WEBVTT - Apple in Talks to Let Google Gemini Power iPhone AI Features 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week Inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.280 --> 0:00:30.080 Well, it is the doubling down of a relationship that's 0:00:30.080 --> 0:00:33.400 already existed for many years. We're talking about that between 0:00:33.479 --> 0:00:37.919 two very well known household tech giants in UH that 0:00:37.960 --> 0:00:40.320 have been in the news a lot, and we're talking 0:00:40.320 --> 0:00:41.760 about Apple and Google specifically. 0:00:41.840 --> 0:00:44.680 Yeah, this story by Bloomberg's Mark German an exclusive and 0:00:44.680 --> 0:00:46.760 it's among the most read stories on the Bloomberg today. 0:00:46.800 --> 0:00:49.720 It's certainly caught the attention to of investors, sending both 0:00:49.720 --> 0:00:51.919 stocks hire today and giving a lift to the overall 0:00:52.040 --> 0:00:53.000 equity trade today. 0:00:53.040 --> 0:00:54.360 All Right, so let's get to it for more and 0:00:54.360 --> 0:00:57.080 what's going on. Let's bring in Mark German on his story. Marks, 0:00:57.080 --> 0:01:01.320 Bloomberg News chief technology reporter, joining us from LA Along. 0:01:01.600 --> 0:01:04.240 Also with us is Bloomberg News Senior Executive editor for 0:01:04.280 --> 0:01:07.399 Global Technology, Tom Giles. He's here in studio Mark's story though, 0:01:07.400 --> 0:01:10.760 as we said, and exclusive among I think it's a 0:01:10.800 --> 0:01:13.960 top the most read mark. Let's start with you lay 0:01:14.000 --> 0:01:16.160 it out for us in terms of the news and 0:01:16.200 --> 0:01:17.200 what you are hearing. 0:01:18.600 --> 0:01:20.720 Yeah, where you're hearing that. Apple and Google are and 0:01:20.760 --> 0:01:24.400 talks for Apple to license Gemini. That's Google's top generative AI, 0:01:24.760 --> 0:01:28.600 a large language model for integration into the iPhone and 0:01:28.680 --> 0:01:32.640 iOS eighteen and the iPad later this year. Apple has 0:01:32.760 --> 0:01:36.240 its own homegrown AI, including some GENAI that will be 0:01:36.280 --> 0:01:39.600 based into the device. Those will be models that run 0:01:39.680 --> 0:01:42.000 on the phone themselves. But what a lot of consumers 0:01:42.040 --> 0:01:46.399 are clamoring for are like Gemini, Microsoft Copilot, Chat, GBT, 0:01:46.840 --> 0:01:49.320 the ability to type in a short prompt and get 0:01:49.360 --> 0:01:52.520 an essay, a letter, or an image or what not 0:01:52.640 --> 0:01:55.480 created for you that's very reliant on the cloud. It's 0:01:55.520 --> 0:01:58.920 a very expensive endeavor obviously that comes with a lot 0:01:58.920 --> 0:02:01.919 of challenges and scrutiny as well, and so Apple felt 0:02:01.920 --> 0:02:04.640 like going with a partner at least this year isn't 0:02:04.680 --> 0:02:08.080 its best interest. It has talked to open AI, and 0:02:08.320 --> 0:02:11.919 it has talked to Google. The open AI talks happened recently, 0:02:12.000 --> 0:02:15.440 but the Google talks are active, and it appears both 0:02:15.480 --> 0:02:19.520 Google and Apple are keen on getting something done by June. 0:02:19.600 --> 0:02:22.399 Obviously this could still fall apart, but this is what's 0:02:22.400 --> 0:02:24.360 happening right now, the two being in discussions. 0:02:24.400 --> 0:02:27.040 Hey, Mark, does it also tell us a story? Does 0:02:27.040 --> 0:02:29.639 it tell you a story about where Apple is when 0:02:29.720 --> 0:02:33.640 it comes to its progress on AI right now? Yeah, 0:02:33.680 --> 0:02:34.600 and that's the real question. 0:02:34.680 --> 0:02:38.240 It tells us that Apple has not made as much 0:02:38.280 --> 0:02:41.560 progress as it would need to on the generative AI 0:02:42.000 --> 0:02:46.240 and cloud based generative AI front specifically. I do think 0:02:46.280 --> 0:02:48.560 they have made a lot of progress on on device 0:02:48.600 --> 0:02:52.120 AI in day to day usability, but either it has 0:02:52.120 --> 0:02:54.360 not made progress or it doesn't feel like it needs 0:02:54.360 --> 0:02:57.880 to make progress on cloud based GENAI specifically based on 0:02:57.919 --> 0:03:00.720 short prompts I would imagine do come down to the 0:03:00.760 --> 0:03:02.200 fact that they need They know they need to get 0:03:02.200 --> 0:03:05.239 this out this year. They know Google's the best. Why 0:03:05.280 --> 0:03:08.200 not expand that search deal? Maybe make some money off 0:03:08.240 --> 0:03:10.800 of it too well, having far less liability than they 0:03:10.840 --> 0:03:12.560 would if they went in house. 0:03:12.639 --> 0:03:14.200 Yeah, I do feel like the pressure is on all 0:03:14.240 --> 0:03:16.000 of the big tech names to kind of really move 0:03:16.000 --> 0:03:17.880 forward when it comes to AI. Tom Giles, come on 0:03:17.919 --> 0:03:19.720 in on this, because I feel like when you hear 0:03:20.000 --> 0:03:23.080 Apple and Google get together on anything I feel like 0:03:23.200 --> 0:03:28.080 exponentially the impact, and I think about regulators just being like, wait, 0:03:28.280 --> 0:03:30.440 what are you two doing now again. 0:03:30.880 --> 0:03:33.880 As we saw this story coming together, the wheels in 0:03:33.919 --> 0:03:37.400 my head started turning. Immediately. My thinking is DOJ and 0:03:37.520 --> 0:03:41.200 FTC are going to look at this, this agreement should 0:03:41.200 --> 0:03:44.320 it come together with great interest. As we all know, 0:03:45.120 --> 0:03:48.800 DOJ is already looking into that relationship between Apple and 0:03:48.840 --> 0:03:53.320 Google that gives Apple, that gives Google added prominence on 0:03:53.400 --> 0:03:54.920 the iPhone when. 0:03:54.760 --> 0:03:57.040 It comes to search right, when it comes to search right. 0:03:57.440 --> 0:04:00.600 But so if you see something that deepens the relationship 0:04:00.640 --> 0:04:04.120 between two of the most powerful companies in the world, 0:04:04.840 --> 0:04:07.560 you're gonna want to make sure that that's not something 0:04:07.600 --> 0:04:11.560 that's gonna thwart competition or in any way hurt the 0:04:11.640 --> 0:04:18.440 consumer somehow keep competitors from getting into this space. So 0:04:18.480 --> 0:04:20.599 there's lots of questions that they have that they're going 0:04:20.640 --> 0:04:22.919 to ask. And already the FTC is looking at the 0:04:23.000 --> 0:04:27.039 relationship when it comes to AI between Microsoft and open AI. 0:04:27.640 --> 0:04:29.520 So these kinds of things they're gonna. 0:04:29.279 --> 0:04:31.599 They're gonna be why Whiteboard, I'm assuming you guys had 0:04:31.640 --> 0:04:32.840 this massive We're. 0:04:32.480 --> 0:04:34.919 Gonna want to look at the fine at the details 0:04:34.960 --> 0:04:35.599 the fine print. 0:04:36.279 --> 0:04:39.560 So Mark, it's funny when you when you talk about 0:04:40.000 --> 0:04:43.919 Apple and Alphabet, you know they're certainly competitors to the 0:04:43.960 --> 0:04:47.240 extent that Alphabet has the Android operating system, which you 0:04:47.320 --> 0:04:51.680 know is the biggest operating system in competition with Apple's iOS. 0:04:51.880 --> 0:04:54.560 But at the same time they are partners, and Apple 0:04:54.640 --> 0:04:57.760 has had partnerships with once rivals in the past. I 0:04:57.760 --> 0:05:00.040 think back to this event in twenty fifteen, when I 0:05:00.080 --> 0:05:02.040 think it was an iPhone event or maybe an iPad event, 0:05:02.080 --> 0:05:04.359 where a Microsoft executive was on stage, and it was 0:05:04.400 --> 0:05:07.039 such a big deal that like a Microsoft executive was 0:05:07.080 --> 0:05:10.479 actually on stage at this event. If this partnership comes 0:05:10.520 --> 0:05:12.839 to fruition, is it that big of a deal or 0:05:12.880 --> 0:05:14.960 is it not that big of a deal because Apple 0:05:14.960 --> 0:05:16.679 and Google have had a partnership in the past. 0:05:18.240 --> 0:05:21.240 I certainly remember that iPad pro announcement that was in 0:05:21.320 --> 0:05:25.120 September twenty fifteen, and Microsoft at the time, under their 0:05:25.160 --> 0:05:29.440 new CEO, Sat Nadela, at the time, their goal was 0:05:29.440 --> 0:05:32.520 to get their software and services everywhere. Apple's goal at 0:05:32.560 --> 0:05:34.680 the time was to make the iPad more of an 0:05:34.720 --> 0:05:38.600 office device, and so there was some mutual benefit there 0:05:38.839 --> 0:05:41.560 getting office on the iPad would be good for both parties. 0:05:41.880 --> 0:05:44.839 In this case, getting Gemini built into the iPhone would also. 0:05:44.680 --> 0:05:45.800 Be good for both parties. 0:05:46.360 --> 0:05:49.120 Apple would be able to push new AI features that 0:05:49.160 --> 0:05:52.680 everyone's claiming for to its two billion users, and Gemini 0:05:52.760 --> 0:05:56.760 would be gaining many more users and a stronghold on 0:05:56.760 --> 0:06:00.920 one of the most popular devices of our lifetimes. Right, 0:06:00.960 --> 0:06:02.680 and I want one more thing I want to add. 0:06:02.760 --> 0:06:06.200 Tom's point is excellent about the FTC and the DOJ. 0:06:07.240 --> 0:06:10.080 Our thinking on this is that in order to combat 0:06:10.120 --> 0:06:14.360 those concerns, Apple probably will have to have an API 0:06:14.520 --> 0:06:17.240 or some sort of sort or feature for other generative 0:06:17.279 --> 0:06:20.880 AI providers, maybe Open AI, maybe Anthropic, maybe someone else, 0:06:21.240 --> 0:06:24.880 to be able to integrate themselves into iOS as an 0:06:24.920 --> 0:06:28.200 alternative and better yeat. Apple probably would have to let 0:06:28.279 --> 0:06:30.279 users choose when you boot up the phone for the 0:06:30.320 --> 0:06:33.240 first time, who you want your generative AI provider to be, 0:06:33.880 --> 0:06:36.320 or as Tom said, the DOJ and FTC are going 0:06:36.360 --> 0:06:38.440 to be smelling around pretty quickly. 0:06:39.440 --> 0:06:43.080 I also do wonder about Gemini, Apple, Google, who gets 0:06:43.160 --> 0:06:45.880 I mean, who benefits more? You just said mark Gemini 0:06:45.880 --> 0:06:48.280 into the iPhone. It's good for both parties. Did one 0:06:48.279 --> 0:06:50.040 of them need to do this more than the other. 0:06:50.920 --> 0:06:51.960 Was the pressure on Apple? 0:06:52.120 --> 0:06:52.880 You in? 0:06:53.040 --> 0:06:55.880 Yeah, you know, I would say the easy answer is 0:06:55.920 --> 0:06:57.760 the pressure is more so on Apple, But I think 0:06:57.760 --> 0:07:01.960 there's pressure on both companies, right Google. You know, Search 0:07:02.120 --> 0:07:05.400 obviously is down. Google is looking for, you know, new 0:07:05.440 --> 0:07:08.760 areas of growth and getting its next big thing on 0:07:08.880 --> 0:07:13.160 the world's biggest or second biggest platform. You know, it's 0:07:13.680 --> 0:07:15.640 a big deal for them. They're already owning their own 0:07:15.680 --> 0:07:18.040 in house platform. They'll own number one, and now they 0:07:18.040 --> 0:07:20.520 could own number two on AI as well. So I 0:07:20.520 --> 0:07:23.720 think the pressure is probably equal on both, maybe more 0:07:23.720 --> 0:07:26.080 so on Google, because I think if Apple didn't do 0:07:26.120 --> 0:07:28.360 anything this year on the A front, if they didn't 0:07:28.400 --> 0:07:30.920 do this, it would be a bad look. We'd certainly 0:07:30.960 --> 0:07:35.000 criticize them heavily for it. But would their revenue drop significantly? 0:07:35.320 --> 0:07:39.400 Would people stop buying iPhones? Probably not so. Certainly, maybe 0:07:39.440 --> 0:07:41.560 the pressure is more on Google, but certainly on both. 0:07:41.760 --> 0:07:44.960 From the investor point of view, you have to look 0:07:45.000 --> 0:07:48.360 at the perception that there are some players that are 0:07:48.400 --> 0:07:51.440 far further ahead when it comes to generative AI. A 0:07:51.480 --> 0:07:53.200 lot of people are giving a lot of props to 0:07:53.200 --> 0:07:56.600 Sachi Nadella and Microsoft for getting in on that relationship 0:07:56.600 --> 0:07:59.680 with open Ai at an early stage, making a big 0:07:59.680 --> 0:08:03.360 invation and being seen as leaders. There's a lot of 0:08:03.360 --> 0:08:07.120 criticism about Google on the other hand, as being something 0:08:07.120 --> 0:08:09.600 of a laggorty. They should have been way ahead of 0:08:09.600 --> 0:08:12.920 the game when it comes to AI. They've got deep mind, 0:08:13.120 --> 0:08:16.640 they had their own AI team at work. Sometimes those 0:08:16.640 --> 0:08:19.800 two teams worked at loggerheads with each other. They're getting 0:08:19.800 --> 0:08:23.520 that better, but they are seen as being behind Microsoft 0:08:23.600 --> 0:08:27.960 and its relationship with open Ai. You see Meta coming 0:08:28.000 --> 0:08:31.320 from out of left field with its lms. It's open 0:08:31.360 --> 0:08:34.800 sourcing them. There's a lot of momentum behind that, and 0:08:34.960 --> 0:08:38.160 Zuck is putting a big push behind that, and Apple 0:08:38.440 --> 0:08:41.960 of those big players. You really would like to see 0:08:42.000 --> 0:08:46.040 Apple being in that conversation. It's not in those conversations. 0:08:46.080 --> 0:08:49.360 It's not being mentioned in the same breath Microsoft, Open Ai, 0:08:49.480 --> 0:08:50.200 and even Google. 0:08:50.320 --> 0:08:52.760 It does feel like today's news has kind of changed that, right, Like, 0:08:52.760 --> 0:08:55.840 all of a sudden, the conversation maybe all right, I 0:08:55.840 --> 0:08:57.199 don't know that Apple all of a sudden, we're looking 0:08:57.200 --> 0:08:58.280 at differently a little bit. 0:08:58.240 --> 0:09:02.480 Potent that it has. There's a strong relationship with Google 0:09:02.520 --> 0:09:05.680 and it's going to capitalize on that and weave more 0:09:05.720 --> 0:09:09.960 of those open those AI features into the iPhone, providing 0:09:10.200 --> 0:09:13.360 a huge platform and a huge validation for what Google's 0:09:13.360 --> 0:09:16.840 been doing. Both have the potential to benefit tremendously from this. 0:09:16.840 --> 0:09:18.560 And Tim, I think about how much we've talked about 0:09:18.559 --> 0:09:21.560 Google Right and the criticism of Gemini, specifically in terms 0:09:21.559 --> 0:09:23.120 of some of the biased concerns. 0:09:23.280 --> 0:09:24.960 Yeah, so talk a little bit about that, mark, because 0:09:24.960 --> 0:09:26.280 it was just a couple of weeks ago that we 0:09:26.280 --> 0:09:29.280 were talking about all the challenges that Alphabet was facing 0:09:29.400 --> 0:09:32.280 in its AI ambitions and the CEO of the company 0:09:32.280 --> 0:09:34.040 had to essentially come out and say, well, you know, 0:09:34.120 --> 0:09:36.319 wait a second, this is not acceptable to us, and 0:09:36.679 --> 0:09:38.720 we're working on this to try to make it better. 0:09:40.160 --> 0:09:42.840 Yeah, I know those I'm familiar. There was some controversy 0:09:42.920 --> 0:09:45.760 on Twitter and other social media about, you know, which 0:09:45.840 --> 0:09:51.720 races were portrayed in a historical context. This is my understanding. 0:09:51.760 --> 0:09:55.480 My understanding is that Google would provide the Gemini underlying 0:09:55.600 --> 0:09:59.560 model to Apple Right, which apparently did not have the issue. 0:09:59.640 --> 0:10:03.280 And this particular issue that Sun Darpa Chai, as you said, 0:10:03.320 --> 0:10:06.000 commented on and was at the center of the controversy, 0:10:06.080 --> 0:10:10.280 was related to the end user interface of the Google chatbot. 0:10:10.440 --> 0:10:13.520 So it's apparent that or apparently from what I'm told, 0:10:13.600 --> 0:10:17.480 this issue wouldn't have been replicated on the iPhone integration. 0:10:18.480 --> 0:10:20.160 You know, it's really interesting, Tim and I are both 0:10:20.200 --> 0:10:23.280 reading Caris Swisher's book that kind of takes you through 0:10:23.320 --> 0:10:24.760 so much in the technology world. 0:10:24.760 --> 0:10:24.920 Now. 0:10:24.920 --> 0:10:27.199 I know our own team has really just chronicled it 0:10:27.320 --> 0:10:30.160 so well over the last couple of decades or the 0:10:30.200 --> 0:10:33.160 last decade and a half. But I just think about how, 0:10:33.559 --> 0:10:35.960 you know, Tom, there are companies that were so much 0:10:36.000 --> 0:10:38.640 seemingly at the forefront that all of a sudden they weren't. 0:10:38.840 --> 0:10:40.960 And I do feel like you see this jocking among 0:10:41.080 --> 0:10:43.520 especially some of the establishment, of like we got to 0:10:43.559 --> 0:10:45.720 be on this because this is what we all think 0:10:45.760 --> 0:10:46.480 is the next wave. 0:10:46.760 --> 0:10:48.520 Well, I'm really struck by if you look at the 0:10:48.520 --> 0:10:51.720 share price of these companies. I mean, Apple rocketed ahead, 0:10:51.760 --> 0:10:54.640 became the world's most valuable company, but at Stock has 0:10:54.720 --> 0:10:57.360 kind of, you know, taken a turn for the worst. 0:10:57.679 --> 0:11:00.679 By contrast, I'm fascinated by you look the share price 0:11:00.720 --> 0:11:03.360 for Meta on the other end. A couple of years ago, 0:11:04.040 --> 0:11:06.680 Meta was on the ropes. We were talking about the 0:11:06.720 --> 0:11:12.160 existential threat posed by companies like TikTok. For example, we 0:11:12.200 --> 0:11:16.120 were talking about the things that Apple has done, sort 0:11:16.120 --> 0:11:18.760 of changing and making it harder for you to monetize 0:11:18.920 --> 0:11:22.520 advertising on the iPhone, and that really hurt Facebook. A 0:11:22.559 --> 0:11:25.800 couple of years ago, their stock was tanking as a 0:11:25.800 --> 0:11:28.120 result of all these things. Now look at how Meta's 0:11:28.120 --> 0:11:31.760 performing visa the Apple. The story has changed dramatically. 0:11:31.960 --> 0:11:34.400 Well, Tom, I'm curious about this idea of a land 0:11:34.480 --> 0:11:36.800 grab for AI going on right now, because each of 0:11:36.840 --> 0:11:41.000 these big megacap companies has their own identity, right Facebook, 0:11:41.120 --> 0:11:44.760 Meta owns social networking, Apple owns the iPhone and the 0:11:44.760 --> 0:11:47.080 mobile operating system, at least at the high end. Right, 0:11:47.640 --> 0:11:50.600 you have Alphabet that owns search. You have Microsoft, which 0:11:50.600 --> 0:11:52.480 would say that it owns productivity, but it plays in 0:11:52.520 --> 0:11:55.040 a lot of different areas. And now they're all going 0:11:55.080 --> 0:11:57.680 after what is essentially the same thing. Is there any 0:11:57.720 --> 0:12:01.240 sort of historical corollary for that? When you have so 0:12:01.280 --> 0:12:03.360 many companies that are known for their own thing kind 0:12:03.360 --> 0:12:04.960 of going after a new thing. 0:12:05.120 --> 0:12:06.760 Yeah, and some of them do better than others. I 0:12:06.800 --> 0:12:10.199 mean the Internet, some of them, you know, built themselves 0:12:10.240 --> 0:12:13.600 on that, and others got left behind. Microsoft comes to mind, 0:12:13.640 --> 0:12:16.920 for example, when it comes to mobile telephony. You know, 0:12:17.200 --> 0:12:22.120 Apple sprinted ahead and really has owned that space. Google 0:12:22.400 --> 0:12:25.520 came in and with Android has done very very well. 0:12:25.800 --> 0:12:28.560 But if you look at dominance of the hardware and 0:12:28.640 --> 0:12:31.200 of the US market, Apple has kind of really run 0:12:31.240 --> 0:12:34.240 away with that. Microsoft went nowhere, So. 0:12:34.480 --> 0:12:36.320 Mark come back in on because I think about just 0:12:36.360 --> 0:12:38.960 the last is it week or so or two weeks 0:12:39.080 --> 0:12:41.240 or so? Apple give it up on the car after 0:12:41.280 --> 0:12:44.240 ten years and now this potential deal, it looks like 0:12:44.280 --> 0:12:47.200 with Google moving kind of all in pretty aggressively. It 0:12:47.200 --> 0:12:50.560 feels like with artificial intelligence, how are you kind of 0:12:50.559 --> 0:12:54.360 looking at Apple holistically right now on this news? 0:12:55.480 --> 0:12:59.880 The presence of new artificial intelligence software and capabilities doesn't 0:13:00.080 --> 0:13:03.080 change the underlying idea that Apple's a hardware company that 0:13:03.200 --> 0:13:05.600 makes seventy five percent to eighty percent of their annual 0:13:05.640 --> 0:13:09.200 revenue from hardware. So even if they fix this underlying 0:13:09.240 --> 0:13:12.200 problem with the lack of artificial intelligence, or even when 0:13:12.240 --> 0:13:15.480 they do as I should say, doesn't fix the underlying 0:13:15.520 --> 0:13:19.120 notion that they don't necessarily have a next generation hardware 0:13:19.160 --> 0:13:22.920 product to make money off of. Now here's where those 0:13:22.960 --> 0:13:27.440 two things come together. AI could enable all sorts of 0:13:27.440 --> 0:13:29.160 new hardware products in the future. 0:13:29.280 --> 0:13:30.160 What do you mean very. 0:13:30.120 --> 0:13:33.920 Core of that. Well, the car was an AI product 0:13:34.280 --> 0:13:37.640 right at self driving cars AI hardware, and now that 0:13:37.800 --> 0:13:40.280 AI hardware is no longer happening, So they're going to 0:13:40.320 --> 0:13:43.040 have to figure out some sort of new hardware category, 0:13:43.080 --> 0:13:47.080 whether it's based on AI, probably or not, to really 0:13:47.120 --> 0:13:50.400 move the needle revenue wise. The iPhone has completely plateaued, 0:13:50.640 --> 0:13:54.520 the iPad has been sinking, the Mac has plateaued. Some 0:13:54.600 --> 0:13:57.880 of their other products AirPods, Apple Watch, et cetera. Those 0:13:57.920 --> 0:14:01.280 are growing, right, but those are not meaningful contributors to 0:14:01.320 --> 0:14:03.400 the bottom line. The jury is still out on the 0:14:03.480 --> 0:14:06.360 Vision Pro. There are some other future categories that they're 0:14:06.400 --> 0:14:08.720 working on, so I'll mention now and some I won't, 0:14:08.760 --> 0:14:13.640 including AirPods with cameras, augmented reality glasses, but those don't 0:14:13.640 --> 0:14:16.959 really change the fundamental story. The question is what is 0:14:17.000 --> 0:14:18.960 the next big thing that could bring as much revenue 0:14:18.960 --> 0:14:21.160 and interest in as a car, And I think even 0:14:21.200 --> 0:14:22.880 for Apple right now, it's a little unclear. 0:14:23.240 --> 0:14:25.400 Hey, Mark In, I've got a question for you. In 0:14:25.440 --> 0:14:29.240 the last few seconds, can you talk about where and 0:14:29.320 --> 0:14:32.760 how Apple might use this for Vision pro and real. 0:14:32.640 --> 0:14:35.800 Quick Mark the yeah, that's yeah, yeah, sure, that's a 0:14:35.800 --> 0:14:38.520 great question. So there is some AI in the Vision Pro, 0:14:38.840 --> 0:14:40.840 but nothing like you've seen from what Meta has been 0:14:40.880 --> 0:14:43.880 able to do with their headsets integrating AI. There is 0:14:43.920 --> 0:14:47.600 a future I see where the vision Pro cameras could 0:14:47.600 --> 0:14:50.040 tap into this new generative AI that they're getting from 0:14:50.040 --> 0:14:52.880 Google and their in house to unite those two things. 0:14:52.880 --> 0:14:55.400 You could be walking around a grocery store. The artificial 0:14:55.440 --> 0:14:58.240 intelligence compare with those cameras tell you more about a 0:14:58.240 --> 0:15:00.680 food item you're looking at, or get a player at 0:15:00.680 --> 0:15:03.440 an NBA game. The AI combined with those cameras can 0:15:03.480 --> 0:15:06.040 tell you their stats or what their three point percentage is, 0:15:06.040 --> 0:15:07.640 depending on where they're standing behind there. 0:15:07.880 --> 0:15:09.440 All right, now, I totally kind of get it. 0:15:09.480 --> 0:15:09.880 All right. 0:15:10.520 --> 0:15:12.320 I wish you guys could just stay for the next hour. 0:15:12.400 --> 0:15:15.200 We so appreciate it. Markerman, Bloomberg News Chief Technology reporter 0:15:15.200 --> 0:15:18.240 and of course, Bloomberg News Senior Executive editor for Global Technology, 0:15:18.320 --> 0:15:20.400 Tom Giles, joining us in studio. 0:15:21.200 --> 0:15:24.720 You're listening to the Bloomberg Business Week podcast. Catch us 0:15:24.760 --> 0:15:28.000 live weekday afternoons from two to five pm Eastern Listen 0:15:28.040 --> 0:15:30.200 on Apple car Play, and then brought auto with a 0:15:30.200 --> 0:15:34.360 Bloomberg business act or watch us live on YouTube. 0:15:35.160 --> 0:15:38.840 Check out the Treasury trade, the yields along the curve. 0:15:38.880 --> 0:15:40.760 You got that two year note climbing to its highest 0:15:40.800 --> 0:15:43.080 level this year right now at four seventy three. But 0:15:43.160 --> 0:15:46.880 we were above that level and then you had FED 0:15:46.920 --> 0:15:49.920 swaps pricing and lesson of fifty percent odds of a 0:15:50.000 --> 0:15:52.440 June rate cut. So this is kind of your backdrop 0:15:52.640 --> 0:15:54.000 for the Wednesday FED meeting. 0:15:54.040 --> 0:15:56.160 Tim, I think, needless to say a bit of an 0:15:56.160 --> 0:15:59.040 adjustment over the last few months about rate expectations. Just 0:15:59.080 --> 0:16:00.560 forty eight hours from now, of course, we are going 0:16:00.600 --> 0:16:03.680 to have our second FED decision of twenty twenty four. Well, 0:16:03.720 --> 0:16:05.400 rates are expected to stay and change. We will get 0:16:05.400 --> 0:16:08.040 an update on the Fed's projections for rates this year, 0:16:08.240 --> 0:16:10.200 and of course also on the US economy. 0:16:10.240 --> 0:16:11.720 All right, it is, without a doubt one of our 0:16:11.760 --> 0:16:14.680 key focal points this week for investors with some thoughts 0:16:14.680 --> 0:16:16.920 on the rate environment in recent moves. Let's bring back 0:16:17.000 --> 0:16:20.480 Bloomberg Intelligence Chief US interest rates strategist Ira Jersey. Ira. 0:16:20.520 --> 0:16:23.480 They're out in our BI headquarters in Princeton, New Jersey. Ira, 0:16:24.280 --> 0:16:28.200 I feel like whiplash man. Listen hard to ignore what's 0:16:28.240 --> 0:16:30.280 going on in rates. I feel like over the last week, 0:16:30.360 --> 0:16:33.000 once again give us an idea. I mean, here we 0:16:33.040 --> 0:16:35.360 have what a tenure at four thirty three, at two 0:16:35.440 --> 0:16:37.520 year note at four to seventy three, and we're off 0:16:37.880 --> 0:16:40.200 kind of the highs of this session. It does feel 0:16:40.200 --> 0:16:44.000 like we are pushing up against some of the recent 0:16:44.120 --> 0:16:47.400 highs here. Does it mean that we could go even higher? 0:16:47.440 --> 0:16:49.400 How are you looking at the trade as of late? 0:16:50.520 --> 0:16:53.480 Yeah, So obviously the market's taken out a lot of 0:16:53.480 --> 0:16:56.160 the risk that the economy is going to slow down significantly, 0:16:56.160 --> 0:16:58.080 that the Federal Reserve is going to cut interest rates 0:16:58.200 --> 0:17:01.400 very aggressively later this year, and now it's taking a 0:17:01.400 --> 0:17:04.320 more modest approach. So right around four point seven percent 0:17:04.720 --> 0:17:07.000 is what we have on fair value for the Federal 0:17:07.000 --> 0:17:10.439 Reserve cutting three times this year and then four times 0:17:10.440 --> 0:17:13.720 next year. So we're basically right there, right, And so 0:17:13.960 --> 0:17:16.640 I think that we're we're now to get more direction 0:17:16.880 --> 0:17:18.920 on where the front end's going to going to go. 0:17:19.320 --> 0:17:21.639 It's probably going to come more from the economic data 0:17:21.640 --> 0:17:24.040 than it will from Wednesday's FED meeting. You know, I 0:17:24.040 --> 0:17:26.639 don't think Jay Powell is going to say much different 0:17:26.760 --> 0:17:29.520 than you've heard in recent Fed speak, So he's going 0:17:29.600 --> 0:17:31.520 to say, we're data dependent, We're going to move if 0:17:31.520 --> 0:17:35.879 we have to or when we can, and so you know, 0:17:35.920 --> 0:17:38.720 we'll be concentrating on some of the nerdy really details 0:17:38.720 --> 0:17:41.680 of some things as opposed to you know, when exactly 0:17:41.680 --> 0:17:43.879 the Fed's going to cut, whether it's June, July, maybe 0:17:43.880 --> 0:17:44.919 not till November. 0:17:45.040 --> 0:17:47.280 We like the nerdy stuff here, I right, So share 0:17:47.280 --> 0:17:49.719 it with me, Share it with us. What about when 0:17:49.760 --> 0:17:51.480 it comes to sort of as we get out of 0:17:51.480 --> 0:17:54.000 the curve a little bit on the ten year what's 0:17:54.000 --> 0:17:58.160 your focus on sort of expectations over the next few 0:17:58.160 --> 0:17:59.240 months and perhaps this year. 0:18:00.240 --> 0:18:03.000 So the ten year rate at this has been moving 0:18:03.040 --> 0:18:05.600 along with interest rate policy. So you look at what's 0:18:05.640 --> 0:18:11.480 been moving, it hasn't really been inflation expectations. Inflation expectations 0:18:11.720 --> 0:18:14.000 have been pinned basically between two point two and two 0:18:14.040 --> 0:18:17.440 point four percent according to the tips market. So most 0:18:17.480 --> 0:18:21.479 of the moves in treasuries recently has come from real yields. 0:18:21.520 --> 0:18:23.600 So basically, the idea that the Federal Reserve is going 0:18:23.640 --> 0:18:26.600 to switch policy, interest rates are going to remain volatile 0:18:26.680 --> 0:18:29.639 or not volatile in this case, more volatile. So because 0:18:29.640 --> 0:18:32.800 of those things you've seen, you've seen tips yields like 0:18:32.800 --> 0:18:35.800 ten year tips shields back up again toward two percent 0:18:36.400 --> 0:18:41.360 and pushing up toward there toward that area, and if 0:18:41.400 --> 0:18:44.400 the Federal Reserve does actually ultimately cut, you'd likely see 0:18:44.440 --> 0:18:47.280 real yields, so those tips yields come down a little bit, 0:18:47.359 --> 0:18:50.000 but we're not quite there yet, so I think further 0:18:50.040 --> 0:18:53.200 out the curve, it's all. It's still about Fed policy 0:18:53.200 --> 0:18:55.840 expectations and what they're doing. That nerdy stuff though that 0:18:55.880 --> 0:18:58.399 I was talking about where things like the Fed balance 0:18:58.400 --> 0:19:01.919 sheet policy, because they mentioned Jay Powell mentioned that that 0:19:02.000 --> 0:19:04.600 at this meeting they would start to talk about what 0:19:04.640 --> 0:19:07.120 they were going to do with their balance sheet, how 0:19:07.240 --> 0:19:10.760 balance sheet runoff was going to be maintained for longer, 0:19:10.800 --> 0:19:15.159 but at lower levels. So I suspect that after this 0:19:15.240 --> 0:19:19.119 meeting we won't get an answer or recommendation, but j. 0:19:19.280 --> 0:19:21.920 Powell might lay out two or three options of what 0:19:21.960 --> 0:19:25.280 the Federal Reserve is considering or discussing. And though that's 0:19:25.640 --> 0:19:27.880 kind of where the rates nerds like myself will wind 0:19:27.960 --> 0:19:29.080 up focusing a lot of our. 0:19:29.000 --> 0:19:31.360 Time, I do also keep thinking about with rates day 0:19:31.359 --> 0:19:33.199 and kind of higher for longer, it feels like are 0:19:33.320 --> 0:19:35.960 just at least the treasury curve kind of moving up here, 0:19:36.000 --> 0:19:38.840 that how much of the work is ultimately being done 0:19:39.480 --> 0:19:42.880 by treasury investors versus what the Fed has to do. 0:19:43.960 --> 0:19:46.760 Yeah, that's an interesting point because you know, even though 0:19:46.800 --> 0:19:49.160 the curves inverted more, there was a lot of talk 0:19:49.240 --> 0:19:51.679 when we were priced in for six interest rate cuts 0:19:51.720 --> 0:19:55.840 this year that the financial conditions were too easy, that 0:19:55.920 --> 0:19:58.760