Speaker 1: From the heart of where innovation, money and power collide
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Caroline Hyde and Ed Ludlow.
Speaker 2: Live from San Francisco. This is Bloomberg Technology coming up
Speaker 2: in Nvidia drives a global route in chip stocks after
Speaker 2: new US government restrictions on tech exports to China. Plus
Speaker 2: Lift buys its way into the European market with an
Speaker 2: eye on rolling out autonomous driving. And we speak to
Speaker 2: the President's Chief Technology Advisor and Director of the White
Speaker 2: House Office of Science and Technology Policy, Michael Kratzios. Again,
Speaker 2: it is the chip sector, semiconductors, where our focus is
Speaker 2: new export controls and license requirements on two big names
Speaker 2: for the export of specific technologies designed for the Chinese market.
Speaker 2: This is the picture at the index level. We're down
Speaker 2: three and a half percent. Clearly some pain across the
Speaker 2: industry that's spreading the key names of this in Video
Speaker 2: and AMD, both of them taking write downs in the
Speaker 2: first quarter. We'll get to the numbers very soon. Elsewhere
Speaker 2: ASML is an earning story out of Europe. It missed
Speaker 2: its bookings by almost a billion dollars and it's saying
Speaker 2: we don't know how to quantify the impact of tariff's
Speaker 2: on our business. Their business. They are the biggest and
Speaker 2: most important maker of the machines that make the chips
Speaker 2: chip making equipment. Again, we will go deep on that
Speaker 2: story in the show. Let's get to our top story
Speaker 2: and Video and AMD have been hit hard by new
Speaker 2: US restrictions on semiconductor exports to China. Bluebow Technology editor
Speaker 2: Michael Shepherd joins us from DC give us the details
Speaker 2: the license requirements and I guess, Michael, what happens next
Speaker 2: for these two names.
Speaker 3: Well, what happened just now is the write downs that
Speaker 3: the company had to report.
Speaker 2: First of all, they are not small.
Speaker 3: In video report out of five point five billion dollar
Speaker 3: dollar charge for the first quarter, AMD eight hundred million,
Speaker 3: and all from these new restrictions that they are now
Speaker 3: facing on the chips that they have designed specifically for
Speaker 3: the Chinese market. And these were designed to comply with
Speaker 3: previous rounds of US restrictions on sales of advanced semiconductors
Speaker 3: to China. The goal for the administration and for the
Speaker 3: prior administration too, has been to try to keep those
Speaker 3: sophisticated semiconductors out of Chinese hands where they can help
Speaker 3: Beijing gain an edge militarily and give Chinese companies perhaps
Speaker 3: a way to gain ground on American hyperscalers, an American
Speaker 3: advantage in artificial intelligence. Now, the catch with these chips
Speaker 3: is that while they have been scaled down our lower
Speaker 3: power for the Chinese market AD, they are also useful
Speaker 3: in inference and this is an emerging area in AI
Speaker 3: where it is helping companies develop models faster and more effectively,
Speaker 3: something that we saw with Deep Seek, and that was
Speaker 3: one of the wake up calls for the Trump administration
Speaker 3: as it took offices.
Speaker 4: I'm sure you'll recall, and we heard Commerce.
Speaker 3: Secretary Howard Lutner articulate.
Speaker 4: This and make clear that restrictions like these would be coming,
Speaker 4: and now we're seeing them today and the companies, of
Speaker 4: course are feeling the pain. And this is compounded, of
Speaker 4: course by all the concerns about tariffs and elsewhere.
Speaker 2: In Bloomberg's Mike Shepherd in Washington, d C. Thank you
Speaker 2: very much. The other big downward pressure on the semiconductor
Speaker 2: space is ASML, the world's biggest chip equipment maker, posting
Speaker 2: orders that missed estimates in a very big way. It
Speaker 2: has dimmed the outlook for the semiconductor sector overall, particularly
Speaker 2: with regards to anxiety about tariffs. Bloomberg's executive editor, Peter
Speaker 2: Elstrom is in London and it's a one billion dollar
Speaker 2: miss basically on bookings. But what accounted for the miss
Speaker 2: and what did ASML say about the impact of tariffs
Speaker 2: principally and efforts by the United States for ASML to
Speaker 2: bring some manufacturing to this country.
Speaker 5: Peter, Yeah, it's a big miss by ASML. And ASML
Speaker 5: of course makes the machines that produce chips for the
Speaker 5: likes of TSMC and Intel and Samsung, so they're kind
Speaker 5: of a bell weather for chip demand in particular. Now,
Speaker 5: the CEO, Christoph Fouquet, was pressed pretty hard on the
Speaker 5: earnings call that we were just listening to now, asking
Speaker 5: questions about what's driving this, what are the implications. One
Speaker 5: key factor is certainly this tariff uncertainty that we're seeing.
Speaker 5: It's not exactly clear what kind of demand is going
Speaker 5: to be generated in some of these areas, including artificial
Speaker 5: intelligence and other areas. Another key question is whether tariffs
Speaker 5: are going to be levied on the machines that ASML
Speaker 5: makes as they're getting shipped into the United States. The
Speaker 5: Biden administration now the Trump administration both want to build
Speaker 5: up the chip capacity within the United States, but that's
Speaker 5: going to be more difficult if TSMC and Intel and
Speaker 5: other companies have to pay more for these machines. At
Speaker 5: the same time, you're seeing some weakness in some of
Speaker 5: the key players here. Intel, of course, is struggling quite
Speaker 5: a bit. Even Samsung Electronics now is having a bit
Speaker 5: of a difficult time building up its capacity. Has slowed
Speaker 5: things down, so you don't want to add additional costs
Speaker 5: on top of that. Just to give a sense of
Speaker 5: the scale, ASML's machines can go for three hundred and
Speaker 5: eighty million dollars, if you put a terrif on top
Speaker 5: of that, in the range that the Trump administration is
Speaker 5: talking about, it could be ninety five million dollars in
Speaker 5: tariff costs.
Speaker 6: Now.
Speaker 5: Fo K was very clear to say that the customers
Speaker 5: are going to bear the brunt of those costs. It's
Speaker 5: not going to be ALML themselves. But even if the
Speaker 5: customers bear those costs, it may slow them down a
Speaker 5: bit in terms of buying these machines and then deploying them.
Speaker 5: They may have to think twice about how quickly they're
Speaker 5: going to move ahead in building the kind of capacity
Speaker 5: that the administration actually does want in the United States.
Speaker 2: Bloomberg's Pizza Elstrom in London, Thank you very much. Denny
Speaker 2: Fish is a tech investor with skin in the game.
Speaker 2: His funds at Janis Henderson count Nvidia and ASML among
Speaker 2: its top holdings. There's also TSMC, Broadcom, some of the hyperscalers.
Speaker 2: Let's get the investors take on technology, export controls and tariffs.
Speaker 2: Good morning, Denny Fish. Were you ready for those headlines
Speaker 2: on in video and AMD.
Speaker 7: No. I wasn't, particularly because there was reporting just a
Speaker 7: couple of days ago that they had come to an
Speaker 7: agreement the administration within video that they weren't going to
Speaker 7: have these restrictions. Obviously, that was just a report, but
Speaker 7: it definitely took the market by surprise.
Speaker 2: I want to show a chart which is the proportion
Speaker 2: of Nvidia's revenue that comes from China, and clearly the
Speaker 2: chart tells a clear story. In twenty twenty two, China
Speaker 2: revenues around twenty six percent, currently twenty twenty five with
Speaker 2: down the thirteen percent. I think many except that this
Speaker 2: is headed towards single digit because of the impact of
Speaker 2: technology export controls. Does that matter to you as an
Speaker 2: Nvidia investor, Denny, do you sort of worry about that
Speaker 2: and lay awake at night thinking about in Vidia's business
Speaker 2: in China?
Speaker 7: Well, two parts of that question. One is whether it
Speaker 7: matters to me as an investor. In two, I lay
Speaker 7: awake thinking about China. I think the important thing is
Speaker 7: it's actually good to just get it out of the model. Okay,
Speaker 7: So I mean we're kind of wiping it clean. We're
Speaker 7: taking a clean cut to estimates. And to your point,
Speaker 7: the revenue contribution from China has come down materially over
Speaker 7: the last few years. I think something else that's important
Speaker 7: is that you know, there's something that's it's called the
Speaker 7: diffusion Rule that is supposed to come into effect in
Speaker 7: the month of May, and effectively with that is that
Speaker 7: just puts a quota on the number of GPUs that
Speaker 7: certain countries can actually buy. Now, one might think that
Speaker 7: potentially the diffusion rule could be relaxed somewhat.
Speaker 6: That could benefit in video.
Speaker 7: The other thing that's just kind of puzzling about all
Speaker 7: of this is that in some ways this makes no
Speaker 7: sense at all for.
Speaker 6: The administration to do. And why is that.
Speaker 7: Huawei already produces a chip it's somewhat comparable to the
Speaker 7: H twenty that is actually the customized chip that Nvidia
Speaker 7: has been selling in to China, and as a result,
Speaker 7: they're just giving the market to Huawei. And so they're
Speaker 7: penalizing a US company by you know, restricting a chip
Speaker 7: that's not even that competitive relative to a locally supplied chip. So,
Speaker 7: you know, we've already thought about this, you know, pretty extensively.
Speaker 7: We didn't know if we would get a full cut,
Speaker 7: but I think, you know, the direction of travel was clear.
Speaker 7: Contribution from China was going to go way down, and
Speaker 7: you know, because we're still supply constrained, and Nvidia has
Speaker 7: the benefit of being able to read direct wafers to
Speaker 7: other areas where they can actually sell more powerful chips
Speaker 7: and chips with higher gross margins.
Speaker 2: The goal of this administration appays to be to shift
Speaker 2: mores of the United States, be it localized fabrication of
Speaker 2: the core chip assembly, whatever it may be. And so
Speaker 2: the companies will face the higher cost of doing business
Speaker 2: in this country, or they will face twenty thirty five
Speaker 2: percent net tariff somewhere else. What are the pros and
Speaker 2: cons of just going with what this administration was and saying, Okay,
Speaker 2: we're going to do this in America.
Speaker 7: Well, the pros are that to the extent that we
Speaker 7: actually have the capacity to manufacture leading edge.
Speaker 6: Chips, that's a good thing.
Speaker 7: And it's a good thing because those are the types
Speaker 7: of chips that are used in our most important industries
Speaker 7: for national security and for maintaining our competitive advantage globally
Speaker 7: as we you know, race towards artificial general intelligence. The
Speaker 7: cons are it is more expensive, but nonetheless, you would
Speaker 7: think that the productivity gains that we get in agg
Speaker 7: it from deploying AI probably more than offsets what the
Speaker 7: aggregate costs would be for manufacturing the chips in the
Speaker 7: United States. And I just say, you know, thank goodness,
Speaker 7: TSMC put a shovel in the ground, you know several
Speaker 7: years ago in Arizona that they're actually in a position
Speaker 7: now for companies like Nvidian a MD to actually announce
Speaker 7: that they're going to be producing leading edge two nanometer
Speaker 7: chips with TSMC in Arizona as well as configuring full
Speaker 7: systems in the United States.
Speaker 6: From a manufacturing standpoint, a story.
Speaker 2: We put heavy emphasis on this week. So in video
Speaker 2: is your top holding across a couple of funds, right,
Speaker 2: TSMC is always in there? You said, Thank goodness, that's
Speaker 2: the case basically, But how does your your thinking now change?
Speaker 6: Right?
Speaker 2: Do you stick with this this idea that capital expenditures
Speaker 2: will continue to grow in twenty five, twenty six, twenty seven,
Speaker 2: the hyperscalers will continue to take from Nvidia or are
Speaker 2: you now going to adjust where you put your end assist.
Speaker 6: Any Well, we take the data as it comes.
Speaker 7: But most importantly, I think if you just look at
Speaker 7: the most recent comments out of Nvidia where they just
Speaker 7: had their GtC conference, if you actually parsed through the
Speaker 7: comments from ASML today and you pars through the comments
Speaker 7: that we've heard from hyperscalar CEOs, we don't see signs
Speaker 7: of a slow down in AI capex and so now
Speaker 7: the growth may slow, but nonetheless the signs still support
Speaker 7: healthy growth in AI capex. Well, like I said, we'll
Speaker 7: take the data as it comes. But ASML was still
Speaker 7: optimistic about AI. And you know, it's really the lagging
Speaker 7: edge stuff, you know, analog chips and so forth that
Speaker 7: go into industrial and auto and things like that that
Speaker 7: still you know, continue to be soft. And I will
Speaker 7: remind you, you know, I know this is different with
Speaker 7: the tariffs and the geopolitical situation, but just rewind the
Speaker 7: clock one year and asml same thing happened, they missed bookings,
Speaker 7: the stock was down, and then all they because the
Speaker 7: bookings are really lumpy, and then bookings just reaccelerated throughout
Speaker 7: the year and they're doing some really cool stuff. And
Speaker 7: you know, one of the things they talked about is,
Speaker 7: you know, one of the reasons that you know they
Speaker 7: can continue to drive higher pricing for their EUV and
Speaker 7: high NA EUV is because they're starting to do what's
Speaker 7: called single layer and what that effectively does it increases
Speaker 7: the throughput, it's more valuable, and therefore they can charge
Speaker 7: a higher price that.
Speaker 2: A technology charge a higher price. Danny Fisher, Jannis Henderson
Speaker 2: is great to have you back on the program. Thank
Speaker 2: you very much. Now coming up here on Bloomberg Technology,
Speaker 2: list is expanding outside of the US and Canada. We
Speaker 2: have CEO David Risha on the company's European acquisition. That's next.
Speaker 2: This is Bloomberg Technology. Some deal news. Lift has agreed
Speaker 2: to buy the European Multi Mobility and taxi ailing app
Speaker 2: Free Now for about one hundred and ninety seven million dollars.
Speaker 2: It marks its first global expansion beyond the US and Canada.
Speaker 2: Lift CEO David Risha joins US. Now, I've been using Uber,
Speaker 2: your main competitor in Europe for a really long time.
Speaker 2: I've been going in taxis in Europe for a really
Speaker 2: long time. Why acquire free now and not just launch
Speaker 2: the Lift app in that jurisdiction.
Speaker 8: Because Frenal is a great company that's got great relationships
Speaker 8: all across Europe in the really important taxi industry. I mean, look,
Speaker 8: so Lift, as you know ed you've been following us
Speaker 8: for a while. We're in a stronger position than we've
Speaker 8: ever been. We're picking riders up faster than we've ever
Speaker 8: picked them up before. Drivers are making billions on the
Speaker 8: platform in the US and Canada, and so now's the
Speaker 8: right time for us to go global. And what's great
Speaker 8: about it is it expands our market, doubles our market,
Speaker 8: and it allows us to plug into, as you say,
Speaker 8: the taxi world, which is a huge, huge part of
Speaker 8: the European mobility scene.
Speaker 2: Tomorrow. I think I'm right in saying it's your two
Speaker 2: year anniversary at Lyft, good memories and you have fixed
Speaker 2: the finances of that company to an extent. But the
Speaker 2: data is so key, right, Uber has what one million
Speaker 2: drivers in Europe and I think free now has about
Speaker 2: one hundred and fifty thousand registered taxi drivers nine cities.
Speaker 2: How do you bridge the gap? Are you confident you
Speaker 2: can bridge the gap? Yeah?
Speaker 8: I am the goodness So free Now is a great
Speaker 8: company and one of the things that makes them so
Speaker 8: strong is they really understand the local dynamics, market by
Speaker 8: market by market. Here's that thing. The mobility market in
Speaker 8: Europe for this this kind of you ride heiling is
Speaker 8: about forty billion euros.
Speaker 6: Half of that are offline taxes.
Speaker 8: This are literally still people calling up a taxi company
Speaker 8: and saying, come take me to the airport, come take me,
Speaker 8: I'm going on a business trip.
Speaker 6: Whatever it is.
Speaker 8: So well, it's true, there are other companies there. Free
Speaker 8: Now is the leader in the taxi space. And remember
Speaker 8: is you know, taxi is kind of an elevat experience
Speaker 8: to a lot of Europe think of the London Blackpam.
Speaker 8: So we think that the company is really well positioned
Speaker 8: to really sort of you know, continue to grow and
Speaker 8: take over the much bigger space.
Speaker 2: But it is a company that's only recently broken even
Speaker 2: it's had historic losses. What are you modeling for in
Speaker 2: terms of what it adds to your top line and
Speaker 2: bottom line and how immediately.
Speaker 8: Yeah, so it's a profitable company. It hasn't been a
Speaker 8: billion dollars in bookings, which is significant. Now I've left,
Speaker 8: of course, has sixteen billion in booking. So you know,
Speaker 8: there's a lot of growth, you know, ahead of both
Speaker 8: of us. But it'll be financially creative for us, which
Speaker 8: is wonderful. And I think as we you know, they've
Speaker 8: been owned by Mercedes and BMW, two great sort of
Speaker 8: storied bottom manufacturers, but I think combining with US is
Speaker 8: going to give them some new energy, some new expertise
Speaker 8: to really allow.
Speaker 2: Both of us to grow. There is zero mention in
Speaker 2: the release about autonomous driving, and every cell side note
Speaker 2: about this deal says it's your plan to roll out
Speaker 2: autonomous driving in Europe with those two OEMs that you
Speaker 2: just mentioned. Yeah, so here's how we.
Speaker 8: Think about autonomous as we've said, I mean, first of all,
Speaker 8: of course it's happening in the US.
Speaker 6: We're actually a.
Speaker 8: Little bit further ahead Europe a little bit not so much.
Speaker 8: One of the great things free Now has is well too,
Speaker 8: they've got great relationships with European regulators, and they've got
Speaker 8: great fleet management and as you and I have discussed before,
Speaker 8: fleet management is so important to autonomous So yeah, we
Speaker 8: think it sets this up really well. Let's be clear,
Speaker 8: this is going to be years down the road, but
Speaker 8: it's a really important part of the overall strategy for
Speaker 8: being a global player.
Speaker 2: Two years in you've done some M and A, will
Speaker 2: you do more M and A?
Speaker 6: And where.
Speaker 8: I mean, never say never, but this really is our
Speaker 8: focus right now, right, I mean, the good news is,
Speaker 8: you know again free Now is a great, strong company
Speaker 8: and we've got.
Speaker 6: So much to build on.
Speaker 8: So we're going to be really focused on our European expansion,
Speaker 8: obviously making sure it's a big success. And then who knows,
Speaker 8: we'll talk later about someone else.
Speaker 2: Engine capital activists, investor they want to change your board.
Speaker 2: Your reaction please, I mean, we.
Speaker 8: Interact with shareholders all the time and you know, listen
Speaker 8: to their feedback. Take it seriously. You know, there's a
Speaker 8: whole process for dealing with activist investors that were involved
Speaker 8: in but probably speaking if you look at what shareholders want,
Speaker 8: you know, capital return. We're giving out five hundred million
Speaker 8: dollars in a share buyback. Growth, we're growing, We're now expanding,
Speaker 8: We're strengthening our business by going international.
Speaker 6: I think we're really.
Speaker 8: Well positioned to address all of the issue.
Speaker 2: Have you that shareholders bring Sorry to interrupt, David. Have
Speaker 2: you spoken to them about the free now deal since
Speaker 2: it happened? No, Okay, that's kind of interesting. Final questions
Speaker 2: on technology Atlanta technology partnerships, MAME Mobility operationally give me
Speaker 2: an update please.
Speaker 8: Yeah, so you're referring to the partnership we have with
Speaker 8: MAME Mobility and Autonomous Vehicle group or company that's on
Speaker 8: track for this summer. So super excited to launch right
Speaker 8: in the middle of downtown Atlanta.
Speaker 2: On track for this summer, being commercially on track or
Speaker 2: this is a kind of toe in the water.
Speaker 6: Well, it's on track.
Speaker 8: For us to start operationally this summer in Atlanta and
Speaker 8: then you know it'll grow from there. But first we've
Speaker 8: got to get you know, riders in the cars, and
Speaker 8: that'll be sometime.
Speaker 2: This summer because I have the term to do so
Speaker 2: two years in What would you score yourself or grade
Speaker 2: yourself on the job you've done as the Lift CEO.
Speaker 8: Look, I am a self critical person.
Speaker 2: I am.
Speaker 8: I guess maybe one of the things that I do
Speaker 8: is always look for the next thing. But I do
Speaker 8: have to say I'm proud of what we've accomplished as
Speaker 8: a team over two years, you know, getting to profitability,
Speaker 8: seven hundred million dollars plus in free cash and maybe
Speaker 8: most importantly, picking up riders faster than ever and drivers
Speaker 8: making more on the platform than ever. So if I
Speaker 8: look at it from the customer's point of view, we're
Speaker 8: doing super well. It's up to other people to tell
Speaker 8: me how I'm doing as a.
Speaker 2: CEO, and the street gives you a lot of credit
Speaker 2: for that. M and A maybe they didn't see coming
Speaker 2: so much. Maybe we'll see some more Lift CEO David Risha,
Speaker 2: thank you for joining us here on Bloomberg Technology. Now
Speaker 2: coming up, Americans are still using Chinese e commerce apps
Speaker 2: to shop cheap alternatives to some high end brands. We're
Speaker 2: going to drive into the surge in sales for Timu
Speaker 2: and Sian.
Speaker 9: This is Bloomberg Technology.
Speaker 2: A trade war won't stop Americans from shopping on Chinese apps.
Speaker 2: Revenue surge for both she and and Timu this month
Speaker 2: as US shoppers anticipate price increases due to tariffs. Bloomberg's
Speaker 2: Lily Maya joins US and covers the retail Beat. It's
Speaker 2: really interesting data. A lot of people in my world
Speaker 2: use both of those apps. I don't what are we learning.
Speaker 10: Yeah, it seems like these apps are seeing a lot
Speaker 10: of success and people are going to them as tariffs
Speaker 10: are starting to loom.
Speaker 2: The eco data kind of comes in here right when
Speaker 2: you think about tariffs, we think about passing on the
Speaker 2: costs of the consumer through your beat, through the tech
Speaker 2: companies that are in the ecomma space. What are we
Speaker 2: learning about the consumer and that march data? Yeah, absolutely so.
Speaker 2: It seems like the consumer is looking to spend right now.
Speaker 10: The EGO data showed a lot of spending, and it
Speaker 10: seems like people might be stocking up or buying now
Speaker 10: before prices might get more expensive.
Speaker 2: Lily, you cover retail, specialty retail in particular. What are
Speaker 2: you learning about tariffs? Like, how do companies really think
Speaker 2: about what happens next? They even know?
Speaker 10: Yeah, so a lot of companies are doing different things.
Speaker 10: A lot of the companies I cover report in the
Speaker 10: next month, so that will be really interesting to hear,
Speaker 10: you know, what they're looking to say to investors and shareholders.
Speaker 10: But it seems like a lot of people are in
Speaker 10: kind of a wait and see mode. They're not exactly
Speaker 10: sure how tariffs are going to impact their business, and
Speaker 10: they're trying to figure that out.
Speaker 2: Bloomers really might great to have you on here on
Speaker 2: Bloomberg Technology. Thank you very much. Now, coming up, Mark
Speaker 2: Zuckerberg's email reveals his Instagram and what's strategies from the past.
Speaker 2: We're going to go back to that antitrust case next.
Speaker 2: Let's get to markets as well. It is the semiconductor
Speaker 2: space that's dragging down technologies to shares broadly, but the
Speaker 2: NASDAQ one hundred is under pressure generally speaking, and by
Speaker 2: association some of the other key names in our world.
Speaker 2: The Hyperscala's consumer tech under pressure. Bitcoin is going in
Speaker 2: the opposite direction eighty five thousand US dollars per token
Speaker 2: upper percent or so in the session, but it's not
Speaker 2: behaved uniformly like as risk on risk off. It doesn't
Speaker 2: sort of take into account the same fact as tech does.
Speaker 2: We'll dig into that later in the week. Be right back.
Speaker 2: This is Bloomberg Technology. Welcome back to Bloomberg Technology. I'm
Speaker 2: Ed Ludlow in San Francisco. The market's picture is very clear.
Speaker 2: We are under pressure and that largely comes from the
Speaker 2: chip sector. New US restrictions on technology imports to China,
Speaker 2: specifically for Nvidia and AMD, that is causing pain. But
Speaker 2: by association you see a lot of the mag seven
Speaker 2: megacap names down. Earning season is right around the corner.
Speaker 2: The underperformance of the Philadelphia Semiconductor Index distills that chip pain.
Speaker 2: The single names we know about Nvidia, AMD. Very interesting
Speaker 2: discussion throughout the show on how long that pain will last.
Speaker 2: But ASML is an earning story at missed bookings by
Speaker 2: one billion dollars. Later in the program, per Ferregue, New
Speaker 2: Street Research is going to come on and give us
Speaker 2: deeper and more granular context about this name. There is
Speaker 2: other news elsewhere. In his second day on the FDC's
Speaker 2: antitrust trial, Mark Zuckerberg revealed that he once considered spinning
Speaker 2: off Instagram back in twenty eighteen. In a letter to
Speaker 2: senior leaders, he writes, quote, I'm beginning to wonder whether
Speaker 2: spinning out Instagram is the only structure that will accomplish
Speaker 2: a number of important goals. We should keep in mind
Speaker 2: that there's a real chance that all our work to
Speaker 2: build a family of apps may be something we don't
Speaker 2: get to keep for more. Bloombers Kirk Wagner, who has
Speaker 2: been in the courtroom at that trial, joins us, let's
Speaker 2: go back over it and explain it. At one time
Speaker 2: in twenty eighteen, of his own volition, Mark Zuckerberg considered
Speaker 2: spinning off Instagram. What does that mean in the context
Speaker 2: of this trial, Well.
Speaker 11: It's very prophetic, right, Obviously he was sort of foreseeing
Speaker 11: the issue that he's facing right now coming down the
Speaker 11: road for him, you know, six seven years ago. I
Speaker 11: don't think the fact that he thought about doing this really,
Speaker 11: you know, hurts him so much today. I think it
Speaker 11: was shared in the context of the FTC trying to
Speaker 11: show that Instagram has perhaps harmed users.
Speaker 2: Right, That's part of their play here, is.
Speaker 11: That they want to show that buying Instagram buying WhatsApp
Speaker 11: was actually bad for consumers. And if they can show that,
Speaker 11: you know, Mark Zuckerberg even thought, Hey, maybe we shouldn't
Speaker 11: be doing this seven years ago, maybe that's a sign
Speaker 11: that they weren't you know, employing the best strategy for consumers.
Speaker 11: But it is a very interesting thing, in part because
Speaker 11: it was so foreshadowing of where he is today.
Speaker 2: This is a multi week but potentially multi month process.
Speaker 2: What else does the audience need to know about the
Speaker 2: trial and proceedings? Where his META focused and where have
Speaker 2: the FTC focused.
Speaker 11: It really hinges on this definition of what you know.
Speaker 11: The FTC is considering the friends and family sharing social
Speaker 11: networking market, right, So so they're saying, hey, look, there's
Speaker 11: a lot of places you can spend time online. There's
Speaker 11: very few places where you actually go specifically to share
Speaker 11: with your friends and family, and that is where META
Speaker 11: has their monopoly.
Speaker 2: This is the FTC's case.
Speaker 11: Meta, on the other hand, is arguing, hey, wait a minute,
Speaker 11: we have tons of competitors, right. TikTok is a competitor.
Speaker 11: Well's I message is a competitor, obviously, x Elon Musk's
Speaker 11: X and none of those, by the very narrow definition
Speaker 11: that the FTC is going with, are considered competitors. And
Speaker 11: so this is basically a fight to determine what the
Speaker 11: market should be and if you know, the FTC succeeds
Speaker 11: and keeping it very very narrow. They may have a
Speaker 11: good case, but as Facebook has pointed out repeatedly, they
Speaker 11: consider their competition very wide.
Speaker 2: Being bes Kutwagner, who I am sure we will come
Speaker 2: back to multiple times over the course of proceedings. Thank
Speaker 2: you very much. Let's break down more on what the
Speaker 2: FTC's trial against Meta could mean in regulation the future
Speaker 2: of digital markets. Joining us now is Jennifer Huddleston, Technology
Speaker 2: Policy Senior Fellow at the Cato Institute, and as a
Speaker 2: piece of documentary evidence in a trial like this, the
Speaker 2: CEO at the center of it in a letter six
Speaker 2: years ago, seven years ago saying maybe we should spin
Speaker 2: off Instagram. How does that play in this environment? What
Speaker 2: is this environment of antitrust that this trial represents.
Speaker 12: We've seen a lot of animosity towards some of America's
Speaker 12: leading tech companies and this presumption that big is automatically bad.
Speaker 12: One of the key elements of the FTC's case is
Speaker 12: it's basically imagining a world that never existed. It's trying
Speaker 12: to ask for a do overall on an acquisition it
Speaker 12: approved more than a decade ago. And at the same time,
Speaker 12: the social media dynamics have been changing. They were changing
Speaker 12: in twenty eighteen when that letter came about. They were
Speaker 12: also changing more recently with the emergence of the like TikTok.
Speaker 12: We have to remember that at the time Meta acquired
Speaker 12: Instagram and WhatsApp, these were not surefire successes. In fact,
Speaker 12: there were jokes, particularly about the acquisition of Instagram at
Speaker 12: the time, kind of why are they doing this? Why
Speaker 12: are they paying all this money. We don't want to
Speaker 12: see a world where government enforcers penalize businesses for taking
Speaker 12: risky chances that turn out to be good bets and
Speaker 12: turn out to allow more innovation and more benefits for
Speaker 12: consumers in the market.
Speaker 2: This is a trial, and it is contested between the
Speaker 2: FTC and Meta. But we are a few months into
Speaker 2: this new administration. In the White House. Prior to the
Speaker 2: election and after the inauguration of President Trump, many put
Speaker 2: emphasis on Vice President JD. Vance's views on big tech
Speaker 2: and antitrust. How does that context play here in the trial.
Speaker 2: It seems as if this administration will follow through with
Speaker 2: the general attitude towards big tech that the prior administration did.
Speaker 12: If you look at the history of many of these cases,
Speaker 12: many of them began in the first Trump administration. Then
Speaker 12: we saw further gasoline on the fire during the Biden administration,
Speaker 12: particularly under Chair Lena Kahn at the FTC, and this
Speaker 12: real push towards this big as bad mentality. It seems
Speaker 12: like so far, both with the remedies proposed in the
Speaker 12: Google cases as well as with what we're seeing in
Speaker 12: the medic caase, that this administration seems determined to continue
Speaker 12: that shift away from the kind of law and economics,
Speaker 12: consumer welfare based approach to anti trust, to something that
Speaker 12: makes more presumptions about competitors than consumers, and something that
Speaker 12: perhaps is using anti trust enforcement for other policy goals.
Speaker 2: And that should be.
Speaker 12: Concerning because if we lose focus on the consumers whom
Speaker 12: anti trust was designed to protect, we risk losing the
Speaker 12: purpose behind anti trust and making this powerful tool more subjective.
Speaker 2: Jennifer, why would a breakup of Meta in its family
Speaker 2: of apps be bad for the consumer?
Speaker 12: I think that's what's really at the heart that we
Speaker 12: need to remember when it comes to this case. You'd
Speaker 12: lose certain cross functionality that consumers like, but you also
Speaker 12: would have companies with fewer resources to engage in research
Speaker 12: and development technology to engage in rolling out new features
Speaker 12: that consumers want in the time that AI is disrupting things,
Speaker 12: but also fewer resources to do some of the things
Speaker 12: that consumers have expected around things like young people's online safety.
Speaker 12: And finally, you might have companies that have to rely
Speaker 12: more on data and advertisers because they no longer can
Speaker 12: share those resources, and so they would have to actually
Speaker 12: shift more towards using their consumer data and more on
Speaker 12: doing what the advertisers want rather than what their consumers want.
Speaker 2: Jennifer, the core of Meta's argument or defense is that
Speaker 2: the FTC has this narrow definition, but they're misunderstanding the marketplace,
Speaker 2: that Meta's competition is TikTok and that it is you too.
Speaker 2: How successful do you think that defense will be.
Speaker 12: The FDC is seeking a really narrow definition of personal
Speaker 12: friends and family social media networks, which is a definition
Speaker 12: I don't think the average consumer thinks about, and it's
Speaker 12: something that, if it's successful, could potentially lead to larger
Speaker 12: disruptive disruption in the social media marketplace. Not only does
Speaker 12: this definition exclude companies like TikTok that are incredibly popular
Speaker 12: with gen Z, it also excludes other messaging apps like Signal.
Speaker 12: It excludes platforms like Snap that have grown in popularity,
Speaker 12: so it doesn't seem to reflect the experience of the
Speaker 12: average consumer when it comes to social media and messaging,
Speaker 12: let alone when it comes to broader conversations around things
Speaker 12: like advertising or entertainment more generally.
Speaker 2: In your research and your review of policy pending the
Speaker 2: outcome of this trial, do you expect actions against other
Speaker 2: big tech names, and if so.
Speaker 12: Who We have already seen cases against four of America's
Speaker 12: leading tech companies, Google, which is now in a remedy
Speaker 12: phase in one of its case. There are also penning
Speaker 12: cases against Amazon and Apple, and of course this case
Speaker 12: against Facebook and Meta. All of these cases really raise
Speaker 12: concerns about the potential government intervention into what has been
Speaker 12: a very dynamic ecosystem. Not only could these cases have
Speaker 12: consequences for consumers, but there's going to be a question
Speaker 12: as well of what are we missing out on while
Speaker 12: companies spend their time dealing with enforcement actions instead of
Speaker 12: innovating and trying to provide better things for consumers. What
Speaker 12: sort of messages this side to the startup ecosystem.
Speaker 2: Jennifer Alison of the Cato Institute, thank you very much.
Speaker 2: We'll be right back this is Bloomberg Technology. This is
Speaker 2: Bloomberg Technology, and you're looking at a live shot of
Speaker 2: the principal room. Check out the Bloomberg Technology podcast. You
Speaker 2: can find it on the terminal as well as online
Speaker 2: on Apple, Spotify, and iHeart this is Bloomberg. The United
Speaker 2: States will have to make a creative R and D
Speaker 2: push while making quote smart choices with budgets to stay
Speaker 2: ahead in the AI race. Those were the first public
Speaker 2: remarks by Michael Kratzios, Advisor to the President and White
Speaker 2: House Office of Science and Tech Policy Director, since his
Speaker 2: confirmation in March. The main message on strategy for tech
Speaker 2: promote and protect. Mister Gratzios joins us. Now specifically, what
Speaker 2: do you mean by smart choices? This is a time
Speaker 2: where budgets across federal government are being cut. Some tools
Speaker 2: and examples please, mister Grazios, thank you so much for
Speaker 2: having me ed. I think if you zoom out a
Speaker 2: little bit.
Speaker 13: The message that we were trying to share in Austin
Speaker 13: a few days ago was this question of how does
Speaker 13: the US ensure its position as the global leader in
Speaker 13: critical and emerging technologies? And in order to do that,
Speaker 13: you have to do two major things. You have to
Speaker 13: do promotion and protection, and the key pillar of the
Speaker 13: promote agenda is around being more creative in the way
Speaker 13: that we spend fairly funded research and development dollars. For
Speaker 13: far too long, these R and D dollars have been
Speaker 13: spent in the same ways by the same agencies of the.
Speaker 2: Same types of research.
Speaker 13: And there's a lot more that we can do in
Speaker 13: all sorts of things like prizes and challenges, advanced market commitments,
Speaker 13: or even fast track action grants where we can actually
Speaker 13: worry a little bit less about how much and more
Speaker 13: about how we actually deploy these dollars in ways that
Speaker 13: we can ensure we're making in the best discoveries here
Speaker 13: in the United States for years to come.
Speaker 2: We've reported a lot on DOGE that's the context right,
Speaker 2: the work to cut wasting government. But very specifically, mister Kretsios,
Speaker 2: do you call for support an increase in R and
Speaker 2: D budgets? Growth in R and D budgets?
Speaker 13: Again, the most important thing we have to do is
Speaker 13: make sure that we are prioritizing our R and D budgets.
Speaker 13: Spending a lot of money on the wrong things is
Speaker 13: far worse than spending less money on the right things.
Speaker 2: So what we do at the White House.
Speaker 13: In coordination with the Office of Management and Budget, is
Speaker 13: helped set research and development priorities for the country. The
Speaker 13: President spelled these out and a letter that he sent
Speaker 13: to me two weeks ago, and the ones that he
Speaker 13: did call out were artificial intelligence, quantum computing, and nuclear
Speaker 13: to name three. And you can imagine that in future
Speaker 13: budget cycles these areas that we're going to be prioritizing
Speaker 13: because those are key to our national economic security.
Speaker 2: Are those priorities achievable AI leadership from America with the
Speaker 2: tariffs that we have in place and the technology export controls,
Speaker 2: some of which were amplified overnight on the likes of
Speaker 2: and Video and AMD. Absolutely.
Speaker 13: If you think back to the strategy that we discussed
Speaker 13: a couple of days ago, in order to achieve this
Speaker 13: leadership position, we have to do both promotion and protection.
Speaker 13: On the promote side, we talked a little about the
Speaker 13: R and D pillar. The second piece of that is
Speaker 13: around deregulation. For far too long, especially in the last administration,
Speaker 13: you know, a lot of our regulatory policy has been
Speaker 13: driven by the spirit of fear, this idea that we
Speaker 13: should be worried about these emerging technologies, and what the
Speaker 13: President in the White House has said many times is
Speaker 13: we have to make sure that we lead in this
Speaker 13: technology and actually deploy it, and then on the promote
Speaker 13: on the protect side of the equation, we have to
Speaker 13: make sure that we're not giving our adversaries the critical
Speaker 13: tools that could help.
Speaker 2: Them try to catch up to us in this race.
Speaker 13: We know that the PRC is attempting to catch up
Speaker 13: with us and things like artificial intelligence, and there's no
Speaker 13: reason why we should be helping them do so. So
Speaker 13: that's why in order to kind of achieve this US
Speaker 13: position of leadership in artificial intelligence and other emerging technologies,
Speaker 13: you have to have a balanced promotion and protection agenda.
Speaker 2: In Nvidia and AMD now face the situation where they
Speaker 2: have to apply for licenses to be able to explore
Speaker 2: H twenty and I THREEH eight to China, and the
Speaker 2: administration's argument was they could end up in supercomputers. The
Speaker 2: company's argument is these are much lower performance, and one
Speaker 2: idea is that if they haven't got access to American technology,
Speaker 2: China will simply champion a domestic name. Huawei has a
Speaker 2: similar ACCE accelerator. How will you advise the President on
Speaker 2: whether or not AMD and Nvidia should be granted those
Speaker 2: license to export lower performance accelerators to China.
Speaker 13: Yeah, I'm not going to opine on the specifics there,
Speaker 13: but I will say that there has been a track
Speaker 13: record of a wide variety of chips being used to
Speaker 13: drive the development and training of what are almost frontier
Speaker 13: level open source models by companies within the PRC, And
Speaker 13: as we think about our protect agenda, it's critical that
Speaker 13: we develop an export control regime that is simple and
Speaker 13: clear and is one that we enforce very very strongly.
Speaker 2: One of the elements of PROMOTE is to bring manufacturing
Speaker 2: of lead edge chips and assembling of compute systems to America, Right,
Speaker 2: mister Crassios and ASML is in the splotlight as an
Speaker 2: example because of its earnings report overnight, with this administration,
Speaker 2: consider an exemption of tariffs on the leading chip equipment
Speaker 2: maker in order that they might be able to do
Speaker 2: that bring more of their activity to the United States.
Speaker 13: Again, I can't oppine on specifics, but I think what
Speaker 13: we saw from the news last week on in Nvidia,
Speaker 13: there is a continual effort and we see that from
Speaker 13: all around the world of people wanting to bring manufacturing
Speaker 13: and these core sort of bleeding edge technologies back here
Speaker 13: to the United States. And that's something that the White
Speaker 13: House is very proud of and something that we have
Speaker 13: seen across industry. The policies that the President in our
Speaker 13: trade team have implemented is one that is actually proving true.
Speaker 13: And just a few short days we've had so many
Speaker 13: great announcements about companies coming here to build and manufacture
Speaker 13: these critical technologies in the US, and I suspect that
Speaker 13: we'll be seeing a lot more of those in the
Speaker 13: months in.
Speaker 2: Weeks ahead, there is some confrontation between the administration and
Speaker 2: leading academic and research institutions. Harvard is an example. How
Speaker 2: does the potential of cutting budgets at institutions like that
Speaker 2: impact America's competitiveness in the field of research. I reflect
Speaker 2: on Jensen Wong's comments. I believe in March at GtC
Speaker 2: that well more than fifty percent of the AI research
Speaker 2: is either being done in China or by Chinese nationals,
Speaker 2: and yet here in America we have some debate about
Speaker 2: funding for these institutions.
Speaker 13: Yeah, I want to make sure we don't necessarily conflate
Speaker 13: to such issues. To me, I don't think this is
Speaker 13: particularly hard. There is no reason why we should be
Speaker 13: supporting anti semitism on college campuses or tolerate that. I
Speaker 13: think we can be intolerant of anti semitism on university
Speaker 13: campuses and also support the academic research enterprise. Those two
Speaker 13: things can happen simultaneously. And I think first and foremost
Speaker 13: these universities think very carefully about about Title six, and
Speaker 13: I leave that to the DOJ and to DOE Department
Speaker 13: of Education.
Speaker 2: To think about.
Speaker 13: On my end, and what I've advocated very strongly is
Speaker 13: we continue to need great universities to work on basic
Speaker 13: research that has funded and fueled or innovation ecosystem for decades,
Speaker 13: and that's something the White House will continue to advocate
Speaker 13: for well. At the same time, we can never stand
Speaker 13: for anti semitism on our university campuses.
Speaker 2: Mister Kretzios. Is part of your offices request for information,
Speaker 2: several AI companies submitted responses to you, you asking basically
Speaker 2: to preserve their ability to learn from copyrighted material. We're
Speaker 2: talking about those training frontier models, foundation models, very simple
Speaker 2: yes or no if you will. Is copyright reform on
Speaker 2: the table as part of this President's AI action plan
Speaker 2: and how would you advise him on that? Please?
Speaker 13: Yeah, we were so delighted with how many responses we
Speaker 13: got to the I Action Plan RFI. I think in
Speaker 13: the coming days we'll hopefully be able to release all
Speaker 13: of those responses. It was many, many thousands, and it
Speaker 13: just showed how far and wide the community is that
Speaker 13: wants to think about and help shape the national agenda
Speaker 13: for artificial intelligence. And obviously copyright is going to be
Speaker 13: one of the issues that many people commented on over
Speaker 13: the last few months.
Speaker 2: Mister Christio's copyright reform yes or no again. I think
Speaker 2: we could not be more.
Speaker 13: Thrilled with how many people commented on all sorts and
Speaker 13: all facets of the AI agenda, And this is one
Speaker 13: that we had a lot of commenters send us some
Speaker 13: very interesting and detailed thoughts on.
Speaker 2: The President has spoken with admiration about Jensen Wong and
Speaker 2: in Nvidia's leadership. Just as our audience Boombog Technology gets
Speaker 2: to know you, mister Kratzios and your work in the
Speaker 2: White House, Have you had the opportunity to meet with
Speaker 2: Jensen Wong and his peers about what they plan to
Speaker 2: do in America and also critical markets for them. Which
Speaker 2: once included China. I have yeah.
Speaker 13: In the first two weeks after my confirmation, I had
Speaker 13: the opportunity to meet with most of the leading technology
Speaker 13: industry CEOs and chat with them about how we can
Speaker 13: together usher in this golden age of American innovation that
Speaker 13: the President has called for. With Jensen specifically, he's a
Speaker 13: tremendous thinker, and one of the great things that we
Speaker 13: connected on is the question of AI for science. There's
Speaker 13: been this almost this extreme fixation on thinking about the
Speaker 13: protect side of the agenda when it comes to specific semiconductors.
Speaker 13: But I think another equally more and maybe even more
Speaker 13: important part of the are the problems we face ahead
Speaker 13: of us and our challenges is how can we actually
Speaker 13: implement this technology to drive transformational change for the American people.
Speaker 2: And Jensen and Nvidia he.
Speaker 13: Was extraordinarily excited to help us think through and see
Speaker 13: what we can do more on driving scientific discoveries through AI.
Speaker 13: And it's something that I will be encouraging Secretary right
Speaker 13: with our labs and punch at National Science Foundations so
Speaker 13: many of our other leaders to stick more seriously because
Speaker 13: we have to do better.
Speaker 2: Michael Kratzio's White House Office of Science and Tech Policy Director,
Speaker 2: Thank you, look forward to speaking more over the coming years. Okay,
Speaker 2: I mentioned ASML shares trading significantly lower, the company posting
Speaker 2: a sales miss that was almost a billion euros less
Speaker 2: than expected. Per Fareger of New Street Research, head of
Speaker 2: Global Tech Infrastructure is with us. There are people out there, Pierre,
Speaker 2: and it's good to see you again that a bit
Speaker 2: more sanguine. Right, Orders can be lumpy, But the thing
Speaker 2: that's spooky to many is the inability to quantify tariff impact.
Speaker 2: How are you modeling for that in ASML's case. Yeah,
Speaker 2: I think you're making a good point.
Speaker 14: The way I modeled it is by actually modeling orders
Speaker 14: coming down in the nearter, Because while you're not too
Speaker 14: certain bout tariffs in some industries, you could see people
Speaker 14: like front loading orders before time it gets into place.
Speaker 14: Doesn't work very well with these very large pieces of equipment.
Speaker 14: And then the second approach is to actually wait and
Speaker 14: see and be more careful in the long run. Modeling
Speaker 14: like tariffs requires you to take a view on what
Speaker 14: the tariffs are here for. You know what the US
Speaker 14: administration want to do with these tariffs, and so if
Speaker 14: you listen to them. You know, they want to encourage
Speaker 14: changes in behavior with straight partners. They want to bring
Speaker 14: back to the US or to reliable partners manufacturing, and
Speaker 14: they want to create additional revenues. And if you put
Speaker 14: that into into motion around SEMITAP equipments, what you see
Speaker 14: is that none of these objectives are going to go
Speaker 14: against the ability for the US to build actually the
Speaker 14: AI infrastructure and to continue to, let you know, the
Speaker 14: manufacturing of leading h semiconductors like memory chips and logic chips.
Speaker 2: Yes, as they built up in the US.
Speaker 14: You still need to continue to have like technology advancing
Speaker 14: everywhere in the world. So I'm not too worried about
Speaker 14: the impact of tariff's on SEMITAP equipments.
Speaker 2: You heard mister Kratziosk decline to answer my question on
Speaker 2: whether there would be an exemption for chip equipment makers,
Speaker 2: but mister Fouquet was very clear, we will assemble in
Speaker 2: the Netherlands. Does the administration have a say on what
Speaker 2: a SML does in this case, Pierre.
Speaker 14: They definitely have a say. I think if they if
Speaker 14: they give a phone call, the phone call will be
Speaker 14: will be taken. The specifics of ASML tools is that
Speaker 14: it's very unlikely to see like the final assembly of
Speaker 14: these tools moving away from the Netherlands. The same way
Speaker 14: it's very unlikely to see like the most leading edge
Speaker 14: manufacturing node of TSMC moving away from from Taiwan. Is
Speaker 14: probably like a hard limit that cannot be surpassed. Now,
Speaker 14: what must said as well is that you know, increasing
Speaker 14: the amount of manufacturing done in the US, which is
Speaker 14: already very significant. Yes, where I live, you you already
Speaker 14: have like very critical stages that have been manufactured, Like
Speaker 14: the light source, which is the most critical piece of
Speaker 14: the IVY tool, is manufactured in the US, and seeing
Speaker 14: that going up is a possibility. Like changing like the
Speaker 14: final assembly of these tools is yes, probably probably a
Speaker 14: stype and particularly in practical terms, not doable.
Speaker 2: Right PF Faeryg of New Street Research. Good to catch
Speaker 2: up have you back here on Bloomberg Technology. But that
Speaker 2: does it for this edition of Bloomberg Technology. A huge
Speaker 2: thanks to those of you that submitted questions for some
Speaker 2: of our key interviews throughout the hour. There is a
Speaker 2: lot to recap. Don't forget to check out the podcast.
Speaker 2: You know where to find it on the Bloomberg terminal
Speaker 2: as well as online on Apple, Spotify, and iHeart. What
Speaker 2: a week from San Francisco. This is Bloomberg technology