Speaker 1: From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 2: And Caroline Hyde at Bloomberg's world headquarters in New York,
Speaker 2: and I met Ludlow in San Francisco.
Speaker 3: This is Bloomberg Technology coming up.
Speaker 2: Intel well, it scraps that five billion dollar deal for
Speaker 2: his Radi semiconductor firm Tower after failing to win approval
Speaker 2: in China. Will break down the implications.
Speaker 3: Plus, China tech firms report earnings with ten cent missing
Speaker 3: revenue estimates amid an uncertain economy. Will break down the
Speaker 3: results and look at WHYJD dot Com is bucking the slowdown.
Speaker 2: Speaking of slowdowns, from Buckingham, crypto custodian Bitgo defies the
Speaker 2: broader industry pullback to raise one hundred million dollars in
Speaker 2: securing one point seven five billion dollar valuation. So Mike
Speaker 2: Welsh's going to be joining us later to discuss how
Speaker 2: and why they did it.
Speaker 4: The top story, though, is clear.
Speaker 3: It is Intel walking away abandoning a deal to buy
Speaker 3: Tower Semi for five point four billion dollars. The concern
Speaker 3: is the timeline and the regulatory hurdle of China that
Speaker 3: they were not able to get approved Caro. It goes
Speaker 3: to the core of their foundry business. We're going to
Speaker 3: be talking to one of our guests about what this
Speaker 3: means for the foundry side later in the show. But
Speaker 3: you can see the impact on the market. Tower semi
Speaker 3: clearly down more ten percent, Intel down two point seven percent.
Speaker 3: By the way, Bloomberg reported this before the company confirmed it, Let's.
Speaker 2: Get to one of those reporters please to say a
Speaker 2: Leanna Baker is here with us and it was a scoop,
Speaker 2: but actually maybe the market had seen it coming because
Speaker 2: Tower had been selling off for what months before this.
Speaker 5: Basically it wasn't a total surprise. It was just about
Speaker 5: catching that finale. And even when we put out the story,
Speaker 5: we were wondering, what could happen if there's a hail
Speaker 5: Mary China's watchdog. They update their website at all hours
Speaker 5: of the night here in the US, so it was
Speaker 5: possible even at the last minute, they could have approved
Speaker 5: the deal.
Speaker 2: But once it became a.
Speaker 5: Parent that wasn't happening, it felt worth to publish that
Speaker 5: this was dead.
Speaker 3: Leanna walk us through the mechanics and timeline of the
Speaker 3: deal because there were multiple jurisdictional or regulatory challenges, China
Speaker 3: the main one. But Intel seems so confident when they
Speaker 3: announced this deal that they would get it done by
Speaker 3: a deadline.
Speaker 5: They announced the deal back in February of twenty twenty two,
Speaker 5: so that was already eighteen months ago, so it had
Speaker 5: really been dragging on.
Speaker 2: China is often.
Speaker 5: The last regulatory hurdle that you'll see in transactions. They
Speaker 5: really have jurisdiction over so many deals that have any
Speaker 5: connection to China. So anything right now in semiconductors is
Speaker 5: really hard to touch because it's just such a black box,
Speaker 5: this regulatory watchdog in China.
Speaker 2: It's not going away.
Speaker 5: I think any deal right now in semiconductors could face
Speaker 5: similar risks.
Speaker 2: And maybe other industries. We know that there's this overarching
Speaker 2: concern about AI, about chips when it comes to basically
Speaker 2: geopolitics at play. Does it all come down to geopolitics?
Speaker 2: Is that anything that Intel can see a silver lining
Speaker 2: and all.
Speaker 5: Of this wrong anything with chips, electric vehicles, AI, it's
Speaker 5: all very sensitive. It seems like the US and China,
Speaker 5: given all the geopolitical tensions, are in some kind of
Speaker 5: arms race so I would say any deal in that
Speaker 5: space is going to face a lot of scrutiny. Other
Speaker 5: deals that need China approval, maybe things in clothing and
Speaker 5: other sectors, those are probably safe for now and the
Speaker 5: reviews will be more straightforward. But certainly anything in technology,
Speaker 5: it's going to be a really rough road and traders
Speaker 5: are not going to like what happens.
Speaker 3: All right, bluem both Leanna Baker, who leads our deal's
Speaker 3: team in New York, thank you very much. I want
Speaker 3: to get some comments from Intel CEO Pat Gelsinger. In
Speaker 3: this statement, he said, we are executing well on our
Speaker 3: roadmap to regain transistor performance and power performance leadership by
Speaker 3: twenty two five, building momentum with customers in the broader ecosystem,
Speaker 3: and investing to deliver the geographically diverse and resilient manufacturing footprint.
Speaker 4: The world needs.
Speaker 3: What does this mean for the foundry business as bringing
Speaker 3: Daniel Newman the future and group CEO that for me,
Speaker 3: Dan is the story. How does this impact Intel's big
Speaker 3: plan to become a foundry offering of choice.
Speaker 6: We have a global title prize fight right now that's
Speaker 6: going on between China and the US for semiconductor and
Speaker 6: basically global technology leadership. And we'll talk about that in
Speaker 6: a minute, but right now you've got to look at
Speaker 6: the situation for Intel and say there's a silver lining.
Speaker 6: There's nothing against Intel partnering with Tower and moving forward.
Speaker 6: The profits in the foundry space are in the leading
Speaker 6: edge the analog and some of the specific capabilities that
Speaker 6: this would have given them would have certainly made them
Speaker 6: a full service boundry ed. But as I see it,
Speaker 6: there is plenty of opportunity for partnership. China is going
Speaker 6: to be incredibly complex, and as long as we continue
Speaker 6: to posture and put our microaggressions to maintain our technology
Speaker 6: leadership and push China, you can expect deals like this
Speaker 6: are never going to.
Speaker 7: Make it through.
Speaker 3: Well exactly so, I mean, Caroline Pat Gelsinger would tell
Speaker 3: me that they're super confident that Intel will become the
Speaker 3: leader again in manufacturing. One way to get there organically.
Speaker 3: The other is to go shopping. Shopping seems to be
Speaker 3: off the table.
Speaker 2: And to that point, Dan, it's so interesting is shopping
Speaker 2: off the table in the US as well. We don't
Speaker 2: want to see big tech chance get ever more bigger,
Speaker 2: but then equally international, and particularly when it comes to
Speaker 2: any sort of hot topic for China.
Speaker 6: Yeah, I mean, China's going to be a problem for
Speaker 6: the US for some time, and the US is gaining leadership.
Speaker 7: It's the moves it's made.
Speaker 6: With ASML, with EUV and these are the leading edge
Speaker 6: process capabilities have certainly put China on the defense. And
Speaker 6: you know, they've used some of the you know, different
Speaker 6: you know, components for semiconductors to hold against the US.
Speaker 6: But I see this move as something that's largely gonna
Speaker 6: be okay for Intel.
Speaker 7: Like I said, I see the partnership.
Speaker 6: And by the way, you can't take something like a
Speaker 6: Global Founderies deal, at least the consideration of something of that,
Speaker 6: because you remember Global Founderies exited a significant participation in China,
Speaker 6: so there's another opportunity there. And if Intel really wanted
Speaker 6: to go shopping, that could happen without necessarily needing China's approval.
Speaker 6: So I don't see this. I think Intel is going
Speaker 6: to win the markets. You know, they're going to adore
Speaker 6: Intel more if Intel.
Speaker 7: Can win at the leading edge. The lagging edge has
Speaker 7: been a problem.
Speaker 6: It has caused issues in the supply chain, but I'm
Speaker 6: not as negative about this. I do see this as
Speaker 6: maybe a cash flow benefit for the company, and the
Speaker 6: right partnership could end up being a winner.
Speaker 3: Dan the benchmark that Intel sets itself, the benchmark is TSMC.
Speaker 3: They're pretty candid about it. Do you still think they
Speaker 3: can get there in the end of catching out with TSMC?
Speaker 6: A one step approach, the acquisition of Tower is not
Speaker 6: going to immediately make Intel on the same plane as
Speaker 6: TSMC as a global foundry. Having said that it was
Speaker 6: a step forward, it did give them a more complete
Speaker 6: set of capabilities. I think if you even speak to
Speaker 6: and I have spoken to Pat Gelsinger, he will say
Speaker 6: it's a multi step process. The company providing more resiliency
Speaker 6: option for fabulous companies here like in Nvidia and Qualcomm
Speaker 6: AMD in the United States, to help us reduce the
Speaker 6: risk of future supply chain issues that we saw during COVID.
Speaker 6: I think the immediate opportunity is for Intel to be
Speaker 6: a foundry here, to lessen the United States and parts
Speaker 6: of the world's dependency on Asia and TSMC to compete,
Speaker 6: and of course, to help its own balance sheet and
Speaker 6: income statement with a new source of higher margin revenue.
Speaker 6: We've seen the pressure on Intel's margins and if it
Speaker 6: can win more at the leading edge, that's where the
Speaker 6: margin opportunity is.
Speaker 7: I think it can be a number two.
Speaker 6: I think it's a long way from being on TSMC's
Speaker 6: level as a global foundry and provider.
Speaker 2: I'm talking of global foundry. Just go back to global foundries.
Speaker 2: I mean you say that there's some sort of partnerships
Speaker 2: or a need deals that could be done, but can
Speaker 2: they be done even internally in the US at the
Speaker 2: moment down do you think?
Speaker 6: Yeah, the US environment is complex with what Lena Khan
Speaker 6: has been looking at, and of course the DJ looks
Speaker 6: at some of these deals. Having said that, a lot
Speaker 6: of the deals ultimately have been able to be completed.
Speaker 6: We've seen China stop big deals in the past before
Speaker 6: this one. NXP is a good example. Of course, we're
Speaker 6: seeing the US go through a high amount of scrutiny. However,
Speaker 6: if you stop M and A, you could be putting
Speaker 6: at risk the United States technology leadership. And remember the
Speaker 6: Chips and Science Act, and the whole purpose behind this
Speaker 6: Act was to make sure we were defending the United
Speaker 6: States global technology leadership in semi so, a strong INTEL
Speaker 6: is good for the world, and it's certainly good for
Speaker 6: the United States.
Speaker 3: Daniel, real quick, We've been tracking thirteen f's. In the deadline,
Speaker 3: Intel saw the second biggest decrease in aggregate shares held
Speaker 3: by hedge funds.
Speaker 4: Your reaction to that Intel.
Speaker 7: Has been under continuous pressure. I mean, look, I don't see.
Speaker 6: I haven't had a chance to review the exact positions
Speaker 6: and the changes in the positions. What I would say
Speaker 6: is Intel's had a nice run. It's shown some promise.
Speaker 6: It did have a better quarter, but the outlook, the
Speaker 6: complexity and of course China as a whole, China's economy
Speaker 6: as a whole continues to make a lot of the
Speaker 6: technology plays a little bit risky in the near term.
Speaker 2: Current standing and what fifteen percent of all the ratings
Speaker 2: from analysts on Intel are currently a cell. We keep
Speaker 2: an eye on that.
Speaker 4: Stop.
Speaker 2: Meanwhile, Dan Newman, we thank you as always. Fear analysis
Speaker 2: is of course some future and group. Meanwhile, speaking of chips,
Speaker 2: we've got to stick on end because we're watching shows
Speaker 2: a Samsung. Look the ADR's at the moment company cutting
Speaker 2: its stake in European giant ASML by more than half
Speaker 2: in the second quarter. Look at selling out of this
Speaker 2: because it actually wants to use the proceeds of those
Speaker 2: that chip equipment maker to invest in itself in chip
Speaker 2: production lines, as the world's well currently largest miomrii maker
Speaker 2: is trying to beef up its own guess what chip
Speaker 2: making business. So quite the theme. Hey, we've got to
Speaker 2: talk China because you know the rising economic turbulence currently
Speaker 2: in the country and it's actually weakening the consumer demand.
Speaker 2: All of that weighing are some of the key tech players.
Speaker 2: We keep an eye on ten Cent, for example, the
Speaker 2: giant reported revenue that missed and assessments. We're looking at
Speaker 2: the ADRs currently having well down three and a half
Speaker 2: percent and the lowest we've seen since May thirty. First,
Speaker 2: all of this as we see yet more Chinese tech
Speaker 2: firms coming out, and we want to see who's winning,
Speaker 2: who's losing. We want to get to it with Henry
Speaker 2: Wren in London and Isabel Lee here in New York.
Speaker 2: We can do a great round table, and Henry, I
Speaker 2: go to you first because the details the nuances within
Speaker 2: ten Cent, Where was outperforming, where was lackluster?
Speaker 8: Yes, so two elements are in play here. Advertising, So
Speaker 8: Tensent is seeing gains in advertising basically because it's pushing
Speaker 8: through its TikTok like video stream and its super app
Speaker 8: called Rechat. So basically that's the gaining part. But so
Speaker 8: the disappointing part is in gaming. So when we talk
Speaker 8: about gaming, it's about domestic games, it's about international games.
Speaker 8: So both gaming revenues at home and at abroad or
Speaker 8: lower than analyst estimates. So Tansent was saying, like, this
Speaker 8: is a temporary phenomenon and they should these revenue should
Speaker 8: rebound in the third quarter because they're pushing They're less
Speaker 8: pushy about in game commercialization for these gamers, for these
Speaker 8: players during the quarter to protect the game longevity. But
Speaker 8: it remains to be seen obviously for the third quarter.
Speaker 3: At the company level, JD with a very different story
Speaker 3: sales b estimates and Henry will go to you in
Speaker 3: a second on the specifics. But you look at the ADRs,
Speaker 3: the US listed shares of both, they're both markedly lower.
Speaker 4: Is a bell.
Speaker 3: Investors are basically very concerned here about the strength of
Speaker 3: the Chinese consumer and the Chinese economy exactly.
Speaker 9: Like Tencent is one of the biggest companies in China.
Speaker 9: It's business portfolio spence, finance, entertainment, and because it's seen
Speaker 9: as a barometer of China. What does it tell us
Speaker 9: and China's China's growth has really spotted us of late.
Speaker 2: It's almost kind of a be careful.
Speaker 9: What you wish for a kind of situation, because in
Speaker 9: the beginning of the year, everyone was hoping for this
Speaker 9: big rebound to spur global growth. But then when that
Speaker 9: didn't happen, investors were hoping that, Okay, maybe we can
Speaker 9: wish for a little weakness so that the Chinese Central
Speaker 9: Bank will inject liquidity and spur the economy. But now
Speaker 9: we have data after data showing weakness in China, and
Speaker 9: obviously investors aren't liking that. And I think these two
Speaker 9: tencent and even Ali Baba which reported last week, are
Speaker 9: just really a concrete example or the epitome of the
Speaker 9: Chinese growth in general, which has been lackluster.
Speaker 3: Henry, the story with JD is one about e commerce
Speaker 3: and the six eighteen or June eighteen festival.
Speaker 4: What were the numbers?
Speaker 8: The numbers are looking pretty good, so seal speed estimates
Speaker 8: for headline financials, so JD dot com definitely beating estimates,
Speaker 8: beating expectations here, Remember it's just Isabelle said the expectations
Speaker 8: has been pretty low so far because the consumers UH data,
Speaker 8: the retail sales haven't been doing so well out of China.
Speaker 8: But so when you drill deeper, it's actually another picture.
Speaker 8: So JD dot COM's retail margin actually was below estimates.
Speaker 8: So that's why JD's stock is trading down in US
Speaker 8: trading today as we see. So basically the concern has
Speaker 8: been the competition has been pushing higher because Ali Baba
Speaker 8: is pushing its market share.
Speaker 4: It's definitely losing market share.
Speaker 8: To some other players like Bytdowns, like JD, like Pindord.
Speaker 8: Also it's going heavy on its value for money investing campaigns.
Speaker 8: So basically that's the concern here. So the margin is
Speaker 8: a bit disappointing and is.
Speaker 2: Well, we ain't done yet. There's gonna be other telltale
Speaker 2: signs other companies giving us their earnings and what more
Speaker 2: could we glean? Do you think from mage one on
Speaker 2: the life?
Speaker 9: I think people are just really going to look at
Speaker 9: the other tech companies because there are many big players
Speaker 9: in China and it's an economy that's largely very domestic.
Speaker 9: But if you think that this doesn't matter in other
Speaker 9: economies like the US, you may want to think again.
Speaker 9: We have Bloomberry Economics saying that, Okay, yes, if it's
Speaker 9: a cushion growth, it may not affect the US so much.
Speaker 9: But if China really underdelivers and stimulus, and if growth
Speaker 9: really spirals down, then it may tip the FED to
Speaker 9: cut rates sooner than expected. So it's really China's a
Speaker 9: big player. It's the second largest economy, and whatever happens
Speaker 9: in that nation is really something the whole world closely watches.
Speaker 3: Wow, team covered a lot of ground there. As Carrie said,
Speaker 3: we ain't done yet. More to come this week. Bloomberg's
Speaker 3: Isabel Lee and Henry Wren thank you coming up here
Speaker 3: on today's Bloomberg Technology. Why recruitment companies are pulling back
Speaker 3: their annual guide because well, the labor market is squeezing
Speaker 3: its clients. Plus Nick mac ceo Rachel Tippograph is joining
Speaker 3: us to discuss the biggest takeaways from the retail sector.
Speaker 3: We've had target, we get Walmart, the e commerce story continues.
Speaker 4: This is Bloomberg all right.
Speaker 3: Time for work shifting, where we look at the changing
Speaker 3: landscape of the labor market amid advances in technology. First
Speaker 3: up recruitment companies are abandoning annual earnings forecasts. Amit a
Speaker 3: squeeze which has been spurred by a softening labor market
Speaker 3: in which employers are paying for fewer job listings. Zip
Speaker 3: recruiter withdrew its annual guidance, citing atypical hiring patterns in
Speaker 3: the first half after cutting twenty percent of its own
Speaker 3: staff in May, and the owner of Indeed and glass
Speaker 3: Door warned it was not sure yet whether growth would return,
Speaker 3: despite expecting five hundred million dollars of annual cost savings
Speaker 3: after chopping about twenty four hundred jobs, including about fifteen
Speaker 3: percent of Indeed's workforce, and in an effort to narrow
Speaker 3: the gap between operations in China and India, Fox con
Speaker 3: will begin production for the iPhone fifteen in its plant
Speaker 3: in southern India. Sources say the factories preparing to deliver
Speaker 3: the newest devices only weeks after they start shipping from
Speaker 3: factories in China. Before the iPhone fourteen, Apple with only
Speaker 3: a sliver of its iPhone assembly in India, which lagged
Speaker 3: China output by six to nine months. That delay was
Speaker 3: drastically reduced last year, and Apple produced seven percent of
Speaker 3: its iPhones in India at the end of March, and
Speaker 3: Amazon is imposing a new fee on merchants who don't
Speaker 3: use the company's logistics services. It is to change many
Speaker 3: of these sellers consider surprising, since the US government is
Speaker 3: poised to file an antitrust lawsuit against the e commerce giant.
Speaker 3: Thousands of third party sellers whose ship products themselves will
Speaker 3: start paying a two percent fee on each sale starting
Speaker 3: in October. That is, according to documents reviewed by Bloomberg.
Speaker 3: Were going have more on that story later in the
Speaker 3: out of Caroline we Ah.
Speaker 2: Meanwhile talking about Amazon that's drill into commerce, shall we?
Speaker 2: Because the news has been thick, has been fast July,
Speaker 2: the retail sales coupling and pretty strong, and today we've
Speaker 2: had earning from target profit gain for the company. We're
Speaker 2: really trying to understand where is the consumer, how is
Speaker 2: it shifting, how is it spending in this inflationary environment.
Speaker 2: Please to say we've got an expert for you. Rachel
Speaker 2: Tibograph is with US founder CEO of the e commerce platform,
Speaker 2: mickmac who just has such a bird sye perspective with
Speaker 2: how well ultimately companies are feeling right now and how
Speaker 2: people are spending, are you surprised by the resilience of
Speaker 2: the US.
Speaker 10: Consumer, I'm not because Americans love to spend, they don't
Speaker 10: like to see.
Speaker 4: So what we're.
Speaker 10: Seeing play out is exactly that you know. To quote
Speaker 10: my dear friends Shutrita Kodali, who's the lead analyst at Forrester,
Speaker 10: what we're seeing in the market is that consumers still
Speaker 10: have half a trillion dollar still pent up from the
Speaker 10: pandemic to spend through and they're doing it, and they're
Speaker 10: doing it in despite that the brands and retailers are
Speaker 10: raising prices. So what we're seeing happen in these earnings
Speaker 10: is that retailers have incredible margins right now because consumers
Speaker 10: are spending at a higher rate and they're keeping the margin.
Speaker 2: And that. It's interesting, isn't it? Because Target everyone seems
Speaker 2: to focus on, for example, that profit beaten. This calls
Speaker 2: are just gone, but they look still nervous looking forward.
Speaker 2: What are e commerce players seeing and how much are
Speaker 2: we spending of our wallet online or experientially instead?
Speaker 10: Yeah, I think Target's nervous for all the right reasons.
Speaker 10: What we're seeing right now is that consumers are spending
Speaker 10: on essentials. They're spending on groceries, on alcohol, on personal care,
Speaker 10: pet care, beauty. They're not spending on non essentials so fashion,
Speaker 10: consumer electronics. That discretionary spend is going towards travel and
Speaker 10: dining out.
Speaker 4: So for Target, if they.
Speaker 10: Want to be optimistic about their future, the big question
Speaker 10: that they need to answer is how are they going
Speaker 10: to beat Walmart at grocery?
Speaker 4: Exactly.
Speaker 10: That's really the name of the game right now. It's
Speaker 10: a focus on grocery to drive that habitual weekly shopping behavior.
Speaker 3: So I spotted something on that note that I think
Speaker 3: is relevant. I was going through the Earning school transcript
Speaker 3: because I love it and getting the magnifying out glass
Speaker 3: out and getting closed. But they said there was a
Speaker 3: favorable mix of same day services through the digital channel,
Speaker 3: in other words, people logging on buying something for there.
Speaker 3: And then is that something that Target can use to
Speaker 3: take on a Walmart because I know having covered that company,
Speaker 3: the e commerce strategy is definitely like in the moment
Speaker 3: pick it up.
Speaker 10: Yeah, absolutely, So it's what the industry likes to call
Speaker 10: buy online, pick up in store, and it's really profitable.
Speaker 10: So the retailers want to encourage consumers to shop that way,
Speaker 10: and Target is trying.
Speaker 4: To to do that.
Speaker 10: You know, they're encouraging people to come into store with
Speaker 10: Starbucks pickup, but Walmart has made a major push. A
Speaker 10: big perk of becoming a Walmart Plus subscriber is essentially
Speaker 10: having even faster pickup, even faster delivery. So Target again
Speaker 10: has to answer the question, how are they going to
Speaker 10: beat Walmart at buy online pickup in store?
Speaker 4: Nick Maxio rage with Tippo Grab.
Speaker 3: Always great to have you here.
Speaker 2: Welcome back to Blueback Technology. I'm Caroline Hyde in New
Speaker 2: York and a.
Speaker 3: Med lovelow here in San Francisco. Carry quick check on
Speaker 3: the markets. There's a little bit of red on the screen.
Speaker 3: I'm afraid now's that one hundred software by six tens
Speaker 3: of one percent. It's a really tech heavy index. It's
Speaker 3: why we always go to it. But we're trading at
Speaker 3: our lowest level in around a month. As we've discussed,
Speaker 3: part of it's the earning story dragging us down. Part
Speaker 3: of it is a big global macro discussion about the
Speaker 3: health of economies, particularly China. Looking at tech stocks largely
Speaker 3: moving to the downside in the session. The one name
Speaker 3: that I'm looking at more closely is Coinbase we're getting
Speaker 3: signs now of progress for regulatory approval, but the stocks
Speaker 3: down one point four percent, down for a sixth straight session.
Speaker 3: It's worst streak of declines since April. We started the
Speaker 3: session higher, as you can see right behind me, but
Speaker 3: we quickly fell away. Get the details on the regulatory
Speaker 3: for progress, and then understand the reaction with Bloomberg Shnali Bassak,
Speaker 3: who joins me from New York, explain both to me, Snali,
Speaker 3: this was supposed to be a really big move to
Speaker 3: the industry, and then you look at shares lower hard
Speaker 3: to understand.
Speaker 11: Well, our Oh, things start and end with where crypto
Speaker 11: is going, and bitcoin itself has also been under pressure
Speaker 11: the last several days.
Speaker 7: ED.
Speaker 11: But if you think about it also, the point that
Speaker 11: we're making is what does it mean for coinbase to
Speaker 11: become a future's clearing merchant. To remember, the idea of
Speaker 11: this was that they have tried for the for a
Speaker 11: couple of years, and the derivatives market, the futures market,
Speaker 11: in particularly around bitcoin in itself, has become very, very
Speaker 11: very large, and for Coinbase to become a futures cleaning
Speaker 11: merchant adds another player in a market that has coin funds.
Speaker 11: Chris Perkins has pointed out online has become smaller over
Speaker 11: the years in the broader derivatives markets. For Coinbase to
Speaker 11: be doing this also makes this option more available to
Speaker 11: more retail traders and institutions, as we know that coinbase
Speaker 11: is a large institutional product. But to the point you're making,
Speaker 11: this is not something that's going to be rolled out tomorrow.
Speaker 11: It will be offered in the becoming weeks, and the
Speaker 11: performance is going to have to prove for itself.
Speaker 3: So approval to sell crypto futures in the US in
Speaker 3: the era of tech showdowns and cage fights, there is
Speaker 3: one relationship that we do pay attention to, which is
Speaker 3: Coinbase in the SEC. Does this represent a sort of
Speaker 3: turn in the road for that relationship, Well.
Speaker 11: Let me put it another way. Back on Wall Street,
Speaker 11: there's this view about the cage fight that exists between
Speaker 11: the SEC and the CFTC, the two big regulators on
Speaker 11: Wall Street, one kind of being housed under agriculture when
Speaker 11: it comes to Congress, and one being housed under the
Speaker 11: world of banking and finance. And so for the CFTC
Speaker 11: to move faster just more allows more crypto products to
Speaker 11: be allowed under the wing of the CFTC rather than
Speaker 11: the SEC. But when we look at the lawsuits between
Speaker 11: at the SEC and Coinbase as well as their world
Speaker 11: in the booming landscape of ETF applications tied to bitcoin.
Speaker 11: You look at Boomberg Intelligences Eric al Belchunas and he
Speaker 11: gives it a sixty five percent chance that applications are
Speaker 11: approved by the end of the year, and the CFTC
Speaker 11: relationship the positivity behind it as one of the reasons
Speaker 11: why there is some optimism even for Coinbase is very
Speaker 11: you know, on the surface sour relationship with the SEC. However,
Speaker 11: on the bottom line, this ability for them to be
Speaker 11: working on another part of the industry that could face
Speaker 11: approvals this year.
Speaker 3: Bloomberg Shnali Basset, thank you very much, Caroline.
Speaker 2: Yeah, let's just stick with the world of cryptos, shall we.
Speaker 2: Because crypto custody firm Go guess what, just raised a
Speaker 2: load of money one hundred million dollars for a serious
Speaker 2: d round that values the company we understand at one
Speaker 2: point seventy five billion. We're going to talk about how
Speaker 2: they did it. Mike Belshi's with us, Biggo CEO. I
Speaker 2: mean in time where we're talking about crypto concerns and
Speaker 2: a tightening of money you managed to raise. How is
Speaker 2: it all about growth or what else did you have to prove?
Speaker 12: Well?
Speaker 1: Thanks for having me. It's definitely a tough time in
Speaker 1: the market. So I think you can talk to various investors,
Speaker 1: venture folks, et cetera, and you'll hear that it's pretty
Speaker 1: brutal out there. But I think Biko does stand apart
Speaker 1: a little bit and it comes to kind of an
Speaker 1: excess of four things for us.
Speaker 7: I mean, first off, everybody's talking.
Speaker 1: About regulatory safety at this point right Certainly we have
Speaker 1: a backstop of a macro economy that is really struggling
Speaker 1: in a bunch of different ways. The last thing you
Speaker 1: want is to have your investments in crypto be on
Speaker 1: the wrong side of.
Speaker 7: The regulators.
Speaker 1: So Biko's been building around regulated custody for longer than
Speaker 1: anybody started this back in twenty seventeen. We have for
Speaker 1: trust companies around the planet today.
Speaker 2: Can I just jump in there a moment, though, because
Speaker 2: within regulatory concerns and headwinds comes well a lack of clarity.
Speaker 2: Does that affect your business particularly or is actually you're
Speaker 2: saying it's a boon for you rather than a bust.
Speaker 1: Well, the lack of clarity has mostly been centered around
Speaker 1: what the SEC considers to be securities and what is not.
Speaker 1: We're just talking about the CFTC and the SEC a
Speaker 1: moment a moment ago, and there's a debate there. As
Speaker 1: a custodian, we can hold securities, we can own commodities.
Speaker 1: That's not an issue for us. We are not an exchange.
Speaker 1: We don't get hit by that part of the market.
Speaker 1: So folks that are looking to be able to participate
Speaker 1: in these asset classes can hold with bicko and a
Speaker 1: custodian and there's literally no worry about our regulatory standing.
Speaker 3: Mike, one hundred million dollars, nice chunk of change. What
Speaker 3: are you going to use the funding for?
Speaker 1: Well, Look, the business demand around the globe is continuous.
Speaker 1: We've been in this industry for over ten years. We're
Speaker 1: a bit of a bedrock, Okay, I think in the
Speaker 1: in the world today for crypto. We are expanding here
Speaker 1: in the US for expanding abroad. Like I said, we
Speaker 1: have four trust companies tow in the US too. In Europe,
Speaker 1: We've got some coming in in Southeast Asia. We hope
Speaker 1: soon as well as in the Middle East, so we
Speaker 1: hope to put that together as well as robust defy,
Speaker 1: if that's a word for our product line, make sure
Speaker 1: that we're picking up some adjacent, adjacent products and services
Speaker 1: that can really round out the service of a custodian.
Speaker 3: You have some interesting history in M and A or
Speaker 3: attempted M and A, So I wonder if you go
Speaker 3: shopping and you try and do some M and A,
Speaker 3: how will you do it differently this time around to
Speaker 3: pull off a deal.
Speaker 1: Well, look, I mean you do diligence in deals, and
Speaker 1: if somebody expects that you know everything is perfect before
Speaker 1: you do the diligence, they probably don't understand that the
Speaker 1: process works. But as long as we've got diligence that
Speaker 1: is uncovering the problems and finding it before we get
Speaker 1: into anything, then that's certainly not an issue. So I'm
Speaker 1: sure you're talking about prime trust and look, our diligence
Speaker 1: was great. Indeed, we found everything that was there and
Speaker 1: we're like, yeah, this is.
Speaker 7: It going to work.
Speaker 2: What's interesting, of course, on the M and A front
Speaker 2: was also the fact that you were going to be
Speaker 2: bought at a low evaluation, that you are now, which
Speaker 2: is quite amazing considering the turbulance that we've seen since
Speaker 2: twenty twenty one when Galaxy Digital was looking to buy
Speaker 2: you and how that unwound. How are you bringing transparency
Speaker 2: to your investors and can you bring us a little
Speaker 2: bit of transparency of your investors because you haven't said
Speaker 2: who they are, but you've had the ogs of Pantera
Speaker 2: backing you before and then Goldman and the institutions. Is
Speaker 2: it people who are crypto native who want to invest
Speaker 2: in you, or is it other institutions around the world.
Speaker 1: Well, certainly we've seen investment interests from kind of all segments.
Speaker 1: So your gold and Sacks has been an investor for
Speaker 1: quite some time as well with relation to Galaxy, they're
Speaker 1: still an investor. Also, back in twenty twenty one, when
Speaker 1: we coined that deal or signed that deal, it would
Speaker 1: have made a great strategic sense. We're trying to bring
Speaker 1: together some of the best of Wall Street and the
Speaker 1: best of technology and crypto Bicco had. Look, the SEC
Speaker 1: wasn't ready to help Galaxy be public in the United States.
Speaker 1: They're a Canadian listed company, they're not US listed, and
Speaker 1: the SEC is still struggling about how to have, you know,
Speaker 1: US public companies. So Coinbase got through the door, you know,
Speaker 1: a little bit before the current administration. Now you know
Speaker 1: that's locked up, and there's been no crypto companies through
Speaker 1: the SEC recently.
Speaker 7: As that turns, you know, big will be here, will
Speaker 7: be a lot bigger.
Speaker 1: I'm very excited about the opportunity we have going forward. Sure,
Speaker 1: we had liked the Galaxy deal at the time that
Speaker 1: we signed it.
Speaker 7: Times have changed.
Speaker 1: We've grown a lot, We've expanded in market share pretty
Speaker 1: much across all segments. I think Galaxy's got its own struggles.
Speaker 1: Wish them very well, but we're happy to be running
Speaker 1: it on our own and we're in good shape.
Speaker 3: Mike, I want to stick with with Caroline's question, one
Speaker 3: hundred million dollar round, one point seventy five billion dollar valuation,
Speaker 3: entirely new investors in the round, So who are they, Well, we.
Speaker 7: Haven't revealed that yet, so we'll reveal it when it
Speaker 7: makes sense.
Speaker 4: For giving you the opportunity to do that now money.
Speaker 7: Thank you, I appreciate it. We'll get back to that.
Speaker 1: But you know, look, it's all good investors are outside
Speaker 1: outside investors, they're new. You'll recogonist some of the brand names,
Speaker 1: and when it makes sense for us to do so
Speaker 1: business wise, we will absolutely share.
Speaker 2: Is there an element though, that you're seeing global interest
Speaker 2: in your company? Is it largely in US interest? How
Speaker 2: has that changed given the regulatory environment?
Speaker 7: Yeah, this is both international and US investors.
Speaker 1: Look, I think the regulatory landscape, you know, we talk
Speaker 1: about the US version of it like all the time,
Speaker 1: but every regulator in every country, every region is looking
Speaker 1: at how to deal with digital assets right now, and
Speaker 1: they're coming up with similar but often different answers. So
Speaker 1: we suddenly have find ourselves in the world where we
Speaker 1: have to be able to meet each of those and
Speaker 1: it's it's going to be interesting challenge because.
Speaker 7: Prepared for it that.
Speaker 1: You know, if each regulator requires custody on the ground
Speaker 1: in their country, it's a little bit odd and unusual,
Speaker 1: and I think we're going to have kind of a
Speaker 1: wave of sorting out of the the base what are
Speaker 1: the right regulations and there's could be some normalizations, some differences,
Speaker 1: but there's a lot of work that's going on abroad,
Speaker 1: and yeah, we absolutely want to hit that. We think
Speaker 1: there's going to be more growth outside the US than
Speaker 1: inside the US. Unfortunately the US still looks to be
Speaker 1: you're dragging the markets frankly by not getting ahead on
Speaker 1: the regulatoryfront.
Speaker 2: Well, we thank you for talking us through this deal,
Speaker 2: the regulatory environment, how you're managing to raise and of
Speaker 2: course with your experience having been with Google Chrome and
Speaker 2: then billin Bitco. It's great to have you on the show.
Speaker 2: Thanks so much, Mike Belshie. I'll bit go there. Meanwhile,
Speaker 2: coming up, I've got to talk now quantum computing. We
Speaker 2: are geeking out friends. Phasecraft is going to be with us.
Speaker 2: It's a tech startups just raised well just sixteen million dollars.
Speaker 2: But it's all about developing quantum algorithms. We're going to
Speaker 2: dive into why that is important. This is blue Bog Technology.
Speaker 3: Phase Craft, a British startup span out from University College
Speaker 3: London and the University of Bristol, has raised around sixteen
Speaker 3: million dollars to develop algorithms designed for quantum machinery and more.
Speaker 3: Joining us now from the UK. Ashley Montanaro, phase Craft CEO,
Speaker 3: a bit really excited about this one. You know, algorithms
Speaker 3: step by step sequence procedure to perform a calculation quantum
Speaker 3: on a quantum computer, superposition entanglement. Let's start with what
Speaker 3: is a quantum algorithm?
Speaker 12: Right, Well, first, thanks so much for having me, it's
Speaker 12: great to be here. So a quantum algorithm is indeed
Speaker 12: an algorithm that runs on a quantum computer. And what
Speaker 12: quantum algorithms do is they take advantage of the unique
Speaker 12: features of quantum mechanics such as quantum superposition, being in
Speaker 12: more than one state at the same time, and quantum
Speaker 12: entanglement super strong correlations between separated systems in order to
Speaker 12: perform calculations that just can't be done on any standard
Speaker 12: computer what we call a classical computer. And this is
Speaker 12: incredibly useful as well as being an amazing sort of
Speaker 12: scientific fact, because there are some problems which we would
Speaker 12: really love to solve, in particular those involving modeling the
Speaker 12: sort of quantum systems that occur in nature, for example,
Speaker 12: in batteries and solar panels, which we just cannot solve
Speaker 12: in any reasonable amount of time on a normal computer.
Speaker 12: But quantum computers can solve these problems natively, and that's
Speaker 12: why they're incredibly important devices.
Speaker 2: But largely they've been experimental, some might say impractical. How
Speaker 2: are your algorithms ultimately fixing that in some way to
Speaker 2: make useful, tangible steps forward.
Speaker 4: Yeah, that's right.
Speaker 12: So there's actually been really sustained and impressive progress in
Speaker 12: quantum computing hardware over the last couple of decades. I've
Speaker 12: been working in the field for around twenty years now,
Speaker 12: and the rate of progress has actually been really solid,
Speaker 12: really exciting. But yet we're still at the very early
Speaker 12: stages of the development quantum computing hardware. The way that
Speaker 12: we often think of it is that we're at the
Speaker 12: equivalent stage of like the nineteen forties or nineteen fifties
Speaker 12: with standard computers. And while there are still some important
Speaker 12: things that we could do with the sort of computers
Speaker 12: that we had in nineteen fifty, there was still relatively
Speaker 12: limited and that's why back then you needed to come
Speaker 12: up with incredibly efficient algorithms to get the most out
Speaker 12: of these devices. And that's exactly what we're trying to
Speaker 12: do now with today's quantum computers. So we're developing the
Speaker 12: algorithms which cut down the resource requirements for the quantum
Speaker 12: computers absolutely dramatically by factors of perhaps a million or more,
Speaker 12: to enable us to really solve useful problems on the
Speaker 12: sort of machines we have now or we might have
Speaker 12: in the next few years time.
Speaker 3: Actually, what are your resource requirements? What will you use
Speaker 3: the money raised to do?
Speaker 12: Right So, we're still very much at the R and
Speaker 12: D stage of our quantum computing, quantum algorithms designed right now,
Speaker 12: and that's what we're going to be doing over the
Speaker 12: next few years as we push towards this point that
Speaker 12: people call quantum advantage, so quantum computing outperforming classical computing
Speaker 12: for a problem of genuine practical interest. So we'll be
Speaker 12: using the funding that we've received at this latest funding
Speaker 12: round in order to build our amazing R and D
Speaker 12: team to really make these algorithmic improvements and breakthroughs that
Speaker 12: are going to get us to this point of quantum advantage.
Speaker 2: And you talk about material discovery climate, and you were
Speaker 2: mentioning solar for example. I'm interested, Ashley, as to how
Speaker 2: the UK sits in all of this. We've got a
Speaker 2: tug of war who's got the most AI prowess at
Speaker 2: the moment, who's got the most quantum powers? Is there
Speaker 2: a lot of technical talent over there in the UK?
Speaker 12: Right, So the UK is a great place to do
Speaker 12: quantum computing and to have a quantum startup. The UK
Speaker 12: government has been supporting quantum computing very extensively over many years,
Speaker 12: first with academic research funding and more recently also with
Speaker 12: support for the industrial sector as well. You may have
Speaker 12: seen it was recently announced that the next phase of
Speaker 12: the UK Quantum Technology program will be two and a
Speaker 12: half billion pounds, which is pretty substantial. There are other
Speaker 12: countries in the world which are also great places to
Speaker 12: do quantum computing, the US, Canada, for example, but the UK,
Speaker 12: I think is also very very strong, and this is
Speaker 12: reflected in the fact that there are around forty quantum
Speaker 12: startups in the UK, which is a very impressive number.
Speaker 3: Actually, your field is broadly caught in the US technology
Speaker 3: export restrictions to China.
Speaker 4: Do you worry about that your ability to.
Speaker 3: Work with China or the future of your offering going
Speaker 3: into the Chinese market.
Speaker 12: So firstly I would say, you know these export controls
Speaker 12: or potential export controls in the future. You know, sometimes
Speaker 12: these are implemented by governments for a variety of reasons.
Speaker 12: The only points I'd make about China in particular, firstly
Speaker 12: that there has been really impressive progress on the Chinese
Speaker 12: quantum hardware developments. In the last few years, They've gone
Speaker 12: from essentially a standing start to being one of the
Speaker 12: top quantum hardware players in the world, which is seriously impressive.
Speaker 12: And I'd also say that really the field of quantum
Speaker 12: computing has been marked by a very high degree of
Speaker 12: international cooperation in the past, and I'm hopeful that this
Speaker 12: will continue as long as it is possible.
Speaker 2: Ashley, great to speak with you. Thank you very much, indeed,
Speaker 2: Ashley Montene from Phasecraft, CEO, co founder on their raise
Speaker 2: and what they're you need the money for.
Speaker 4: Let's get back to Amazon.
Speaker 3: Earlier in the hour, we mentioned the company will be
Speaker 3: imposing a you fee on merchants who don't use the
Speaker 3: company's logistics services, charging a new two percent fee on
Speaker 3: each sale they conduct. Bloomberg Technology spencer Soper broke that story,
Speaker 3: joins us now only reporting in the anti trust context,
Speaker 3: but explain this one.
Speaker 13: Yes, so this new fee will apply to sellers who
Speaker 13: use what's called seller fulfilled prime. That means you don't
Speaker 13: use Amazon's logistics services, but you still get that prime
Speaker 13: badge on its site, which really increases your sales because
Speaker 13: people are more likely to buy things that they know
Speaker 13: that they'll receive within within a day or two. And
Speaker 13: so Amazon announced that beginning in October, they're going to
Speaker 13: impose a new two percent revenue fee.
Speaker 4: So this is just kind of like a brand new fee.
Speaker 13: Caught a lot of merchants off guard, especially given the
Speaker 13: anti trust scrutiny, and.
Speaker 4: Merchants aren't sure what they're going to get for it.
Speaker 2: I mean, dwell on that antitrust case because I thought
Speaker 2: there were these last minute negotiations behind the scenes where
Speaker 2: they come together and really try to put to bed
Speaker 2: any of the anxiety around competition. And meanwhile they go
Speaker 2: and do this because this is one of the criticisms
Speaker 2: from the FDC.
Speaker 4: No, yeah, so this would be this would apply.
Speaker 13: The anti trust argument against Amazon has been sprawling in
Speaker 13: all over the place, but this specifically was more about
Speaker 13: tying where you use your dominance in one industry. In
Speaker 13: Amazon's case, it's online marketplace that captures more than a
Speaker 13: third of all.
Speaker 4: US spending online spending.
Speaker 13: It's dominance in the marketplace to give itself an advantage
Speaker 13: in logistics where it's not so dominant, you know, where
Speaker 13: it's competing with ups where there's alternatives like the US
Speaker 13: Postal service. So if Amazon can use its marketplace to
Speaker 13: try to coerce more people to use its logistics services,
Speaker 13: that's potentially an antitrust no no called tying, and that's
Speaker 13: what kind of comes up here when you start charging
Speaker 13: a new fee on something that can kind of entice
Speaker 13: or coerce people to use your own services spender.
Speaker 3: When we cover at earnings a couple of weeks ago,
Speaker 3: we made the point on the blog that Amazon is
Speaker 3: getting better at making money on the dot com stuff
Speaker 3: that's higher margin, in other words, ads and services.
Speaker 4: Does this fee fall into that bucket? Yeah, exactly.
Speaker 13: This falls into the Amazon on seller Services fee, which
Speaker 13: Amazon's third party seller services makes more revenue than Amazon
Speaker 13: Web Services, the cloud computing division, So it's a huge
Speaker 13: chunk of Amazon revenue and it grows more and more.
Speaker 13: We had a chart that shows you know, Amazon's online
Speaker 13: store sales where they're kind of serving as a as
Speaker 13: a retailer, you know, dropping from about sixty something percent
Speaker 13: back in twenty seventeen to like forty percent, and the
Speaker 13: seller services fee climbing from you know, slowly like seventeen
Speaker 13: eighteen percent of all revenue up above twenty so those
Speaker 13: two revenue sources are kind of converging, and Amazon's finding
Speaker 13: it much more profitable to charge people to sell things
Speaker 13: on the platform rather than to sell things itself.
Speaker 2: Really fascinating. Spenser Sofa bringing it day after his birthday.
Speaker 2: Have a birthday for then we thank you. Meanwhile, Loop,
Speaker 2: you've got two Brits, well, one Welsh, one English on set.
Speaker 2: So what are we going to talk about football? Because
Speaker 2: you pointed out at Google trends showing search is for
Speaker 2: the fief for Women's World Cup. Absolutely searching, as well
Speaker 2: as one Lionel Messi too after heat did some pretty
Speaker 2: fancy footwork for Miami. But I've just got to shout
Speaker 2: out for the Lioness's at the moment, three to one
Speaker 2: they're going to take on Spain.
Speaker 4: Yeah, incredible.
Speaker 3: I do support Whales, but I'm backing the lion S's
Speaker 3: three to one victory over hosts Australia in Stadium Australia
Speaker 3: in Sydney, a first World Cup final for England's women.
Speaker 3: It is what people are talking about on not just
Speaker 3: Google trends in terms of search bit x, but I
Speaker 3: see Lionel Messy and into Miami everywhere at the moment. Yeah,
Speaker 3: every social platform and littered across Apple TV plus right now,
Speaker 3: we want to.
Speaker 2: Hear about sporting powess, so we want to hear about
Speaker 2: extraordinary talent. We want to be able to discuss it
Speaker 2: across social media, whether it's via sort of anecdotes or
Speaker 2: quotes or patriotism like I was doing a little bit
Speaker 2: earlier because you know it might be coming home as
Speaker 2: they call it in New England. But it is notable
Speaker 2: that Lionel Messi has just been such a weird in
Speaker 2: for ultimately the MLS, for everything to do with interimentally
Speaker 2: with Miami.
Speaker 3: It feels like, yeah, and Tim Cook name checked Messi
Speaker 3: on an Apple earnings call.
Speaker 4: You know the impact that's held.
Speaker 2: Oh technology, It's everywhere and that does it. With this
Speaker 2: edition of Bloomberg Technology.
Speaker 4: So much to recat it's huge weeks so far.
Speaker 3: Check out the podcast, Apple, Spotify, and the Bloomberg platforms
Speaker 3: from New York and SF.
Speaker 4: This is Bloomberg