunned by its enemies, is to wait out this
Speaker 3: campaign in the hope that the pain and indeed the
Speaker 3: patience of the American public that apparently disapproves of this
Speaker 3: by quite a margin already will wear thin and some
Speaker 3: members of the Ranian regime might be able to survive.
Speaker 2: Talk to us about what remains of the Iranian regime, Dan, it's.
Speaker 3: Very hard to know. It's the supreme leader was killed
Speaker 3: over the weekend in one of those opening salvos, and
Speaker 3: almost by the minute we've received updates about other members
Speaker 3: who have been killed, sometimes as successors of those who
Speaker 3: were recently killed. However, to judge by the cycle of
Speaker 3: fire being maintained by Iran, certainly in Israel, what we've
Speaker 3: been experiencing every half hour a couple hours, sirens and
Speaker 3: calls to take shelter in the face of missiles or
Speaker 3: drones coming in, it would appear that there is still
Speaker 3: a vestigious state functioning, managing to keep up the fight
Speaker 3: and presumably domestically managing to deter members of the opposition
Speaker 3: from trying to take control of the country. That is,
Speaker 3: of course the vision enunciated both by Israel and the
Speaker 3: United States at the outset a situation whereby the Iranian
Speaker 3: regime is sufficiently degraded s officially destroyed to enable the
Speaker 3: Ranian opposition, which many in the West would see as
Speaker 3: the bulk of the Iranian population, certainly the young population
Speaker 3: to take to the streets again as it did only
Speaker 3: a few weeks ago, but this time not facing the
Speaker 3: guns of the state and being able to assume control.
Speaker 2: Extraordinary day in Jerusalem, as you say, a third day,
Speaker 2: Dan Williams, we so appreciate you being with us of Bloomberg.
Speaker 2: Now let's check out what is a human story that
Speaker 2: is affecting markets right now, andw's that one hundred off
Speaker 2: by four tenths seven percent. Big tech is seeing some
Speaker 2: significant moves on individual names. Of course, money moving into
Speaker 2: the likes of Nvidia, palant here as you're seeing up
Speaker 2: six percent as a defense related name from the tech
Speaker 2: perspective pushes high. These are your big points contributors on
Speaker 2: the day and in video in fact making a deal
Speaker 2: putting money into optical companies. We'll dig into that a
Speaker 2: little bit later, but really we're also seeing significant moves
Speaker 2: in other parts of the market, different industry groups, different classes.
Speaker 2: Brent crude unsurprisingly up more than seven percent, extraordinary moves
Speaker 2: as we consider the straight ofform moves an issue about
Speaker 2: supply chains written large for the globe to try and digest.
Speaker 2: Bitcoin is up by more than five percent, with covering
Speaker 2: some of its losses as it was one of the
Speaker 2: main tradable assets over the course of the weekend, and
Speaker 2: strategy if micro Strategy is currently up six point eight
Speaker 2: percent on the back of that Bitcoin buying. Let's talk
Speaker 2: about the market impact more with epec Oscar Deesco, Swiss
Speaker 2: quote senior market analyst, and this is a moment of
Speaker 2: knee jerk reaction of risk of sentiment. But interestingly, we
Speaker 2: are still seeing big tech managing to see some flows
Speaker 2: into it.
Speaker 4: Exactly what we see right now is that as the
Speaker 4: spike in oil prices is being retraced, technology companies are
Speaker 4: also finding some breathing room right now. And we also
Speaker 4: do see some individual divergences in the technologists phase. The
Speaker 4: companies that do have exposure greater exposures to energy costs,
Speaker 4: like the ones that run data centers, are being more
Speaker 4: heavily than the others that are more or less capital intensive,
Speaker 4: like Nvidia for example. The defense related names are also
Speaker 4: gaining on the back of the Middle East conflict news.
Speaker 2: Is that an automatic buying that you think we'll see
Speaker 2: the likes of Palenteer hold on to gains going forward.
Speaker 2: Is there something that is sticky about this demand for
Speaker 2: such defense tech.
Speaker 4: Yes, we believe that globally the defense stocks have been
Speaker 4: in demand due to the rapid shifts and the significant
Speaker 4: shift in global geopolitics. And we have seen a couple
Speaker 4: of times since last year that the geopolitical tensions are
Speaker 4: not ready to ease from the actual levels. So the
Speaker 4: risks are being quite high, and the technology companies are
Speaker 4: in technology and defense companies are benefiting grande from it.
Speaker 4: It's not only in the US, but we also think
Speaker 4: that the defense stocks in Europe will also be will
Speaker 4: also continue to benefit from the rising geopolitical tensions restling
Speaker 4: across the globe.
Speaker 2: I mean, what's notable as benchmarks are actually trying to
Speaker 2: turn around I'm looking at then that's that more broadly
Speaker 2: only off by about a tenth of a percent now
Speaker 2: the SMP and the US currently off by three ten percent,
Speaker 2: even though we see market falls over in Asia and
Speaker 2: European trading, epect just the macro picture for someone who
Speaker 2: is in the audience right now trying to understand where
Speaker 2: to be navigating if they're exposed to technology names well exactly.
Speaker 4: I mean, what the big picture of today was the
Speaker 4: rapids wise that we saw in energy prices at the
Speaker 4: beginning of today's session, so the Asian and European stocks
Speaker 4: were heavily hit. But as we move on towards the
Speaker 4: US session, we see that these gains have been retraced.
Speaker 4: So some of the hotys expectations regarding the major central
Speaker 4: banks that would be lifted.
Speaker 2: That would be that that was.
Speaker 4: Coming actually from the fact that the energy.
Speaker 2: Prices would lift.
Speaker 4: Inflation expectations are also being trimmed right now as oil
Speaker 4: prices are coming back down, and I think that that
Speaker 4: is the global macroeconomic picture that investors should understand. It
Speaker 4: is really today about the energy prices, the inflation expectations,
Speaker 4: and the impact on central bank decisions. As energy prices
Speaker 4: move lower, we are getting back to the levels of
Speaker 4: risk that we saw in the beginning of the session.
Speaker 4: Now we are still higher in terms of energy prices
Speaker 4: and the risk of another upside potential move and sustain
Speaker 4: again in energy prices due persist. But at the moment
Speaker 4: it's quite interesting to see how fast the early gains
Speaker 4: are being retraced and the global markets are immediately readjusting
Speaker 4: to that retracement.
Speaker 2: What is bitcoin acting as in this moment.
Speaker 4: Well, it's interesting because bitcoin has not necessarily been as
Speaker 4: risk haven or a safe haven asset over the past
Speaker 4: few weeks. It was very much in line trend, very
Speaker 4: much in line with technology companies and was hit along
Speaker 4: with the cell off that we saw across the technology space.
Speaker 4: So what we see to is that the bitcoin is
Speaker 4: actually acting as a safe haven asset, and we suspect
Speaker 4: that the regional conflict could eventually bring some capital into
Speaker 4: bitcoin regarding maybe the detentions or or the fact out
Speaker 4: the gold has been overly valued and investors may be
Speaker 4: looking for other safe haven. But to be perfectly honest
Speaker 4: with you, the move that we see in bitcoin and
Speaker 4: the coupling of the correlation with the technologists is quite
Speaker 4: interesting right now, even more so as the higher energy
Speaker 4: energy prices should normally also have negative impact on bitcoin impact.
Speaker 2: It's great to catch up with you. Thank you very much. Indeed,
Speaker 2: I thank you ipec's go desh guys with us on
Speaker 2: Swiss quote. We appreciate it. Mean while coming up, we'll
Speaker 2: speak with representatives Samncardo, a congressman from Silicon Valley about
Speaker 2: the conflict in the Middle East and AI policy. Meanwhile,
Speaker 2: check out shares of Apple. There is other news happening
Speaker 2: amid of course the concerns in the Middle East. We're
Speaker 2: up almost two tens of percent as Apple is unvailing
Speaker 2: the iPhone seventeen E. It's the latest version of its
Speaker 2: lower end smartphone, faster version of an iPad Air also
Speaker 2: coming out with the iPhone seventeen e, including a faster processor,
Speaker 2: new in house wireless chips. This is Bloomberg Tech. We
Speaker 2: are awaiting remarks from President Trump in Washington, who is
Speaker 2: about to participate in a public event, and we anticipate
Speaker 2: there might be some commentary regarding the war with Iran.
Speaker 2: We will be bringing you up to the moment breaking
Speaker 2: news on that subject, but within the context of Middle
Speaker 2: East Anthropic it has been saying that there's been an
Speaker 2: outage that impacted thousands of Claud users, but it has
Speaker 2: now been resolved. Reports of the issues with the chatbot
Speaker 2: came is the AI provider experiences a surge in demand
Speaker 2: driven by the company's feud with the Pentagon and for
Speaker 2: the potential use of its technology for mass surveillance in
Speaker 2: the development of autonomous weaponry. Now, Seth Figman, a Bloomberg
Speaker 2: News and place to say, joins us to set the
Speaker 2: context first, because while a feud is erupted between Anthropic,
Speaker 2: we've actually seen Open Ai complete a contract with the
Speaker 2: Pentagon in the use of its own AI technology. Just
Speaker 2: take us through the weekend, Seth.
Speaker 5: Yeah, I think this has to be the most dramatic
Speaker 5: weekend we've seen AI lands since the ouster Sam Altman
Speaker 5: a couple of years ago. But to your point, Carolyn, Yes,
Speaker 5: Openingey swooped in hours after Anthropic was effectively blacklisted by
Speaker 5: the Defense Department and segaing to deal with the Defense
Speaker 5: Department for classified AI work. Now, opening I is not
Speaker 5: saying if this replaces Anthropics were, but they are signaling
Speaker 5: that they are comfortable with the contractual safeguards to make
Speaker 5: sure that their technology is not used for domestic surveillance
Speaker 5: or for autonomous weaponry, which were the two red lines
Speaker 5: that Anthropic really centered on and which led to this
Speaker 5: fierce standoff with the Pentagon.
Speaker 2: It's been a standoff that has erupted online, with many
Speaker 2: people calling to stop using chat GBT to instead shift
Speaker 2: one's attention to Anthropics consumer apps. Now, it might be
Speaker 2: said that Claude for Enterprise hasn't been affected by the
Speaker 2: outages today. It's interesting that Treasury Secretary Scott Bessen has
Speaker 2: been saying that he's following President Trump's direction on Anthropic
Speaker 2: and in the Treasury Department is terminating all use of
Speaker 2: Anthropic products. But there's reporting to show that it's of
Speaker 2: course still being used at the moment and was over
Speaker 2: the course of the weekend with Iran.
Speaker 5: Yeah, I think to step back, let's just say that
Speaker 5: what seems clear is that the federal government is moving
Speaker 5: forward with rethinking its use of CLAUD. What's less clear
Speaker 5: is what the broader impact than blasphe igus will be
Speaker 5: unanthropic from the many other businesses and companies that work
Speaker 5: with the government. To take headsets tweet literally, he's implying
Speaker 5: that any business that does commercial business with Anthropic must
Speaker 5: stop that if they also work with the military. But
Speaker 5: Dario Miday, at the CEO of Anthropics there over the weekend,
Speaker 5: he thinks it's much more limited in scope. It'll just
Speaker 5: be if they do military work with the anthropics. So
Speaker 5: that remains to be seeing how it's interpreted.
Speaker 2: Still a lot of work to be done by the
Speaker 2: likes of Palenteer, for example, Bloomberg Seth Fiegeman across this story.
Speaker 2: Thank you very much. Indeed, now look US lawmakers, they're
Speaker 2: gearing up for a vote on a war powers resolution
Speaker 2: following the strikes in Iran. This is unfolding as the
Speaker 2: debate over AI used by the military continues. We're poased
Speaker 2: to say we're joined by representatives Sam Nacardo his district
Speaker 2: includes parts of Silicon Valley. There is drama in Washington,
Speaker 2: where you've just got the train to us from. There
Speaker 2: is drama in where you represent as well. Can I
Speaker 2: just ask you, first and foremost, what do you think
Speaker 2: the relationship of some of the companies that within your
Speaker 2: district is evolving with the Pentagon? How do you observe
Speaker 2: what occurred over the last few days.
Speaker 6: I think Silica on Vallet, there's a strong libertarian streak,
Speaker 6: and so there are many who are cheering to see
Speaker 6: Anthropics step up as it had. And look, there's a
Speaker 6: free market here in the Defense Department has many competitors
Speaker 6: to choose from, and it has a right to choose
Speaker 6: whoever it wants. But it seems to me that at
Speaker 6: the end of the day, when we're talking about AI safeguards,
Speaker 6: these ought to be decisions that are not confined to
Speaker 6: back room negotiations between lawyers at the Pentagon and individual companies.
Speaker 6: These ought to be very public discussions. The administration should
Speaker 6: be setting rules, Congress should be setting rules. And the
Speaker 6: way this all went down now with retribution against Anthropic
Speaker 6: in the way that Secret Heseth and others have articulated,
Speaker 6: I think is very damaging to Silicon Valley and frankly
Speaker 6: to the country.
Speaker 2: In many ways, Anthropic and Daria Amide have tried to
Speaker 2: make it a public discussion, brought it into the light.
Speaker 2: What's interesting is Dario has also said that the law
Speaker 2: has not yet caught up with AI's ability. Therein lies
Speaker 2: your role in Congress. How can Congress keep up at
Speaker 2: this moment to ensure that there aren't these blurred red
Speaker 2: lines that everyone's trying to digest from open AI's contract
Speaker 2: and from Anthropics.
Speaker 6: Well, this isn't the first time someone has said Congress
Speaker 6: is not moving at the pace of technology. We've been
Speaker 6: waiting thirty years for a data privacy bill, for protections
Speaker 6: against for protections for children online, etc. But the reality
Speaker 6: is this is an area where both Congress needs to
Speaker 6: act and the administration needs to act. There should be
Speaker 6: clear lines. I don't think a lot of folks argue
Speaker 6: with the lines that Anthropic articulated. In fact, open Ai
Speaker 6: seem to have embraced them. So why not rather than
Speaker 6: punishing the company, hold these up as examples. This is
Speaker 6: an opportunity where the industry can inform the government, and
Speaker 6: we ought to be taking those cues you.
Speaker 2: Say, open eyes, embrace the red lines that anthropy put forth.
Speaker 2: There's reporting to suggest that the cynicism.
Speaker 6: Around that, yes, well that is to be determined. I
Speaker 6: guess I'm simply relying on what I'm hearing publicly.
Speaker 7: Now.
Speaker 6: Obviously I understand why there might be cynicism. Look, the
Speaker 6: bottom line is this shouldn't be enforced by one particular
Speaker 6: CEO at one company. There's a reason why there ought
Speaker 6: to be a public discussion because this is going to
Speaker 6: impact all of us, and certainly when we talk about
Speaker 6: issues like public surveillance.
Speaker 2: I mean, realistically, are you able to have the time,
Speaker 2: the insight, the focus and the moment when we've got
Speaker 2: an erupting war withether on and indeed, well government shut down?
Speaker 2: How effective can you be at this moment? Congress?
Speaker 6: Well, I'm not going to speak for Congress because frankly,
Speaker 6: as you know, if you ever made a bet on
Speaker 6: Congress not getting anything done, you win ninety nine times.
Speaker 6: Out About Fumber's markets, yeah, they're doing pretty well. But
Speaker 6: I will say this week I'll be introducing a provision
Speaker 6: in what's called the Defense Productions Act really to prevent
Speaker 6: any federal agency from retaliating against companies like Anthropic when
Speaker 6: they proposed reasonable limits on the deployment of their technology.
Speaker 6: Technology is obviously a wonderful thing. We know it has
Speaker 6: enormous risks. We ought to take the cues from industry.
Speaker 6: Tree tells us these risks are too great. Let's draw lines.
Speaker 2: What do you think will be the support of that
Speaker 2: bill across both aisles.
Speaker 6: We'll be discussing it this week in the House Financial
Speaker 6: Services Committe where we were having their markup. I'm still
Speaker 6: having those conversations with my colleagues.
Speaker 2: Okay, so maybe we can find some support that it
Speaker 2: shouldn't be down. There shouldn't be retribution, There shouldn't be
Speaker 2: sort of unprecedented moves where you deem a company a
Speaker 2: homegrown domestic champion as a supply risk in some way.
Speaker 2: But when you think more broadly about AI regulation in
Speaker 2: the hands of Congress or in the hands of the
Speaker 2: executive right now is are you comfortable with the amount
Speaker 2: of executive orders that have been deemed around AI, the
Speaker 2: way in which the administration has had to take maybe
Speaker 2: the steps necessary if the Congress void is still there.
Speaker 6: Well, I know this president is not unique and using
Speaker 6: executive orders where Congress is failing to act. The way
Speaker 6: in which these executive orders have been deployed a deeply
Speaker 6: problematic and certainly we've seen in many cases quite unconstitutional.
Speaker 6: Congress needs a step up, and that requires the majority
Speaker 6: party to do its job, that is to defend the
Speaker 6: progatives under Article one of the Constitution, where Congress has authority,
Speaker 6: and we've seen a host of areas from tariffs, certainly
Speaker 6: the AI where Congress has simply not been stepping up
Speaker 6: and allowing this president to take too much of the turf.
Speaker 6: There's a reason why we want Congress to be deciding this.
Speaker 6: These are issues that have massive impacts in many communities
Speaker 6: that are diverse communities that are simply not benefiting from
Speaker 6: AI as much as my communities so Oka Valley might be.
Speaker 6: That's why you need to have a national conversation.
Speaker 2: You were having a national conversation before the conversation became
Speaker 2: much more of war in the Middle East and war
Speaker 2: with Iran. You were talking about how we shouldn't see
Speaker 2: Congress just slam the brakes on AI innovation, and equally
Speaker 2: they shouldn't accelerate. There should be a way of grabbing
Speaker 2: the steering wheels. The way you wrote it in an
Speaker 2: op ed. Can we get some sort of bipartisan approach
Speaker 2: to grabbing a steering wheel in When you say so
Speaker 2: many states are affected in different ways.
Speaker 6: By AI, I'd like to think we can. Look, there's
Speaker 6: a lot of fears right now around AI, around lots
Speaker 6: of jobs, around impacts on utility bills. There are opportunities
Speaker 6: for us to move together. For example, we know these
Speaker 6: hyperscalers need speed. Let's give them federal permits enable them
Speaker 6: to accelerate if they're keeping rate payers whole and protecting
Speaker 6: them from these utility at the risk of higher prices
Speaker 6: on their utility bills. And you know, investing in batteries
Speaker 6: and the kinds of technology we know that will be
Speaker 6: sustainable rather than simply pulling more natural gas and colon.
Speaker 6: You know, for example, on jobs, there are things that
Speaker 6: we can do that our bipyrason that can incentivize companies
Speaker 6: to invest in community colleges and local state universities, up
Speaker 6: skill and reskill. These are not necessarily partisan notions. This
Speaker 6: is a time for us to be thinking more creatively
Speaker 6: across the aisle on these kinds of solutions. We don't
Speaker 6: have the kind of administration now in office that is
Speaker 6: particularly bipartisan, and so it's really going to have to
Speaker 6: come from ground up.
Speaker 2: You mentioned social media, and I think in many ways
Speaker 2: people have felt that there's been a void of lawmaking
Speaker 2: around social media because there is so much nuance to
Speaker 2: much of this. Is there sometimes too much nuance when
Speaker 2: it comes to the likes of impact by the Pentagon's
Speaker 2: decisions on mass surveillance, on issues of autonomous weaponry, that
Speaker 2: really laws can't be made that can keep up.
Speaker 6: Briefly, it's fair to say that this is incredibly complex,
Speaker 6: and you can't simply declare amateur hour and start to
Speaker 6: announce edicts that are going to apply broadly across multiple
Speaker 6: industries where the impacts may be very different. What I
Speaker 6: have been proposing, and we'll be coming out with legislation soon,
Speaker 6: is how, for example, on AI, we can essentially enable
Speaker 6: industry experts academic experts to be able to establish what
Speaker 6: those best practices are in an industry, allow industry to
Speaker 6: reach those best practices, rather than having some kind of
Speaker 6: monolithic eedic come from Congress or the administration. Government's not
Speaker 6: going to get it right. We have to acknowledge that
Speaker 6: this is moving too fast. We need to rely on
Speaker 6: the best thinking in the industry to establish what the
Speaker 6: best practices are and then mandate that folks can reach
Speaker 6: those they can have the benefits for example of preemption.
Speaker 6: If they don't, then they're subjected to the edicts of
Speaker 6: fifty different states.
Speaker 2: We appreciate you stopping by.
Speaker 8: It's great to be with you.
Speaker 2: You see here in New York Representative Sam Niicado, who
Speaker 2: represents the heart of Silicon Valley and much more in California.
Speaker 2: Now coming up Bitcoin, it shakes off invest a caution
Speaker 2: as Middle East tensions they rattle global markets, will bring
Speaker 2: you more market impact. Next, this is Blomberg Tech Bitcoin
Speaker 2: staging and comeback nearing seventy thousand dollars levels after the
Speaker 2: US and is really a taxed on Iran shook investor
Speaker 2: confidence over the weekend. Who in the latest is Bloomberg
Speaker 2: Cross asset reporter Isabelle Lee. They shape people with thinking
Speaker 2: of a world of war. That is not something to
Speaker 2: take lightly. But we think about the assets impacted. How
Speaker 2: is bitcoin managing to rally through this? Definitely behaving like
Speaker 2: a risk asset. I feel like, I mean, when you
Speaker 2: see a big pullback like that, it's eventually going to
Speaker 2: bounce back. It's now higher by around six percent after
Speaker 2: dropping as much as sixty three percent sixty three thousand
Speaker 2: over the weekend. Other less liquid, smaller coins are also
Speaker 2: in degree in higher by six percent, like ether. The
Speaker 2: thing I love about cryptocurrency is that trades twenty four
Speaker 2: to seven, and you really can see and use it
Speaker 2: as a risk sentiment when markets are closed, and now
Speaker 2: that we see US stark open, you see worries about
Speaker 2: an inflation resurgence. For instance, bonds are slumping, traders are
Speaker 2: trimming their FED rate cuts, heaven assets are surging dollar
Speaker 2: gold oil.
Speaker 9: Of course, an interestingly higher oil prices will actually weigh
Speaker 9: on crypto prices because crypto prices are behaving like tech
Speaker 9: stocks and risk assets, and of course those are sensitive
Speaker 9: defed erate moves. So everything is just interconnected, and I
Speaker 9: find that very interesting. In the top of all of this,
Speaker 9: it's a busy week for US ECO data. We have
Speaker 9: non farm payrolls. We also have unemployment rate and now
Speaker 9: for now we have more questions than answers. We have
Speaker 9: President Trump saying that the attacks could last a few weeks.
Speaker 9: So I think investors are just really preparing themselves for
Speaker 9: the tailors events and preparing for worst case outcomes. But
Speaker 9: at least for now that cooin is nearing seventy thousand.
Speaker 2: You keep us prepared as WELLI we appreciate it on
Speaker 2: all things of the market's reaction to a story that continues,
Speaker 2: because coming up we will join by American Enterprise Institute's
Speaker 2: senior fellow, Corey Shocky on all things defense, tech, geopolitics,
Speaker 2: so much more.
Speaker 8: This is Bloomberg Tech.
Speaker 2: Welcome back to bluemmeg Tech. We take a look at
Speaker 2: these markets, markets that are currently reacting to the news
Speaker 2: over the course of the weekend war in the Middle East,
Speaker 2: war with Iran. We're currently down on the Nastak one
Speaker 2: hundred by some five ts percent, coming back into Low's
Speaker 2: having tried to bounce into the green on the border indices.
Speaker 2: Video is actually up more than two percent because deals
Speaker 2: are still getting done. From an M and A perspective,
Speaker 2: or from an investment perspective, this is as we see
Speaker 2: in video making four billion dollars investment in data center
Speaker 2: optics companies. That's coherent and momentum. Their stock surge. Palenteer
Speaker 2: defense Tech. There is buying of this name for obvious reasons.
Speaker 2: On the day we're up almost six percent, but CrowdStrike
Speaker 2: is also interesting. Look are great colleagues at bloemmeg Intelligence
Speaker 2: like mandat Si seeing putting out really great notes talking
Speaker 2: about how palenteer of courses going to see buying a
Speaker 2: mid geopolitical tensions. We'll also see tailwinds for security spending
Speaker 2: with the larger companies such as CrowdStrike Palo Alto likely
Speaker 2: to see some focus and mid concerns about cyber attacks.
Speaker 2: We'll get into that in a little bit, but let's
Speaker 2: head back now to DC, where it's notable that the
Speaker 2: Pentagon is shifting AI providers after reaching a deal with
Speaker 2: opening I to deploy its models within the department's classified network. Rumat.
Speaker 2: Senior Tech editor Mike she But joins us on what
Speaker 2: is an extraordinary story that intertwines with a geopolitical story.
Speaker 2: How significant is this move that Sam Altman goes where
Speaker 2: Daria Ama Day won't.
Speaker 10: Well, it's not just significant that it happened, it's also
Speaker 10: caraed that it happened so quickly after the Pentagon decided
Speaker 10: that it would walk away from its relationship with Anthropic,
Speaker 10: which had been in place for roughly a year and
Speaker 10: the Anthropic had really worked itself into the classified space
Speaker 10: that is crucial for the Pentagon being able to deploy
Speaker 10: artificial intelligence in some fashion during critical operations, including combat,
Speaker 10: and Anthropics products have been used bipalent here as part
Speaker 10: of this so called maven system that colloquially might be
Speaker 10: thought of as windows for war where battlefield commanders can
Speaker 10: have access to information and have it interpreted and processed
Speaker 10: and analyzed and assessed in a much faster fashion and
Speaker 10: presented to them. Now, what this means is that within
Speaker 10: six months, the Pentagon must transition to a new provider,
Speaker 10: and open AI and arch rival to Anthropic, is stepping in.
Speaker 10: And what they are saying also is that they are
Speaker 10: willing to take the terms that Anthropic thought were unacceptable,
Speaker 10: terms that open AI says still respects its own guidelines
Speaker 10: when it comes to two key areas, and that is
Speaker 10: mass surveillance of Americans and also deployment of fully autonomous weapons.
Speaker 10: Open AI says that the contract and the relationship with
Speaker 10: the Pentagon are strong enough that those two requirements by
Speaker 10: the firm are respected. Anthropic, from its standpoint, did not
Speaker 10: see the same in the contract language, and it will
Speaker 10: be interesting to see how this unfoldes, Carol, because the
Speaker 10: US government has declared Anthropic a supply chain risk and
Speaker 10: also ordered it off US government agency networks elsewhere, and Treasure.
Speaker 2: Sectory Scott Besson talking this morning saying that the Treasure
Speaker 2: Department is terminating all use of Anthropic products, is following
Speaker 2: President Trump's direction on Anthropic, But of course this is
Speaker 2: as the consumer moves in a different direction. Mike. We've
Speaker 2: actually seen Anthropic in many ways not offline for consumers
Speaker 2: because so many people were demanding the product and downloading it,
Speaker 2: and maybe as some sort of pushback to open AI.
Speaker 2: There's calls to cancel chat GPT on the internet.
Speaker 10: Well, that's right, Kera, we are seeing some of this
Speaker 10: popular sentiment swell in Anthropics favor. Certainly online there is
Speaker 10: a lot of applause in favor of Dario Amiday and
Speaker 10: would have seen as a principal stance by many against
Speaker 10: depending on against the administration. That you know, look, if
Speaker 10: you thought that you couldn't do business with and Thropic,
Speaker 10: why not just cancel the contract? Declaring them a supply
Speaker 10: chain risk was seen by many as going a step
Speaker 10: too far and being vindictive. It's also important to remember
Speaker 10: that Claude's products are gaining popularity because many see them
Speaker 10: as quite good.
Speaker 2: And we have talked.
Speaker 10: In this space about how much Claude is threatening to
Speaker 10: disrupt other industries such as law, such as financial services,
Speaker 10: wealth management, you name it. And the tools that Claude
Speaker 10: offers really have some benefits, and that is yet another
Speaker 10: reason in addition to perhaps this populist sentiment swing.
Speaker 2: Mike Shepard always on the news. We appreciate it so
Speaker 2: much from DC that let's bring in Corey Shocking, Senior
Speaker 2: Fellow and Director of Foreign and Defense Policy Studies at
Speaker 2: the American Enterprise Institute. You've been thinking about really the
Speaker 2: Pentagon's reaction to this. Just talk us through your thinking
Speaker 2: as to whether the step of banning Anthropic from the
Speaker 2: supply chain in this way is the right step.
Speaker 7: It's a petulant reaction by this Secretary of Defense that's
Speaker 7: likely to turn out to be advantageous to Anthropic, but
Speaker 7: it's going to be bad for the Defense Department and
Speaker 7: bad for the security of the United States. The idea
Speaker 7: that you could either nationalize or blacklist a leading American
Speaker 7: company is outrageous and it's going to discourage other leading
Speaker 7: edge tech firms from being willing to expose their business
Speaker 7: by participating in the defense ecosystem.
Speaker 2: Okay, there's going to be immediate shock, as you say,
Speaker 2: from those in the space and the reaction function of
Speaker 2: the Pentagon. But more broadly, how transparent should these sorts
Speaker 2: of conversations become at this moment? Very difficult ethical questions
Speaker 2: that seem to be shown a significant public light on
Speaker 2: by dari Ama Day, the leader of Anthropic himself.
Speaker 7: Yeah, I think that's exactly right. I mean, this is
Speaker 7: a frontier technology that we are still understanding what its
Speaker 7: consequences are going to be. And to suggest that we
Speaker 7: have less transparency or that a firm has no right
Speaker 7: to set standards on how a cutting edge technology will
Speaker 7: be utilized by the Defense Department, I think is probably
Speaker 7: a losing proposition for DoD What should.
Speaker 2: Be forced, what could be forced by Congress? We just
Speaker 2: had a representative of California to start the show talking
Speaker 2: about wanting to bring law to bed that companies aren't
Speaker 2: pushed off of any sort of national supply chain in
Speaker 2: any retribution act. But what move already can be done
Speaker 2: by Congress at this moment to make clearer the lines.
Speaker 7: Well, Congress really runs defense policy and they can legislate
Speaker 7: in this space and DoD will be required to be
Speaker 7: compliant with it. It's actually shocking to think that the
Speaker 7: Defense Department blacklisted an American company. That's the kind of
Speaker 7: thing we do to Chinese firms, not to patriotic American
Speaker 7: firms who are already participating in classified DoD activity.
Speaker 2: Can you give us some guiding principles on then, how
Speaker 2: open Ai and sam Altman might be able to find
Speaker 2: appeasement in a contract. Do you think extra steps had
Speaker 2: been taken? Is there though really a need at this
Speaker 2: moment for companies to see the law as it stands
Speaker 2: as where the line should be, rather than trying to
Speaker 2: insert their own language into certain contracts.
Speaker 7: Well, it's an open question, but I do think that
Speaker 7: open Ai is saying, yes, we trust the government that
Speaker 7: they won't use our product in a way they say
Speaker 7: they won't, and Anthropic is saying, we actually need proof
Speaker 7: and we need indemnification that our product is being used
Speaker 7: as we are advertising our product. I think, given the
Speaker 7: low level of trust in the Trump Department of Defense,
Speaker 7: this is likely to be advantageous marketing for Anthropic and
Speaker 7: very difficult for DoD to be able to say you
Speaker 7: need to trust that we will abide by the law,
Speaker 7: when so much of their behavior, including blacklisting an American company,
Speaker 7: looks to be a bending of the law, or at
Speaker 7: least an aggressive and predatory use of the law.
Speaker 2: Corey, it is interesting open AI defended saying that it
Speaker 2: built a number of safeguards into the contract with the
Speaker 2: Pentagon and agrees with said the Pentagon actually agrees with
Speaker 2: these principles and reflects them in law and policy. When
Speaker 2: we're thinking about where AI's role now is in defense
Speaker 2: in war, as we're currently seeing an unfold, can you
Speaker 2: just educate our audience as to how integral AIS now become.
Speaker 7: Yes, what AI is already proving incredibly valuable for in
Speaker 7: the defense space is serving enormous amounts of data, for example,
Speaker 7: identifying threat portfolios. You know, the ability to see patterns
Speaker 7: in large amounts of data. But what Anthropic is saying
Speaker 7: is we do not want it to be used for
Speaker 7: domestic surveillance of the US or for decisions about the
Speaker 7: use of lethal force before we have higher confidence in
Speaker 7: the model and those are not unreasonable standards and provide
Speaker 7: the basis for what Congress perhaps ought to put into
Speaker 7: law until we have better transparency and better understanding of
Speaker 7: what these models are capable of in future iterations.
Speaker 2: Cry shocking. Great to speak with you of the American
Speaker 2: Enterprise Institute. We appreciate your time and expertise today. Look
Speaker 2: as the conflict with Iran intensifies, cybersecurity experts their warning
Speaker 2: of a rise in Iranian linked cyber threats targeting critical
Speaker 2: networks and infrastructure joining us to discuss Cynthia Kaiser as
Speaker 2: senior vice president of Ransomware Research Center at House and
Speaker 2: former Deputy Director of the FBI Cyber Division, Cynthia, are
Speaker 2: those threats real?
Speaker 11: They are? We're already seeing Iran have real threats and
Speaker 11: conduct cyberactivity against organizations in the Middle East, and we
Speaker 11: anticipate that they could follow on with operations here in
Speaker 11: the United States.
Speaker 2: And we said infrastructure in particular, where are the vulnerability
Speaker 2: is likely to be targeting.
Speaker 11: So throughout infrastructure in the Middle East and in the US,
Speaker 11: we see Iran target what they can get into. So
Speaker 11: it doesn't really matter the sector, It matters how the
Speaker 11: specific organization has done with their cybersecurity, has been able
Speaker 11: to fix those vulnerabilities, because what Iran does. They go on,
Speaker 11: they try to exploit something, get into something, and then
Speaker 11: they go out in the media and they say we've
Speaker 11: done more. So I've gotten under one machine in an organization,
Speaker 11: but I'm going to say that we've gotten onto the
Speaker 11: entire facility, and say a water treatment facility is down.
Speaker 11: So it's really a mix within critical infrastructure of getting
Speaker 11: onto something but then moving on and lying and exaggerating
Speaker 11: to try to stoke fear and chaos.
Speaker 2: How sophisticated is their ability to get onto something.
Speaker 11: So they are one of the world's most malicious and
Speaker 11: capable cyber actors in critical infrastructure. Overall, there are many
Speaker 11: many devices that are connected to the Internet and haven't
Speaker 11: been hatched for vulnerabilities that Iran is exploiting. Just late
Speaker 11: last year, FBI put out a warning about Iranian state
Speaker 11: sponsored actors who are targeting critical infrastructure in the United
Speaker 11: States through these types of vulnerabilities.
Speaker 2: From the perspective that we see the market as always
Speaker 2: trying to get ahead of any sort of concerns and
Speaker 2: indeed well move money on the back of it, we've
Speaker 2: seen cloud strike on the highest side, seeing padow to
Speaker 2: networks in the green always seeing really a desire to
Speaker 2: be fop the infrastructure of resistance, to be seeing our
Speaker 2: companies have the right place, the right sort of restraints
Speaker 2: on well use cases in place. At the moment.
Speaker 11: Absolutely, we've seen a lot of movement tours, being able
Speaker 11: to practice incident response plans, know what you're going to
Speaker 11: do if you are hit, including what you're going to
Speaker 11: do in the media to say if something's being exaggerated,
Speaker 11: to patch devices that maybe we're on some type of
Speaker 11: schedule to be patched later, doing that today, and conducting
Speaker 11: a lot of engagement across industry as well as with
Speaker 11: the FBI to be able to know the latest on
Speaker 11: what might be coming down and what threats that they're.
Speaker 2: Facing and the threats to all II in many ways,
Speaker 2: I'm sure Cynthia, they are.
Speaker 11: We've seen a lot of AI enabled threats and really
Speaker 11: where we see the biggest risk with AI enabled threats
Speaker 11: is in wanna be or very low level actors. But
Speaker 11: that's who I RAN might use I RAN users proxies
Speaker 11: to be able to conduct their activity. There's one group
Speaker 11: our Healthy on Intel team had identified who named Sakari,
Speaker 11: who is currently telling its members to conduct activity conduct
Speaker 11: attacks in the Middle East. But they've used AI to
Speaker 11: make their bad software. They're what they're deploying and it
Speaker 11: doesn't work very well. But what it actually means is
Speaker 11: it destroys networks when it gets on instead of being
Speaker 11: this kind of ransom you're going to pay to try
Speaker 11: to get back online.
Speaker 2: Oh so like collateral damage when actually just trying to
Speaker 2: exert financial damage, Cynthia. From the perspective of AI, we
Speaker 2: just come off the back of a couple of weeks
Speaker 2: where software names were pummeled, where particularly cyber companies were
Speaker 2: under pressure because people thought general to AI companies were
Speaker 2: going to be able to take their business. A plugin
Speaker 2: from Anthropic would be the answer to our our ransomware
Speaker 2: and cyber concerns. How are you seeing that evolve? How
Speaker 2: are you seeing companies actually wanting to use and build
Speaker 2: from within or still dependent on external offerings.
Speaker 11: So being able to build within is really important in
Speaker 11: a way to consistently know what's going on your network,
Speaker 11: be able to fix those vulnerabilities I talked about in
Speaker 11: real time, and then be able to identify other errors
Speaker 11: or things that might be going on that are malicious
Speaker 11: across a network. But it's only going to know what's
Speaker 11: plugged into it. It's not going to have a lot
Speaker 11: of these this additional information. What a threat group might
Speaker 11: be saying in a dark web forum, what's the new
Speaker 11: zero day that might be coming down the pike. Figuring
Speaker 11: out that aspect, being able to plug the really sensitive
Speaker 11: great information the private sector has into some of these
Speaker 11: new processes. Organizations just mean the cyber security is going
Speaker 11: to be better. It doesn't mean there's a replacement on
Speaker 11: either side.
Speaker 2: Can you take us to allies? Can you take us
Speaker 2: as to how strong their defenses.
Speaker 11: Are across the close allies the United States has, there
Speaker 11: are lots of sharing implement things implemented as well as
Speaker 11: these sharing mechanisms where we're sitting inside different governments, they're
Speaker 11: sitting with us to be able to counter cyber threats.
Speaker 11: Because this has been practiced for years.
Speaker 2: Cyber threats just.
Speaker 11: Don't have any boundaries. They're going across the entire world.
Speaker 11: That's especially true with our European allies, with Australian allies,
Speaker 11: with Israel, and so we have really identified ways to
Speaker 11: share quickly share in real time these threats that are
Speaker 11: facing all of us, and we all face the same challenges,
Speaker 11: but we all can come up with the same solutions
Speaker 11: and really counter these adversaries together.
Speaker 2: And Cynthia, from just an audience perspective, is as likely
Speaker 2: to be an attack that is focused in the end
Speaker 2: prize in one's work environment, or could this be something
Speaker 2: that you're navigating as a consumer.
Speaker 11: Right now, it's mostly going to be focused within the
Speaker 11: enterprise environment, especially within the United States. We have seen
Speaker 11: Middle Eastern countries organizations in those countries being targeted by
Speaker 11: Iranian state sponsored groups in the last few days for
Speaker 11: some of the data they might have on people, whether
Speaker 11: that's patients, customers, parts, and employees of that organization. We
Speaker 11: do see Iran going out trying to identify personal information
Speaker 11: for people they perceive maybe dissidents or enemies of the
Speaker 11: Iranian regime, and that's something to watch out for there,
Speaker 11: but we haven't necessarily seen that come over to the
Speaker 11: United States or to our European allies.
Speaker 2: Cynthia Kaiser of House and former FBI Deputy Director, we
Speaker 2: appreciate your time