Speaker 1: Bloomberg Audio Studios, podcasts, radio news from the heart of
Speaker 1: where innovation, money and power collide in Silicon Valley and beyond.
Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed louveloan.
Speaker 2: Lie from New York. I'm Caroline Hyde and.
Speaker 3: I'm Mike Sheppard in San Francisco. This is Bloomberg.
Speaker 2: Technology coming up the US probes where the deep seek
Speaker 2: bypassed US restrictions to buy advanced in video chips through
Speaker 2: third parties. In Singapore, Plus, Apple gives a reassuring revenue
Speaker 2: forecast for the current quarter. The results show declining iPhone
Speaker 2: and Chinese sales over the holidays, and we sit down
Speaker 2: with the CEO of HPE of thedoj swing to stop
Speaker 2: its fourteen billion dollar acquisition of Juniper Networks, but first
Speaker 2: check in on these markets, which have underperformed from a
Speaker 2: tech perspective in the last month the most. It's twenty sixteen.
Speaker 2: A brilliant line coming from Bank of America's Michael Hartnett,
Speaker 2: who potentially thinks we are now seeing the dawn of
Speaker 2: the Lagnificent seven. He coined the phrase magnificent seven. Mike,
Speaker 2: and we're starting to question the overall peak of AI spending.
Speaker 2: This is of course crucial in the context of this week.
Speaker 2: We started the week on deep seak revelations. Do you
Speaker 2: need as much compute when you've got an R one
Speaker 2: model that's brought to bear the implications that that has
Speaker 2: for the GPU sellers such as in video, And today
Speaker 2: we get that first official meeting between in Vidio, CEO
Speaker 2: just One and indeed President Donald Trump. That we understand
Speaker 2: that the meeting has been in the week's works for
Speaker 2: several weeks now. They plan to discuss AI policy, but
Speaker 2: that policy just got so much more interesting following the
Speaker 2: revelations of.
Speaker 3: Our one Caro. There is so much riding on this
Speaker 3: meeting for Jensen Wang, and you're right. We heard him
Speaker 3: say at CES that he was looking forward to a
Speaker 3: meeting with Donald Trump. But so much has happened since then,
Speaker 3: and all the other major tech leaders have had their
Speaker 3: chance in their sit downs with Donald Trump. And the
Speaker 3: question now is whether it might be a case of
Speaker 3: too little, too late for Jensen Wang as he sits
Speaker 3: down with Trump with all the pressure growing on whether
Speaker 3: the US should impose even more restrictions on AI chip
Speaker 3: sales to China, Cara.
Speaker 2: And of course for many, the question still remains as
Speaker 2: to whether or not it was done with very high
Speaker 2: powered in video chips or not. It all comes as
Speaker 2: US officials and Fat Mike approbing whether Deep Seat bought
Speaker 2: advanced video chips through third parties perhaps in Singapore. We
Speaker 2: here's what a representative Roga Krishna Mudy had to say
Speaker 2: on the Show of Balance and Power yesterday.
Speaker 4: What I'm concerned about is, for instance, with deep Sea,
Speaker 4: that they weren't able to stockpile a number of the
Speaker 4: highest ends before the export controls actually went into effect,
Speaker 4: namely the H one hundred chips, and then they bought
Speaker 4: a lot of these H eight hundred chips. And so
Speaker 4: what we want to do is both strengthen the export
Speaker 4: controls and make sure that they're not porous.
Speaker 2: A leading lawmaker there on the policy implications of China
Speaker 2: and US, and we bring in Blumeg's Jordan Robertson because
Speaker 2: there is much speculation as to whether or not Deep
Speaker 2: Seak achieved this with chips that it was allowed to purchase,
Speaker 2: or chips that perhaps it circumvented some key policies here
Speaker 2: in the United States.
Speaker 5: Yeah, thanks for having me. We reported today that US
Speaker 5: officials are investigating whether deep Seek achieved its breakthrough in
Speaker 5: AI chatbots, you know, through the acquisition of Nvidia advanced
Speaker 5: in video chips that it's not supposed to have. Now,
Speaker 5: I should point out that the timeline here, you know,
Speaker 5: it's messy, you know, because deep Seek has acknowledged using
Speaker 5: chips in its in its network. You know, that is
Speaker 5: not a secret. That is not something the company has
Speaker 5: tried to hide. The question is which chips has it used,
Speaker 5: and when did it buy those chips and where did
Speaker 5: it buy those chips from? And our reporting, our reporting
Speaker 5: is that American officials are looking at, you know, whether
Speaker 5: those acquisitions of chips included chips that were not supposed
Speaker 5: to be sold to China and that transited you know,
Speaker 5: from the US to China via Singapore.
Speaker 3: Jordan, let's get blunt here, are the export controls even working?
Speaker 3: Have they been able to stay ahead of what appears
Speaker 3: to be China's ability to leapfrog ahead or around them.
Speaker 5: Yeah, that's the big question in a lot of the
Speaker 5: China revelations we've seen over the last you know, especially
Speaker 5: twelve months, whether it's you know, the chips used in
Speaker 5: Huawei phones or in this case, you know, the chips
Speaker 5: used to you know, facilitate Deep Seeks breakthroughs. You know,
Speaker 5: I think there's certainly a story to be told about
Speaker 5: creativity and ingenu in you know, rethinking how you do
Speaker 5: these AI large language models. You know, that certainly is
Speaker 5: part of it. But at its core, you do need hardware,
Speaker 5: you do need software. You still do need the most
Speaker 5: advanced technology available, whether that's a SML hardware to make
Speaker 5: chips or in this case, you know, in videos GPUs
Speaker 5: to run these these models. And again deep Seek has
Speaker 5: not hidden the fact that it uses in Vidio chips.
Speaker 5: The question is which chips and when did it get them?
Speaker 2: Maybe a classic example here of just fast follow the
Speaker 2: idea that if you curtail, you bring about innovation. Jordan,
Speaker 2: that innovation has got a lot of people in the
Speaker 2: US excited the app being downloaded for deep Seek, But
Speaker 2: you're reporting that actually we're having to prevent it being
Speaker 2: used by government by companies.
Speaker 3: Yeah.
Speaker 5: Yeah, the Pentagon, I mean, we've had a number of
Speaker 5: stories come out in the past few days. One of
Speaker 5: them was that the Pentagon was kind of caught flat
Speaker 5: footed on this. You know a number of Department of Defense,
Speaker 5: you know, employees in official downloaded, you know, connected their
Speaker 5: work computers to the Chinese deep deep seek servers and
Speaker 5: downloaded the code the large language models. It was not blocked,
Speaker 5: and they were downloading this code for several days before
Speaker 5: the Defense Information Systems Agency, which is essentially like the
Speaker 5: IT and Cybersecurity Department for the Pentagon, began blocking those links.
Speaker 5: And what we've also reported is that now there's an
Speaker 5: effort underway throughout the military to identify where deep Seek's
Speaker 5: code has wound up on military networks and to remove it.
Speaker 5: So this was an example of, you know, the fast
Speaker 5: changing nature of technology and the fact that it's really
Speaker 5: hard to keep up with what the latest potential threats are.
Speaker 3: Bloomberg's Jordan robertson Thank You Coming up. Apple's holiday results
Speaker 3: showed declines for China and the iPhone, but the company's
Speaker 3: forecast helped to reassure investors. Will break down Apples earnings
Speaker 3: after the break.
Speaker 6: If you look at our Greater China revenue for the quarter,
Speaker 6: we were down eleven percent year over year, and over
Speaker 6: half of the decline that we experienced was driven by
Speaker 6: a change in channel inventory.
Speaker 2: Apple CEO Tim Cobb there trying to perhaps comment on
Speaker 2: the sales decline in China, which was a key miss
Speaker 2: in the numbers. Apple's biggest market well is the US,
Speaker 2: but in large part China is dominant too. It struggled
Speaker 2: to fend off competition from local brands. Let's get to
Speaker 2: Mark German, who was trying to understand really what this
Speaker 2: inventory change really meant it. How did it spawn an
Speaker 2: eleven percent decline in China sales.
Speaker 7: Yeah, so whenever Apple has a shortfall these days, of
Speaker 7: course there were days where they didn't have these shortfalls,
Speaker 7: they have some color or I guess, an excuse as
Speaker 7: to why that happened. And for China this time around,
Speaker 7: we're talking a seven billion dollar decline from a few
Speaker 7: years ago. On the holiday quarter. They're saying that they
Speaker 7: simply didn't have enough inventory. They're saying that they underprojected
Speaker 7: how many units they needed in the channel for the quarter,
Speaker 7: and by the end of the quarter, by the end
Speaker 7: of December, they simply ran out, which meant they weren't
Speaker 7: able to fulfill those orders, which led to a decrease
Speaker 7: in revenue. And he says about half of the eleven
Speaker 7: percent shortfall was due to that find It makes sense, right,
Speaker 7: but clearly that you are anticipating a shortfall to begin
Speaker 7: with if they under provided inventory. And I think the
Speaker 7: response right this morning you see the saw prices up
Speaker 7: considerably despite the significant miss in China, right and the
Speaker 7: three percent decline of iPhone revenue. I think one is
Speaker 7: the guidance, right, they're going to grow again in the
Speaker 7: March quarter, which is a far cry from where they
Speaker 7: were just a year and a half ago where there
Speaker 7: was a series of quarters in a row where they
Speaker 7: were declining. So that's positive. But I also think investors
Speaker 7: believe that because they missed those sales in China due
Speaker 7: to inventory in Q one, those sales will return in
Speaker 7: Q two. If you're an Apple customer and you want
Speaker 7: the new iPhone or ipowder watch or what have you,
Speaker 7: and the Apple store doesn't have it and it's unavailable,
Speaker 7: you're not really going to give up in most cases, right,
Speaker 7: You're going to go back when it's in sock. And
Speaker 7: so I think investors and analysts believe that is going
Speaker 7: to happen, and we are going to see that China
Speaker 7: revenue actually come in and factor in into the March quarter.
Speaker 3: Mark. How much have a grace period are investors they're
Speaker 3: willing to give Apple given some of the struggles that
Speaker 3: we've seen with Apple Intelligence and also areas like wearables too.
Speaker 7: Yeah, no, both good points. So on Apple Intelligence, I
Speaker 7: think investors are giving Apple a little bit of leeway.
Speaker 7: They've shown their ability to come into new categories slowly
Speaker 7: and improve the product over time. Obviously AI is a
Speaker 7: different beast. Obviously they have rivals both here and abroad.
Speaker 7: They are absolutely crushing them right now. But I think
Speaker 7: investors are going to give them a little bit of leeway.
Speaker 7: I would give them two more quarters, right analysts, I
Speaker 7: believe we'll give them two more quarters before they start
Speaker 7: having real concerns about this technology and its ability to
Speaker 7: drive sales and from a fundamental perspective, how it works
Speaker 7: feature wise. In terms of wearables. The new CFO, Kevin Burakt,
Speaker 7: made an interesting point on the earnings call that.
Speaker 8: There was a little bit of a tough compare.
Speaker 7: So typically over the last few years or so, you've
Speaker 7: see an Apple roll out two or three new Apple
Speaker 7: Watch models. This past fall, in September, they only released
Speaker 7: an Apple Watch Series ten. There was no new Apple
Speaker 7: Watch Ultra that's coming later in the year. This year.
Speaker 7: There'll be a new Apple Watch se later in the
Speaker 7: year this year, so you will see a little bit
Speaker 7: of that momentum return to the wearables category. But clearly
Speaker 7: the Apple vision pro not driving anything material to grow.
Speaker 8: That category, right.
Speaker 7: I mean, if you look at the big picture, Apple's
Speaker 7: first major new product category in years thirty five hundred
Speaker 7: dollars in revenue or peace at minimum, and it's not
Speaker 7: driving anything to that segment. That just tells you how
Speaker 7: few of these devices they're still selling.
Speaker 3: Bloomberg's Mark German, thanks for joining us. Let's get more
Speaker 3: with Gene Monster of deep Water Asset Management. Deep Seek
Speaker 3: really shook up the markets earlier this week and cause
Speaker 3: so many reflections upon investment in AI and development of
Speaker 3: AI in this country. What sort of pressure does that
Speaker 3: put on Apple specifically with its Apple Intelligence product.
Speaker 9: It's probably put a relief on Apple because if deep
Speaker 9: Seek does advance some of these third party models and
Speaker 9: basically creates an environment where the primary models like GPT
Speaker 9: or Gemini will have to lower their price to compete
Speaker 9: with more of these open source that benefits Apple from
Speaker 9: two perspectives. First is that as you use Apple Intelligence
Speaker 9: and it goes and taps into open ai, for example,
Speaker 9: there is a cost that comes to Apple for that
Speaker 9: those tokens. That's how it's measured. The usage is measured,
Speaker 9: and they sell tokens. As the price of those comes
Speaker 9: down driven by deep seek. That's a positive for Apple.
Speaker 9: And separately is Apple's app developers who are building these
Speaker 9: AI tools need to be aware of the costs that
Speaker 9: these apps have in terms of pulling in the token
Speaker 9: costs and lowering the token costs will should promote more
Speaker 9: AI development within the apps. And so that's why you
Speaker 9: saw Apple move up on the deep seek news. And
Speaker 9: I think that more broadly, I mean this has been
Speaker 9: I've been around tech for a while, and what I've
Speaker 9: seen this week related to deep seek is I think
Speaker 9: captured in the concept that the market is now the
Speaker 9: nastak is now flat from where it closed on Friday,
Speaker 9: and I think that essentially the commentary from Apple about
Speaker 9: how they can better fit from this. To answer your question, Mike, specifically,
Speaker 9: they focus in a.
Speaker 2: Long way on and AI security. They talk up their chips,
Speaker 2: they talk up private service. Is that going to be
Speaker 2: integral to a consumer when we're thinking about using Chinese
Speaker 2: apps When it comes to artificient intelligence.
Speaker 9: So for US consumers and Western consumers, they're probably not
Speaker 9: going to want to use a model I think. I
Speaker 9: suspect most people will not want to use a model
Speaker 9: that's based in China. And part of it is because
Speaker 9: I think this data integrity question, that's something that matters
Speaker 9: more for people who are over thirty five years old,
Speaker 9: when through our research we've seen that younger demographics tend
Speaker 9: not to care. I think the whole TikTok example is
Speaker 9: a pretty clear example. People just want the content, and
Speaker 9: I think some of the potential downfalls to using some
Speaker 9: platforms it's just not top of radar. But to answer
Speaker 9: your question, is that Apple will brand around security of
Speaker 9: course with AI and benefit I think with deep seek
Speaker 9: or some other third party open source AI within China.
Speaker 9: Is that that needs to Apple really needs to fill
Speaker 9: that AI hole in terms of Apple intelligence. Who is
Speaker 9: their partner in China.
Speaker 2: Let's just talk about Apple intelligence that we just heard
Speaker 2: from Mark German. I know you speak with him. He's
Speaker 2: been saying, look, you the analyst community and the investor
Speaker 2: community will give Apple a two quarter grace period to
Speaker 2: get this intelligence side right. Is that the sort of
Speaker 2: length of time we need.
Speaker 9: I think actually investors are going to give probably a
Speaker 9: little bit more room and probably give a pass largely
Speaker 9: on fiscal twenty twenty five. And if you look at
Speaker 9: the street numbers right now after these adjustments last night,
Speaker 9: iPhone growth is going to be around three percent. It
Speaker 9: steps up to eight percent in fiscal twenty six. And
Speaker 9: so I think that as long as that carrot is
Speaker 9: out there, and Apple did a good job of reminding
Speaker 9: investors that carrot's there because in markets that Apple Intelligence available,
Speaker 9: they said sales did better than in the other markets.
Speaker 9: As long as that carrot's out there, I think you're
Speaker 9: going to see this kind of this trend towards investors
Speaker 9: focused on what this breakout potentially could look like. And
Speaker 9: I would just say this, and Mark's done an incredible
Speaker 9: job of reporting on the features, on Apple Intelligence, the
Speaker 9: timing all these and from my perspective, I think that
Speaker 9: they still fall short of well short of what needs
Speaker 9: to happen for these products to really get people excited
Speaker 9: and tell their friends to buy it. I think they're
Speaker 9: going to get there. I'm an Apple shareholder, are Fermones,
Speaker 9: and I think they're going to get there. But I
Speaker 9: think that the product needs not only more distribution over
Speaker 9: the next few quarters, but the feature set really needs
Speaker 9: to get pumped up.
Speaker 3: Gene In China, we saw Apple report inventory issues there,
Speaker 3: but soon they're going to have some geopolitical ones, perhaps
Speaker 3: thanks to tariffs that Donald Trump is threatening against the
Speaker 3: world's second largest economy. How do you see Apple navigating
Speaker 3: that later this year if that happens.
Speaker 9: Well, just quickly on the tariff side of it was
Speaker 9: the second to last question on the call last night,
Speaker 9: and Cook just said, we're monitoring the situation, so basically
Speaker 9: sidestepped the question. I think most investors believe that there's
Speaker 9: just no risk to the tariffs given what happened seven
Speaker 9: eight years ago. They're able to navigate around that. So
Speaker 9: this probably is more of a risk to Apple stock,
Speaker 9: just given I think that most investors are complacent on
Speaker 9: what this potentially could mean. I think it's going to
Speaker 9: be fine. I think they're going to be able to
Speaker 9: navigate that. But I think there's something bigger going on
Speaker 9: in China. Potentially something bigger going on when you see
Speaker 9: Huawei their phone sales up fifteen percent of the December quarter,
Speaker 9: and Samsung and Apple, if you just for the channel
Speaker 9: inventory down three four or five six percent. It begs
Speaker 9: a question, is it about lack of AI features or
Speaker 9: is there some sort of shift that Chinese consumers, some
Speaker 9: sort of bias movity towards more homegrown products. And this
Speaker 9: goes beyond Apple and Samsung, but maybe think about like
Speaker 9: how Tesla could be impacted, and the Chinese government does
Speaker 9: an amazing job of being able to kind of steer
Speaker 9: how public sentiment is around some of these products. And
Speaker 9: that's kind of in the back of my mind about
Speaker 9: what me something else may be going on. This isn't
Speaker 9: just China economies week and a quarter in that negative
Speaker 9: in a way exactly.
Speaker 2: I mean, with thirty seconds to go, give marks out
Speaker 2: of ten for this earning season. This week with Tesla
Speaker 2: their Meta two, I.
Speaker 9: Think the fundamentals were six out of ten. It was
Speaker 9: it was okay, nothing, But I think what was most
Speaker 9: important as far as the a topic deep seek, the
Speaker 9: commentary about how they feel AI is going to proceed,
Speaker 9: and the spending around that.
Speaker 8: It was a ten out of ten.
Speaker 2: Gene Monster, a deep water asset management, more earnings, more chips.
Speaker 2: Let's look at Samsung chip maker, of course, on the
Speaker 2: downside by three tenths of percent. It's Pivotal Chip division's
Speaker 2: reported a smaller than expected profit. The company is fighting
Speaker 2: off arch rival s k Heinez so itself has been
Speaker 2: on the downside after a four day holiday in sat
Speaker 2: Over in South Korea, and some warriors post deep seek
Speaker 2: and what it means that chips. More broadly, mic Caro.
Speaker 3: Intel posted better than expected fourth quarter results as the
Speaker 3: company saw a sales beat, partly from Asia customer orders
Speaker 3: ahead of possible tariffs from the US, But the company
Speaker 3: says first quarter sales are expected to fall short of
Speaker 3: expectations on weaker demand and tougher competition. We're joined now
Speaker 3: by Wedbush analyst Matt Bryson, who's been writing that the
Speaker 3: results were quote nothing unexpected. He maintains a neutral rating
Speaker 3: on the stock with a twenty dollars price target, and
Speaker 3: he's with us now, Matt. We did hear a somewhat
Speaker 3: more realistic tone from the interim CEO about the prospects
Speaker 3: for maybe turning the company around in the short term.
Speaker 3: How did that land with you?
Speaker 8: I think it's the right way to think about things
Speaker 8: in the sense that Intel Underpat Elsinger was consistently you know,
Speaker 8: being optimistic about where where things were going to end up,
Speaker 8: and at the end of the day that that ended
Speaker 8: up disappointing investors. So you start off with a more
Speaker 8: realistic bar and the hope is you're you're able to
Speaker 8: execute from there.
Speaker 2: Realistic looks pretty painful and the shares do drop on
Speaker 2: the back of all of this. No quick fixes, but
Speaker 2: what can be done the interim when you get no
Speaker 2: news on a new CEO?
Speaker 8: Yeah, so I think the big question is what does
Speaker 8: Intel do from here? So under underpat Intel's plan was
Speaker 8: we're going to make Intel grate again. So we're going
Speaker 8: to restore our our fabs to competit ofness. That's going
Speaker 8: to bolster the entire operation. So now the real question
Speaker 8: is when you bring in a new CEO, is that
Speaker 8: still the plan of record or rather, do you do
Speaker 8: what a m D did, try to split the business up,
Speaker 8: look more like a Broadcom or Marvel, be a chip
Speaker 8: design house, spin the fab out. I think until we
Speaker 8: get an answer to that, it's going to be hard
Speaker 8: to kind of figure out what future looks like for Intel.
Speaker 3: Matt, what is your timeline? Nonetheless for Intel to be
Speaker 3: able to close the gap with rivals in critical areas
Speaker 3: like server chips for all those data centers that we're
Speaker 3: starting to see built across the country.
Speaker 8: Yeah, so there's two things to think about there. One
Speaker 8: is where are they with their fabs. They've they've told
Speaker 8: us that AT and A is going to ship second
Speaker 8: half of this year, So I think it's really important
Speaker 8: as to what those new chips look like. If the
Speaker 8: ships are competitive, that's a huge victory for Intel. Their
Speaker 8: struggles really started almost a decade ago when they missed
Speaker 8: their their their FAB upgrades. So getting that right, I
Speaker 8: think would be would be a huge positive. But the
Speaker 8: next piece is what we're seeing is a whole lot
Speaker 8: more consumption of AI chips. So whether it's Nvidia or
Speaker 8: Broadcom or Marvel building for for some of the large
Speaker 8: data centers or a m D, their growth has come
Speaker 8: from the AI side. Intel there, they still really don't
Speaker 8: have a product. Gouty disappointed. They just told us that
Speaker 8: their next product, Fealton Shores, is going to be more
Speaker 8: of a test product. So I think getting things right
Speaker 8: there it is important, But we don't have a whole
Speaker 8: lot of insight into what exactly that that roadmap is
Speaker 8: going to look like and how successful it's going to be.
Speaker 7: Matt.
Speaker 2: In thirty seconds, they're planning to spend twenty billion dollars
Speaker 2: on new plants. Will the administration be supporting this long term?
Speaker 6: That is?
Speaker 8: That is a great great question is SEMs like this
Speaker 8: administration goes from one place to another place. You never
Speaker 8: quite know where it's going to go. So hopefully for
Speaker 8: Intel sake they will. But I'm not going to guess
Speaker 8: what the Trump administration is going to do.
Speaker 2: Matt Bryson, a wed Verse, Thanks so much for your
Speaker 2: time today. Welcome back to Blue Meg Technology. I'm Caroline
Speaker 2: Hide in New.
Speaker 3: York and I'm Mike Shepard in San Francisco.
Speaker 2: As we wrap up the week, let's look at these markets,
Speaker 2: because what a week has been. The Monday anxiety. What
Speaker 2: does deep seek our one model mean for the need
Speaker 2: for GPU, the need for AR infrastructure. The selloff was
Speaker 2: hard on the Monday, but we've actually managed to grind
Speaker 2: our a higher on the NASZAC over the last five days.
Speaker 2: On the Naszak one hundred, we are now up the
Speaker 2: tenth of a percent. Sure underperforms on an SMP level
Speaker 2: from a tech perspective versus the rest of the index,
Speaker 2: but in the NASVAC we core it higher. But that
Speaker 2: release of deep seeks are one has perhaps for some
Speaker 2: venture capitalists do rethink their strategy around investing in AI startups,
Speaker 2: particularly on the hardware side of thing. But let's get
Speaker 2: the VC take. Joining us now is Joshualf, co founder
Speaker 2: of lux Capital, which is an investor in Hugging Face
Speaker 2: and Angual industries in data bricks the name but a
Speaker 2: few Josh, and you actually have been more plowing into
Speaker 2: the application layer of generative AI rather than the models.
Speaker 2: But what do you make of this?
Speaker 10: Well, I think there's two key takeaways from this past
Speaker 10: week and basically the entire trend of what's happening in AI.
Speaker 10: The first is on the capital side, and then the
Speaker 10: second is on the human capital side. On the capital side,
Speaker 10: I think that the people that have been investing in
Speaker 10: the large foundation models are a little bit shaken. The
Speaker 10: idea of putting tens of billions of dollars into something,
Speaker 10: even if it was partially replicated by China, and then
Speaker 10: having a five or six million dollar overlay on top
Speaker 10: of that, I think has people shaken to their core,
Speaker 10: and rightly so. But the other piece of this is
Speaker 10: thinking about the open source models. Those are things like
Speaker 10: you mentioned, hugging face together compute, thinking about novel model
Speaker 10: architectures like Sikana out of Japan. This is where we've
Speaker 10: been investing over the past two or three years. And
Speaker 10: then also thinking about the next wave, which is going
Speaker 10: to be really in AI for the three dimensional physical world,
Speaker 10: biology and robotics, and there I think you're going to
Speaker 10: see a lot of great new companies physical intelligence evolutionary scale.
Speaker 10: Those are people that are not going to have the
Speaker 10: same kind of competition on the large language model scale.
Speaker 3: Josh, is there a third piece to this though, maybe
Speaker 3: geopolitics and the rivalry between the US and China. How
Speaker 3: does deep Seek fit into that You're invested in Andrail
Speaker 3: and Palanteer. Where do you see this as part of
Speaker 3: pantheon of issues between the US and China?
Speaker 10: Mike, I think you nailed it. This is increasingly, you know,
Speaker 10: whether you think we are in Cold War two point
Speaker 10: zero or not. The TikTok piece over the past few
Speaker 10: year and now with President Trump coming in and maybe
Speaker 10: thwarting what I think is a grave national security threat
Speaker 10: is number one. Number two is deep Seek. With people
Speaker 10: saying my gosh, this is not just made in China
Speaker 10: with us things that are manufactured there like our iPhones,
Speaker 10: but actually created and invented there or even if it
Speaker 10: is copied. I think the bigger thing is this human capital.
Speaker 10: We are at war for talent. We need a brain
Speaker 10: drain coming here. And let me give you three stats
Speaker 10: that shocked me to my core and viewers are listening.
Speaker 10: Fifty percent of undergraduates in AI around the world are
Speaker 10: coming from China. They are producing fifty percent of the
Speaker 10: undergraduate researchers in AI. Number two, thirty eight percent of
Speaker 10: American researchers are from China. Thirty seven percent are Native Americans.
Speaker 10: So think about that, we're outnumbered in our own country. Now.
Speaker 10: We want to get those people here and keep them here,
Speaker 10: but if they're going back to Chinese companies, it's.
Speaker 7: A really bad thing.
Speaker 10: And Number three, the US used to be about twenty
Speaker 10: three to twenty five percent of international students that we're
Speaker 10: coming here to our country. Today it's only about fifteen percent.
Speaker 10: So it underscores the need that we are in competition
Speaker 10: not just for the hardware and the physical capital, not
Speaker 10: just for the financial capital, but for the human capital.
Speaker 10: And we need to do something. I think this is
Speaker 10: a real big wake up call.
Speaker 2: You should know you're on trustee of the SANA fans
Speaker 2: to think a look about Josh. I want to go back, though,
Speaker 2: to something you've been posting a lot on the national
Speaker 2: security front. I think of what you put on X
Speaker 2: and you're talking about Chinese state backed companies and not companies.
Speaker 2: They're arms of the government. They're designed to erode US competitiveness.
Speaker 2: And you talk about TikTok, Dji and I in the Sky,
Speaker 2: deep Sea Huawei. I'm interested, though, does it matter if
Speaker 2: China continues to fast follow. They need the compute power,
Speaker 2: the inference to actually get all of this innovation into
Speaker 2: people's hands. If you rate what just happened this week,
Speaker 2: is this really a concern or is this like us
Speaker 2: even more determination to remain ahead of the game and
Speaker 2: have to continue to invest in the overall AI infrastructure.
Speaker 10: Well, as you said, very well right now, if it
Speaker 10: is a wake of call and people are now saying
Speaker 10: we need to compete, we need to be more aggressive.
Speaker 10: We cannot be complacent or lazy, than it's a win
Speaker 10: for America. We do not want the rest of the
Speaker 10: world relying on Chinese models which will approach inn as
Speaker 10: in totive truth but never fully get there. Try searching
Speaker 10: for Wigers or Jannaman Square Taiwan. You're not going to
Speaker 10: get truth. You're going to get CCP censorship. We don't
Speaker 10: want the world or the world's companies developing on those models.
Speaker 10: To the point about hardware infrastructure, you also now in
Speaker 10: that we are seeing a shift from training where you
Speaker 10: need one hundred thousand clusters of h one hundred chips
Speaker 10: and video chips to inference. And there's going to be
Speaker 10: a big fight on inference on two fronts. And I'll
Speaker 10: give you a sort of preview what I think is
Speaker 10: going to be the next big wave here. If you
Speaker 10: can do inference on device, I suspect about thirty to
Speaker 10: fifty percent of your inference, your prompts, your queries will
Speaker 10: be on your chats, your cash, emails, your photos, your
Speaker 10: health data. You don't need to go to the cloud
Speaker 10: for that. And so the memory players and other chip
Speaker 10: makers are going to become dominant, and I think that
Speaker 10: the attention and the capital allocation is going to shift
Speaker 10: towards them. Maybe you're doing fifty to seventy percent of
Speaker 10: your inference in the cloud, and you're going to perplexity
Speaker 10: your chat GPT with search or Google Gemini as you
Speaker 10: today would for Google for basic search. But that ecosystem
Speaker 10: is going to change. The other big thing we're going
Speaker 10: to see the death of ap high. AI going to
Speaker 10: bring in the death of APIs. And what I mean
Speaker 10: by that is all of the backwards backchannel software negotiation
Speaker 10: that happens between all of our applications today are going
Speaker 10: to be usurped by AI basically just acting like a
Speaker 10: user and navigating on your phone. And there's going to
Speaker 10: be big fights between Meta and Apple and some of
Speaker 10: the app layer people in that. So those are two
Speaker 10: big things to watch.
Speaker 2: The agent fight. You of course a part of the
Speaker 2: Hill and Valley Forum group. It's a private, bipartisan community
Speaker 2: of lawmakers and business people about the national security focus
Speaker 2: of US versus China. And I just want to take
Speaker 2: your thought on whether the administration current one gets this,
Speaker 2: because we've got Jenson One meeting Trump today.
Speaker 3: You know, I think that they do.
Speaker 10: I think there's a lot of brilliant people that have
Speaker 10: gone into this administration. When you think about Jacob Hilbert,
Speaker 10: you think about Scott Besson, these are both friends and
Speaker 10: people that I think are extraordinary service and highly competent.
Speaker 10: They feel very strongly about this issue. Now has done
Speaker 10: a good job of flattering Trump because they know that
Speaker 10: flattery works to influence. I hope that the people around
Speaker 10: him recognized, particularly on the TikTok issue, how nefarious and dangerous,
Speaker 10: insidious TikTok is for the American public and the things
Speaker 10: that we believe for the rest of the technological competitiveness.
Speaker 10: I think it is great to see things like Hill
Speaker 10: and Valley where you have cutting edge technologists, venture capitalists
Speaker 10: like us, and policymakers that are all working together. People
Speaker 10: used to warn about the military industrial complex, and rightly
Speaker 10: so back in the day we went from fifty primes
Speaker 10: to five. Now you're seeing Anderill and Sale, Drone and
Speaker 10: Hadrian and Varda, these neo primes, these new emergent companies
Speaker 10: getting the space and the speed pass to compete. I
Speaker 10: think that is absolutely critical against the civil military fusion doctrine.
Speaker 10: Where As I said in my tweetstorm there that every
Speaker 10: company is not an independent Chinese company, it is part
Speaker 10: of the government. They have to report everything that they
Speaker 10: do and all the information to the Chinese Communist Party
Speaker 10: into Shujipin.
Speaker 3: Josh, you stress the importance of research as fundamental to
Speaker 3: developing AI in this country. Do you have any concerns
Speaker 3: that the new administration may be taking a chillier or
Speaker 3: more hostile approach to science. You're a scientist, to yourself,
Speaker 3: what is your view? I do.
Speaker 10: I feel very deeply that we should be funding basic science.
Speaker 10: If we knew the answer to questions, we would just
Speaker 10: go and pursue them. But you need fundamental research, you
Speaker 10: need funding. Can those things operate better? Yes, But the
Speaker 10: answer is not on the administrative side trying to cut things.
Speaker 10: The answer is giving more grants and more money, not less,
Speaker 10: to younger people, to younger researchers. And I know that
Speaker 10: sounds crazy, but most of the great breakthroughs happen from
Speaker 10: that crazy cocktail, that potent combination of ambition and naivete
Speaker 10: and people that question why wouldn't.
Speaker 3: We try that?
Speaker 10: Why not try? Versus the old guard that often is
Speaker 10: set in their ways and sclerotic and solidified, and they
Speaker 10: are basically always saying why try that? So instead give
Speaker 10: more money to young people. But we should absolutely, as
Speaker 10: we're seeing from China and their competitive rise, We should
Speaker 10: absolutely be giving more federal funding to basic science and
Speaker 10: undirected research to create the spontaneous breakthroughs that can change
Speaker 10: the world. We want the GLP ones invented here. We
Speaker 10: want the GPUs invented here. TSMC itself should have been
Speaker 10: invented here instead of in Taiwan. So we want all
Speaker 10: these break great breakthroughs, whether they're in chemistry, physics, material science.
Speaker 10: We dominated in software for the past two decades and
Speaker 10: for the past generation. We really want to dominate in
Speaker 10: the physical sciences, robots, space rocketry. Thank gosh for SpaceX,
Speaker 10: even though I'm really critical of Elon. An amazing company
Speaker 10: and an amazing American company, So we need more of
Speaker 10: that no less.
Speaker 3: Josh Wolf, co founder and managing partner at Lux Capital,
Speaker 3: thank you for joining us. Coming up, we speak with
Speaker 3: Hewlett Packard Enterprise CEO Antonio nari As the US sus
Speaker 3: to block the company's acquisition of Juniper Networks. This is
Speaker 3: Bloomberg technol.
Speaker 2: Let's take a quick look at shares of HPE and
Speaker 2: Juniper Networks. The DOJ yesterday announcing it's suing to stop
Speaker 2: the fourteen billion dollar acquisition of Juniper Networks arguing the
Speaker 2: merger would harm competition in the market for enterprise wireless equipment.
Speaker 2: We're rallying off the back of some falls yesterday joining
Speaker 2: us now Antonio nairy hpe CEO, and you have fought
Speaker 2: back saying the DOJ is ignoring key competitors here. Why
Speaker 2: are they doing that?
Speaker 11: Welcome on it, Caroline, thank you for having me. We
Speaker 11: believe the thesis from the euj's flawed because they consider
Speaker 11: their market very narrowly in the wireless line, only three competitors,
Speaker 11: when the reality there are eight.
Speaker 3: You know.
Speaker 11: Even industry analysts came out yesterday, you know, stating that
Speaker 11: that's the case. So as we go in through the process,
Speaker 11: we understood that that's going to be a challenge, but
Speaker 11: ultimately we believe there is no case here. This is
Speaker 11: pro competitive. We will bring it too complementary technologies together,
Speaker 11: which also will enable us to compete outside the United
Speaker 11: States in the context of the previous competition we have
Speaker 11: with Josh against the Chinese vendors, in the context of
Speaker 11: national security, particularly in cloud and the service provider space.
Speaker 11: So that's why we're going to fight this vigorously, and
Speaker 11: we believe we're going to prevail. Through the process.
Speaker 2: Do your lawyers think you will prevail? It's interesting, of
Speaker 2: course other regulators sign this off, so it must have
Speaker 2: been a surprise.
Speaker 11: Yeah, it was a surprise because fourteen of these sixteen
Speaker 11: jurisdictions around the globe approved the deal pretty much by
Speaker 11: September last year, which was very very quick. You know,
Speaker 11: since the announcement was January nine, twenty twenty fourth, and
Speaker 11: that included in the UK, in the European Union. They
Speaker 11: never asked for a second request. Customer testimony was always
Speaker 11: in favor of the transaction, and that's why, you know,
Speaker 11: since September we were pretty much substantially complete with the
Speaker 11: DOJ process, but obviously through the elections and the like,
Speaker 11: we took us to today and then you know, when
Speaker 11: I meet with it DOJ on Tuesday, nothing new came
Speaker 11: out of that conversation, and therefore, you know, we are
Speaker 11: surprised and disappointed, but ultimately we believe this is pro
Speaker 11: competitive and we believe this is the interested on the
Speaker 11: national security in alignment with the current administration agenda. And
Speaker 11: that's why from a puran the trust perspective, we believe
Speaker 11: we have a case here for us.
Speaker 3: And tell you, did you try in the course of
Speaker 3: those conversations with the Justice Department ahead of the losses
Speaker 3: being filed, to negotiate something or perhaps offer concessions. What
Speaker 3: might those have been and what did DOJ ask you for?
Speaker 11: No, it was not necessary. In the DOJ never asked
Speaker 11: for any concessions whatsoever. They ask us through the process
Speaker 11: several extensions, but we never discuss remediation or any concessions
Speaker 11: as a part of the approval.
Speaker 3: Are you a little surprised them by the current administration
Speaker 3: actually following through with this case? You pointed to its
Speaker 3: posture when it comes to competitiveness in the US and
Speaker 3: trying to foster investment. How does this square with what
Speaker 3: the President, for instance, would be talking about when it
Speaker 3: comes to business.
Speaker 11: Well, Mike, we don't have yet the permanent leaders, neither
Speaker 11: of the DOJ nor at the Antitrust Division, so we're
Speaker 11: looking forward to have them on board. We hope that
Speaker 11: they will take a second look at the case and
Speaker 11: realize that this transaction is core tech, no big tech.
Speaker 11: Remember that both Juniper Networks and HP powers a lot
Speaker 11: of the United States infrastructure in the Department of Defense,
Speaker 11: Department of Energy, and many other administrations. Across the government,
Speaker 11: and so we're hopeful that when the new administration is
Speaker 11: in charge, they're going to look at this and take
Speaker 11: a second look and realize this is aligned perfectly with
Speaker 11: the agenda that the President has America first, building the
Speaker 11: United States. Let's remind yourself a lot of the equipment
Speaker 11: that HP produces today for the United State governments building
Speaker 11: the United States and also outside the United States to
Speaker 11: compete with China. The reason why the market looks the
Speaker 11: way it looks in the United States, which is eight
Speaker 11: vendors and this is data from the industry analysts, which
Speaker 11: we provided obviously tremendous amount of documentation, is because worldwet
Speaker 11: is not allowed to play in the United States, but
Speaker 11: when you go outside the United States, they're actually nine members.
Speaker 2: It does feel like China continues to be the bogey
Speaker 2: man that a lot of companies are going to turn
Speaker 2: on to try and get things through. And ultimately, I
Speaker 2: put to you that James McHenry, who's the acting Attorneys
Speaker 2: General at the moment in the US, probably want to
Speaker 2: pursue this and as he got some sort of sign
Speaker 2: off from the new administration, a more pro business administration.
Speaker 2: So do you think really this is going to land
Speaker 2: any differently with Pamboni.
Speaker 11: We don't know, Karen, I will not speak related to that.
Speaker 11: Excuse me for my voice. I will not speak related
Speaker 11: in that. You know, we have dealt with the Department
Speaker 11: of Energy Anti Trust Division. We were very collaborative, constructive
Speaker 11: throughout the process, and we hope that the new administration
Speaker 11: one is in charge, they're going to look at this
Speaker 11: and they will bring us back at the table. Otherwise,
Speaker 11: you know, we will pursue the actions through the court.
Speaker 11: They were the ones decided to file the lawsuit to
Speaker 11: block the transaction, and we believe we have the right
Speaker 11: to defend ourselves there and we believe that we can
Speaker 11: prevail through the just the anti trust aspect of the
Speaker 11: and then in addition to that, we hope that also
Speaker 11: the national security aspect of this article see.
Speaker 10: That as well.
Speaker 3: HPE CEO Antonio Neri, thank you. Here's the story. We've
Speaker 3: got to get to the future of H one B
Speaker 3: visas in America's tech industry under the new administration. This
Speaker 3: is Trump's birthright citizenship order, sparks fear in H one
Speaker 3: B parents. Let's bring in HIBBA and from the ericson
Speaker 3: immigration group HIBBA. The rhetoric from the White House and
Speaker 3: elsewhere in the administration about immigration has to be very
Speaker 3: troubling for a lot of your clients to digest what
Speaker 3: are you hearing from them.
Speaker 12: So what we're hearing is basically concerns resulting from some
Speaker 12: of the impacts of the Birthright Citizenship Executive Order, namely that,
Speaker 12: for example, if an individual who's here on an H
Speaker 12: one B visa has a baby in the United States,
Speaker 12: according to this executive order, that baby is no longer
Speaker 12: considered a US citizen. So if that child is not
Speaker 12: a US citizen at birth, and if that child is
Speaker 12: not a citizen of the parents' home country at birth,
Speaker 12: then what this executive order does is essentially create a
Speaker 12: category of stateless children. And that is very, very concerning
Speaker 12: for a lot of the visa holders in the United States,
Speaker 12: inclusive of the age one B visa. And so a
Speaker 12: lot of the questions that we're getting stem from those concerns,
Speaker 12: because a lot of these restrictionist policies are creating an
Speaker 12: environment that is seemingly hostile towards immigrants.
Speaker 1: So if the tech.
Speaker 12: Industry is about talent attraction and employee incentives, this really
Speaker 12: isn't going.
Speaker 2: To help hiper I'm going to make this personal. I
Speaker 2: came here with already one child, and I gave birth
Speaker 2: to one in the United States and automatically got us citizenship.
Speaker 2: I was on a temporary visa at the time. I
Speaker 2: wasn't worried about coming here to have an American baby,
Speaker 2: and it wasn't hard for me to get her case
Speaker 2: citizenship afterwards. So who is it that is really concerned here,
Speaker 2: because I imagine it's not developed nation to develop nation.
Speaker 2: Who of your clients when he thinks that it's integral
Speaker 2: to have a child that is with birthright citizenship.
Speaker 12: So the thing is that there are a lot of
Speaker 12: countries around the world where if the parents have a
Speaker 12: child born abroad, that child is not going to automatically
Speaker 12: get citizenship from the home country until the parents take
Speaker 12: some sort of affirmative steps to apply.
Speaker 2: For that city. Night had to do that too, which
Speaker 2: wasn't add well.
Speaker 12: So essentially, you have to look at it in the
Speaker 12: totality of the circumstances. We can't look at it in
Speaker 12: a vacuum. If the United States is going to have
Speaker 12: policies that are seemingly hostile towards immigrants, or making it
Speaker 12: harder for immigrants to establish their families and their lives
Speaker 12: in the United States than irrespective of whether the citizenship
Speaker 12: of the home country is easy for the parent to
Speaker 12: obtain for their child, that visa holder in the United
Speaker 12: States is going to think twice about whether or not
Speaker 12: they want to settle in the United States long term.
Speaker 12: So then if you take a look at the companies
Speaker 12: that actually employ those individuals, those companies are going to
Speaker 12: find it more difficult to retain the top talent that
Speaker 12: they rely on in order for them to be competitive
Speaker 12: on a global stage. So what I'm hopeful for is
Speaker 12: that whatever policy comes out of this administration continues to
Speaker 12: be very welcoming and creates that culture welcome irrespective of
Speaker 12: whether the individuals have to deal with certain citizenship issues
Speaker 12: for their child or not. But we have to understand
Speaker 12: that birthright citizenship is enshrined in our constitution. So one
Speaker 12: of the key issues here is the fact that there's
Speaker 12: a presidential action that is seeking to overturn something in
Speaker 12: the Constitution outside the proper process, and that's also been
Speaker 12: concerning to a lot of individuals as well.
Speaker 3: Hibba Trump has yet to alter the H one B
Speaker 3: program itself. Let's home in there for a moment. Are
Speaker 3: you anticipating any changes from the administration or Congress to it.
Speaker 12: I don't know if we're necessarily going to see something
Speaker 12: that directly impacts the he B program. However, there are
Speaker 12: a lot of executive orders that have come out since
Speaker 12: the inauguration that indirectly impact legal immigration in the United States.
Speaker 12: For example, this Birthright Citizenship Executive Order. So, for example,
Speaker 12: if this executive order ends up being successful, and if
Speaker 12: children that are born in the United States are not
Speaker 12: automatically US citizens, then what that implies is that there's
Speaker 12: an additional number of individuals that are going to get
Speaker 12: included in the overall green card Q. Now, the backlogs
Speaker 12: for obtaining a green card in the United States are
Speaker 12: they're already very, very lengthy and long for a lot
Speaker 12: of individuals, So this is only going to increase their
Speaker 12: wait times. So again, if you look at the totality
Speaker 12: of the circumstances, this is getting a little bit of
Speaker 12: like a discouraging environment for individuals that are seeking to
Speaker 12: live in the United States.
Speaker 2: Well said, I can tell you it took a long
Speaker 2: time to get a green card Heave and the really
Speaker 2: great to have you on the show from ericson Immigration Group.
Speaker 2: Now that does it for this edition of Bloomberg Technology, Mike,
Speaker 2: do not forget to check out our podcast provided on
Speaker 2: the terminal, as well as online on Apple, Spotify, and
Speaker 2: iHeart This is Bloomberg.