Speaker 1: Bloomberg Audio Studios, podcasts, radio news from Mahard. We're Innovation
Speaker 1: of Money and Power Collie in Silicon Valley NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: Live from New York and San Francisco.
Speaker 4: This is Bloomberg Technology coming up China's chip sectors. He's
Speaker 4: a thirteen million dollar rally. We discussed the bets on
Speaker 4: Beijing stimulus.
Speaker 5: And Amazon's leaders pushed for a return to offices to
Speaker 5: protect the tech giants.
Speaker 4: Culture and a US infrastructure hack American water works. The
Speaker 4: latest target is officials warn of threats from Iran and China.
Speaker 3: But first we turn to our top story on.
Speaker 4: The markets, which is this Chinese chip maker Semi Conductive
Speaker 4: Manufacturing International SMICK leading that thirteen billion dollars sector rally
Speaker 4: after global investors, but that Beijing will declare more policy
Speaker 4: or financial support for the industry that is central to
Speaker 4: its geopolitical ambitions.
Speaker 3: It makes Emeni Grafeo Jones us for more.
Speaker 5: Look.
Speaker 4: Smick is blacknisted for US investors, but this is a
Speaker 4: broad rally in the chip sector over in China.
Speaker 6: This is it's not just SMIC that's rallying but that
Speaker 6: stock is up over twenty eight percent just on the day,
Speaker 6: up about sixty five percent in the.
Speaker 3: Last few days.
Speaker 6: And these are shares that have been trading in Hong
Speaker 6: Kong because the stock market actually in the mainland China
Speaker 6: has been closed all week for the holiday. So there's
Speaker 6: a lot of anticipation that when the Chinese stock market opens,
Speaker 6: I guess tonight for us in the US, but tomorrow morning,
Speaker 6: Tuesday morning in China, that there's going to be a
Speaker 6: florry of bets. So we're seeing now traders kind of
Speaker 6: getting ahead of that. Smaller competitive competitors in the chips
Speaker 6: fake space are.
Speaker 5: Also up as well.
Speaker 6: Hua Hoang Semiconductor up something like seventeen percent right now.
Speaker 5: Investors think that the Chinese government is going to have
Speaker 5: some kind of semiconductor industry specific stimulus. Right, But if
Speaker 5: you look at the Chinese equity market since kind of
Speaker 5: late September, things have been improving. Give us the bigger
Speaker 5: picture of this performance relative to I guess US tech
Speaker 5: or European tech so far in twenty four.
Speaker 6: Well, I mean the bigger picture performance is that Chinese
Speaker 6: stocks overall have pretty much been in a bear market
Speaker 6: since about February of twenty twenty one. So although we've
Speaker 6: seen big gains since late September, when, like you said,
Speaker 6: Beijing did announce fiscal and monetary stimulus, we're still down
Speaker 6: for the year in a lot of these areas. And
Speaker 6: that's right. It's really a big question here what exactly
Speaker 6: are we going to get from China when they do
Speaker 6: have that press conference later tonight tomorrow morning in China
Speaker 6: and when the stock market reopens. There was a note
Speaker 6: from analyst Brent Donnelley and the line of his email
Speaker 6: was China, China, China, China.
Speaker 3: And then he has a point.
Speaker 6: Yeah, he has a point, And his note he said,
Speaker 6: how big is a stimulus? Will they even tell us?
Speaker 6: Tonight's China reopening is likely to be spicy, So there's
Speaker 6: a lot of questions about is the government actually going
Speaker 6: to pledge specifically to add stimulus to the semiconductor sector.
Speaker 6: But the bet here in the market right now is
Speaker 6: that they will.
Speaker 3: And also, look, this has been a long hated area.
Speaker 4: More broadly, positioning has not been long China and indeed
Speaker 4: China techno broadly because people have.
Speaker 3: Gotten burned by it in the last two years.
Speaker 6: Anyone who's gotten in, like I said back in twenty
Speaker 6: twenty one, is actually still in negative territory. We are
Speaker 6: seeing sentiment start to I guess, come around as one
Speaker 6: would expect, the stock market goes up, ETF flows follow
Speaker 6: So in just the last week we saw about six
Speaker 6: billion dollars flowing into US listed China ETF. So even
Speaker 6: you know, across the globe, investors are trying to get
Speaker 6: in or at least play the momentum right now.
Speaker 5: Ex Emily Graffair with the reporting on the market moves
Speaker 5: on China tech. Let's discuss a bit more with Janetarly,
Speaker 5: head of market analysis at RBC Brewin Dolphin and your reaction, Janet,
Speaker 5: was to upgrade your call on in the exuities context
Speaker 5: on Asia ex Japan. When you're weighing up the factors
Speaker 5: in the context of China tech, what were the things
Speaker 5: that you were looking at short, medium and long term.
Speaker 7: Thanks for having me.
Speaker 1: I think we have been skeptical on China, as many
Speaker 1: people are, but I think is really how undervalued China
Speaker 1: has been versus say the US or other development markets,
Speaker 1: and also the fact that position.
Speaker 7: Has been very light.
Speaker 1: I mean for US, we have been underweight for quite
Speaker 1: a sustained period of time, so I think that is shifting.
Speaker 1: And I think your Chinese market is a very momentum
Speaker 1: driven and very liquiditive driven, so we have seen both
Speaker 1: happening and I think we would like to participate in
Speaker 1: this rally.
Speaker 7: This probably has more to go.
Speaker 1: And in terms of Chinese tech, I mean obviously undervalued,
Speaker 1: very unloved versus the US counterpars part. Obviously they're they're different,
Speaker 1: but still we think that there is still much upside
Speaker 1: potential from here. But haven't said that we I mean
Speaker 1: we just upgraded modestly. I think there's still a lot
Speaker 1: of question mark for the longer term.
Speaker 5: Emily's reporting just in that conversation was largely about some
Speaker 5: of the domestic chip names in China. What's your attitude
Speaker 5: towards the semiconductor sector in mainland China?
Speaker 1: Yes, I think it is obviously a very state supporter
Speaker 1: sector has been for a while long term wise, so
Speaker 1: I think it makes sense for investors who favor this
Speaker 1: sector given basically I think the new tech, the semiconductor
Speaker 1: strategic areas of uh, you know those equities have you know,
Speaker 1: it should do well given how important that is. But
Speaker 1: ultimately we have to understand that a lot of developed
Speaker 1: economies are likely to steal being skeptical, and you know,
Speaker 1: have restrictions of all sorts of those companies products.
Speaker 7: So I would say I would participate in the rally.
Speaker 1: I do think that it has further to go, but
Speaker 1: I would be a bit more cautious over a longer term,
Speaker 1: and we have to kind of understand where to take
Speaker 1: profits when when it is necessary.
Speaker 4: To that point, Janet, do you think that people are
Speaker 4: protecting to the downside enough? Do we think a lot
Speaker 4: of people are going to get burned once again?
Speaker 7: I mean, it is potentially possible.
Speaker 1: We have seen that play out before in the previous
Speaker 1: bull market cycle and then a very sharp band market
Speaker 1: in China. We have seen that play out again again.
Speaker 1: But I think I think it could last for quite
Speaker 1: a bit. As I said, given how light the positioning,
Speaker 1: how underweight it is for global investors, So I would
Speaker 1: say it could have further to run in the next
Speaker 1: a couple of months at least.
Speaker 7: I think.
Speaker 1: I think the Chinese bodies, their heads are tied. They
Speaker 1: would just have to provide more stillables. But you're right,
Speaker 1: there is absolutely a chance for some investors to get burned,
Speaker 1: So that's.
Speaker 7: Why we had to auditor it very closely.
Speaker 4: What's been interesting is there's been institutional money flowing in
Speaker 4: David Tepper saying how much he's liking China and also retail.
Speaker 4: I want to get your check just more broadly on
Speaker 4: sentiment towards semiconductors globally technology globally. Where are we seeing
Speaker 4: the optimism still in institutional money or is it now
Speaker 4: sort of retail and we question there for the longevity, I.
Speaker 1: Think well, I think for US, for example, we still
Speaker 1: like the global semiconductor sector. Obviously that's mostly US Clay,
Speaker 1: so I think there's a lot of structural supportive drivers
Speaker 1: behind that. We are very happy to get exposure to
Speaker 1: those high quality companies.
Speaker 7: But I think for.
Speaker 1: Institutions, I think it will be very dangerous if you
Speaker 1: don't participate in the semiconductor That AI related theme, I
Speaker 1: think what retail investors is. I think once the momentum
Speaker 1: is back, I think that would draw in more participation. Basically,
Speaker 1: as interest rates are being cut, the economy continues to expand,
Speaker 1: and hopefully let's bad news out there on the headlines,
Speaker 1: I think that that could help.
Speaker 7: Although we still like the setter pretty much.
Speaker 1: We have stayed invested and we continue to encourage investors
Speaker 1: to add in more money when valuations have turned attractive
Speaker 1: of say the past couple.
Speaker 5: Of months, Janet, when you got to your desk this
Speaker 5: morning in London, how big a factor risk was trade
Speaker 5: risk or supply chain risk for technology investors around the world.
Speaker 1: Obviously, it is part of the consideration given that you know,
Speaker 1: the cheap industry is very you know, the supply chain
Speaker 1: is very complicated, and if there's well widespread trade productionism
Speaker 1: then obviously that's not great.
Speaker 7: But fundamentally the demand is still very strong.
Speaker 1: And I think what we are a bit more reassured
Speaker 1: now is that if you look at the polls and
Speaker 1: the the probability of Trump winning the election by betting market,
Speaker 1: it has gone down. Obviously it is a very tight race,
Speaker 1: but it gives us a bit of comfort to be
Speaker 1: a bit more positive on the China equity story and
Speaker 1: also the global semiconductory part. But I think ultimately fundamentally
Speaker 1: is about the demand the long term build up of
Speaker 1: AI infrastructure and how strategically important that sector is for
Speaker 1: many sovereigns.
Speaker 4: Out there, Jennet, how important therefore, when you sat down
Speaker 4: was the four percent number on the tenure yield in
Speaker 4: that macro context for these AI bets, Well.
Speaker 7: The thing is, yeah, we saw you go back to
Speaker 7: four percent.
Speaker 1: I think some small to meet cap stocks could be
Speaker 1: struggling a little bit today, but we still see some
Speaker 1: of the key semiconductor stocks right. Obviously it's very company specific,
Speaker 1: but what we think is, you know, ah, I think, yeah,
Speaker 1: astrong economy, good job market hair Outomley is good for
Speaker 1: the world economy, for the US, for corporate earnings, et cetera.
Speaker 1: I wouldn't look too much into this one day move
Speaker 1: for equities. If they're down or struggling a little bit,
Speaker 1: I will still be quite comfortable to be overweight in
Speaker 1: the US and in the usmiconductor space.
Speaker 4: Chanit mely love having you on head of market analysis
Speaker 4: at LBC Brew and Dolphin.
Speaker 3: Thank you.
Speaker 4: Now coming up, US water infrastructure is under attack. More
Speaker 4: on the latest cyber attack on American water Works. This
Speaker 4: is blue Big Technology. American water Works says it's computer
Speaker 4: networks and systems were hacked.
Speaker 3: Now the New Jersey based company.
Speaker 4: Which supplies drinking water and wastewater services to fourteen million people,
Speaker 4: So that parts of its systems were disconnected or deactivated
Speaker 4: as they worked to contain the cyber attack. From more
Speaker 4: of Bloomberg's Jordan Robertson joins US, Now, we've had warnings
Speaker 4: from governments about this How much how broad is this
Speaker 4: attack from real perspective, Jordan.
Speaker 8: Yeah, thanks for having me. So, this company that was
Speaker 8: breached is the biggest publicly traded water and wastewater company
Speaker 8: in the US. As you mentioned, it serves some fourteen
Speaker 8: million customers across half of the states in the US.
Speaker 8: It's potentially a very big deal, you know. Unfortunately, we
Speaker 8: don't have a lot of details or specifics about this
Speaker 8: particular attack. We just know what the company is disclosed
Speaker 8: this morning in a regulatory filing, which is that a
Speaker 8: victim of a cyber attack, and that it's disconnected or
Speaker 8: deactivated some of its systems. We don't have a lot
Speaker 8: of specifics about the actual attack, but we do have
Speaker 8: a lot of context around attacks against water treatment and
Speaker 8: water facilities in general, which is that the US government
Speaker 8: has been advising for months, in particular that Chinese groups
Speaker 8: have been infiltrating US water systems. Impossible kind of preparation
Speaker 8: for more disruptive attacks. Now, we don't know if this
Speaker 8: is one of those, or if this is some other
Speaker 8: type of breach, but given the context and given the
Speaker 8: size of this water company, it's potentially a very big deal.
Speaker 3: Can you give us the context?
Speaker 4: As well as the US accusing the China linkt tackers
Speaker 4: of infiltrating networks that operate as well critical US services.
Speaker 3: We've got reports in the Wall Street.
Speaker 4: Journal on Friday about potentially an attack on well providers
Speaker 4: of Internet of Wireless, but also of US BORBA more broadly.
Speaker 8: Yeah, what's happening now is a little bit different than
Speaker 8: what's happened in previous years with regard to Chinese hacking.
Speaker 5: You know, for many, many.
Speaker 8: Years, the US government has issued warnings about Chinese hacking
Speaker 8: for economic espionage, so industrial espionage purposes, and also just
Speaker 8: regular espionage, you know, spying on government agencies and military
Speaker 8: contractors and things like that. But what the government has
Speaker 8: been warning a while about now is that there are
Speaker 8: using Chinese hackers, particularly a group called volt Typhoon, which
Speaker 8: is the name that cybersecurity professionals have given them of
Speaker 8: kind of pre positioning themselves inside critical networks to conduct
Speaker 8: potentially disruptive attacks at some predetermined point in the future.
Speaker 8: In the military, they call this kind of preparing the
Speaker 8: battle space. That's a very different type of attack than
Speaker 8: we've seen in the past from some of these Chinese groups.
Speaker 8: So that's what the US government has been warning about.
Speaker 8: Again in this case, we don't know yet if this
Speaker 8: is related to these Chinese attacks at all, or if
Speaker 8: it's something else, potentially like ransomware. But given that context,
Speaker 8: and given that the US government is really ringing the
Speaker 8: bell and really raising the alarm about these Chinese attacks,
Speaker 8: it bears paying pretty close attention to this incident to
Speaker 8: see if there's something deeper involved.
Speaker 5: Jordan, you're deep on the cybersecurity beat, right, and there's
Speaker 5: going to be a section of our Bloomberg Technology audience
Speaker 5: around the world that go, they're attacking water infrastructure. So
Speaker 5: speak a little bit more about that water infrastructure and
Speaker 5: do we have any reporting on sort of the competence
Speaker 5: of US companies and US government to defend against it.
Speaker 8: Yeah, to answer your first question, why attack water companies?
Speaker 8: You know we saw with the attack on Colonial pipeline
Speaker 8: several years ago that you know, you don't have to
Speaker 8: attack an actual pipeline to disrupt the to disrupt critical systems,
Speaker 8: you know, whether in the US or elsewhere, you only
Speaker 8: have to disrupt their IT systems. In the case of
Speaker 8: Colonial Pipeline, which you know, disrupted gasoline shipments across the
Speaker 8: entire Eastern US, it was their IT system. There's a
Speaker 8: billing system that went down as a result of ransomware attacks.
Speaker 8: So there's a lot of damage and a lot of
Speaker 8: disruption that hackers can do by simply disrupting even just
Speaker 8: the IT systems of some of these critical infrastructure providers,
Speaker 8: whether that's electricity providers, whether it's water providers, you know,
Speaker 8: kind of whether it's gasoline shipment companies and pipeline operators.
Speaker 8: So there's potentially a very great advantage that a foreign
Speaker 8: nation would have could have, you know, if they decided
Speaker 8: to disrupt in that way. And with regard to the
Speaker 8: competence of critical infrastructure providers, We've done a lot of reporting.
Speaker 8: The cyber team A Bloomberg's got a lot of reporting
Speaker 8: on this topic. And the answer to your question is
Speaker 8: it varies. You know, the largest companies, the largest electricity
Speaker 8: suppliers in particular, tend to be pretty good at cybersecurity.
Speaker 8: They've gotten the message.
Speaker 5: They've got big budgets.
Speaker 8: But as you go down that ladder, and you go
Speaker 8: down the ladder of resources in particular, you know, it
Speaker 8: really just varies. There are some very large, critical infrastructure
Speaker 8: providers that are just not as great at protection as others.
Speaker 5: Blombergs Jordan Robinson were grateful for that reporting, Thank you. Meanwhile,
Speaker 5: Ukrainian hackers say they carried out a cyber attack that
Speaker 5: took down online broadcasts of Russian state TV and radio channels.
Speaker 5: According to officials in Kiev, at least twenty Russian broadcasters
Speaker 5: were affected, though claims could not be verified by Bloomberg News.
Speaker 5: The disruptions to the broadcasts coincided with Russian present in
Speaker 5: Vladimir Putin's seventy second birthday Caroline.
Speaker 4: Back in the US, ed State, local officials across the
Speaker 4: country are bracing for a range of possible disruptions, including
Speaker 4: cyber attacks as well as disinformation on ruly crowds, even
Speaker 4: ahead of the US elections next month. We're want to
Speaker 4: dig into that with Bloomberg's Jamie Tarabay joining us. You
Speaker 4: went to Arizona. You are focusing on really the computer
Speaker 4: systems in particular around voting in Arizona.
Speaker 3: Why remind us.
Speaker 9: Well, Arizona four years ago was the scene of one
Speaker 9: of the biggest flash points in the twenty twenty election.
Speaker 9: There is an aspect to what they did at the
Speaker 9: time that they really learned from going forward. And one
Speaker 9: of the first things that they did was look at
Speaker 9: physical security as well as cybersecurity. Of fence went up
Speaker 9: to protect the workers inside, and then they began this
Speaker 9: system of trying to reach for utmost transparency. There's a
Speaker 9: twenty four hour livestream camera that actually doesn't even have
Speaker 9: to work outside of election season, and that is going
Speaker 9: three sixty five days a year, twenty four hours a day,
Speaker 9: seven days a week.
Speaker 3: They are inviting people.
Speaker 9: To come to tour to look at all of the
Speaker 9: computer systems to see that everything is serialized, everything is audited,
Speaker 9: everything is tracked. All the networks are air gap so
Speaker 9: they're not actually connected to the internet. Whatever ways people
Speaker 9: might think that there's a possibility that an election or
Speaker 9: that their vote could be hacked, the people in Arizona
Speaker 9: are doing their utmost to really push back and try
Speaker 9: to dispute a lot of those conspiracy theories.
Speaker 5: Jamie four years ago, I was there posted on the
Speaker 5: election trail in Maricoba County, and I think it's worth
Speaker 5: just discussing the basics of what we're talking about. It's
Speaker 5: a building, it has windows and bricks and mortar, and
Speaker 5: they're making modifications to it because inside that building they'll
Speaker 5: count votes. Take it from there and run with the
Speaker 5: rest of the story.
Speaker 9: To go into this building now and as you said,
Speaker 9: four years ago, we literally the conspiracy theorist Alex Jones
Speaker 9: made it into the building. A couple of days later,
Speaker 9: one of the people who was a protester in the
Speaker 9: January sixth attack on the Capitol was in the parking lot.
Speaker 9: Heavily armed people were in the parking lot. And now
Speaker 9: you cannot get in there without access without a security clearance.
Speaker 3: The room that where all.
Speaker 9: The ballots are tabulated is a place where you can
Speaker 9: only go in if you have security clearance. Every single
Speaker 9: every single machine is audited and tracked and checked. They
Speaker 9: have literally done everything they can to get ahead of
Speaker 9: any possible question about any irregularities or any redundancies. I mean,
Speaker 9: there's a machine that go that sifts through the ballots,
Speaker 9: and if one of those ballots ways just a little
Speaker 9: bit different.
Speaker 5: To the rest.
Speaker 9: They basically will you get rid of They'll cancel out
Speaker 9: the batch two hundred before and two hundred after.
Speaker 3: They're really doing everything they can.
Speaker 5: Here Bloomberg's Jamie Taraba terrific reporting. Thank you very much.
Speaker 2: This is a first look inside the world's first humanoid
Speaker 2: robot assembly plant. It's a work in progress. Here Agility
Speaker 2: Robotics is going to manufacture digit in a teal and
Speaker 2: middle gray bot that walks like a bird. It's sneeze
Speaker 2: beIN backwards, and it is designed to work at first
Speaker 2: anyway at warehouses, including at Amazon and Gxologistics. The factory
Speaker 2: is on Marshy, former agricultural land on the outskirts of Salem,
Speaker 2: Oregon's capital, not the robotics hotspot, but it is up
Speaker 2: the road from Corvallis, an Oregon State university where Jonathan
Speaker 2: Hurst Robotics, the professor, co founded Agility, and of course
Speaker 2: there is an Amazon warehouse nearby. Agilly's first design was
Speaker 2: a monopod called Thumper. Later in more sophisticated bots have
Speaker 2: arms and a head unit for sensors, making them a
Speaker 2: little less creepy. At this facility, Agility simulates work its
Speaker 2: spots are already doing for clients, stacking tote bins at
Speaker 2: Amazon and placing bins on conveyor belts in the case
Speaker 2: of GXO. While I was watching one Digit tried to
Speaker 2: place a stack of bins on top of another, but
Speaker 2: was off by a small margin, so the new bins
Speaker 2: SATIS kew pass and watch for a few seconds. As
Speaker 2: a software tried to figure out what to do, it
Speaker 2: gave up. Other times it was seamless. Digits, communications systems,
Speaker 2: and for sensors live in its head unit, and first
Speaker 2: Agility didn't put heads on the robots. The team started
Speaker 2: with the goal of building bots able to move in
Speaker 2: human spaces, not ones that looked like us Digit does
Speaker 2: and fingers. Agility's first Digit model started with black paddles
Speaker 2: capable of lifting totes, and they're adding other end of
Speaker 2: arm devices. The company hopes this building will be able
Speaker 2: to churn out ten thousand robots a year. If we
Speaker 2: could doing there, we'll take a while. Engineers are still
Speaker 2: documenting assembly processors, figuring out what tools should go where
Speaker 2: before they can start mass hiring technicians to assemble the bots.
Speaker 2: The first robot assembled year one of Digit's new fourth
Speaker 2: version will be completed sometime this month.
Speaker 4: Talking of Amazon, a rare analyst downgrade citing concerns over
Speaker 4: the company's margin trends into next year, saying growth in
Speaker 4: the cloud computing business is unlikely to help much, Whilst
Speaker 4: Fargo Securities cut the stock to equal way from overweight
Speaker 4: and cut a price target from two hundred and twenty
Speaker 4: five to one hundred and eighty three dollars, one of
Speaker 4: the lowest on Wall Street.
Speaker 3: ED will have more on that later.
Speaker 5: Yeah, Amazon, which recently decided to bring corporate employees back
Speaker 5: to the office full time, honoring Bloomberg Spencer. SIP sources
Speaker 5: are telling us that there's a reason for that, and
Speaker 5: the reason is culture. Explain that.
Speaker 10: Yeah, so Jesse is saying CEO Andy Jasse is saying
Speaker 10: that new hires, and remember Amazon doubled in size to
Speaker 10: the pandemic, that newly hired Amazon employees just aren't getting
Speaker 10: the chance to learn and understand the culture the way
Speaker 10: they would if they were working in the office, you know,
Speaker 10: all week long. They're currently at three days a week.
Speaker 10: There's a lot of what they call coffee badging going on,
Speaker 10: you know, people badging in grabbing a coffee, heading home,
Speaker 10: doing the rest of the day from home.
Speaker 5: So three days isn't quite enough to have that overlap.
Speaker 10: Of people where the younger employees are getting an opportunity
Speaker 10: to learn thirty seconds.
Speaker 4: I'm afraid, Spencer, but this is something Andy Jesse is
Speaker 4: very passionate about.
Speaker 10: Well, that's what you're saying. You wrote a very long
Speaker 10: note to employees explaining it. And then the pushback on
Speaker 10: he mentioned the word culture multiple times, and then the
Speaker 10: pushback is, oh, well, you're just trying to lay more
Speaker 10: people off and this is a way to further thin
Speaker 10: the ranks. And the true answer is probably a little
Speaker 10: bit of both. They want to help the culture and
Speaker 10: they want to thin the herd a little bit.
Speaker 3: It's always somewhere in the middle. Spenser Soper Blue.
Speaker 4: Welcome back to Blue Meg Technology and Caroline Hyde in
Speaker 4: New York.
Speaker 5: And Amed Lovelo in San Francisco. Going to take a
Speaker 5: quick look at markets. It's hard to summarize what's going
Speaker 5: on beyond strong jobs data on Friday for the months
Speaker 5: of September. Kind of pairing back the increments that we
Speaker 5: expect the Federal Reserve to cut rates. Then as that
Speaker 5: one hundred modestly lower, basically flat. The Philadelphia Sembiiconductor Index
Speaker 5: is flat. There is some name single names moving to
Speaker 5: the upside, some of the downside, Bitcoin pushing above sixty
Speaker 5: three thousand US dollars per token. There's lots of analyst
Speaker 5: noise out there. Apple was downgraded by Jeffreys over iPhone
Speaker 5: sales pessimism. The analyst says high expectations for the iPhone
Speaker 5: sixteen in iPhone seventeen are premature. An analyst note Caro
Speaker 5: on an iPhone seventeen that doesn't even exist yet.
Speaker 4: One that we're going to be digging in with another
Speaker 4: analyst in a moment. But let's just talk about what
Speaker 4: does and doesn't exist. Bloomberg's Apple whisperer, Mark Kerman is
Speaker 4: with us, and you've been writing over the weekend power
Speaker 4: On as always about the cadence with which Apple gives
Speaker 4: us products and ultimately about a timing mismatch perhaps with
Speaker 4: what actually is eventually on the market.
Speaker 11: You know, I think it's interesting because my point over
Speaker 11: the weekend in my power On column, I think is
Speaker 11: very much connected to what analysts are now seeing.
Speaker 12: Right.
Speaker 11: I think some of these analysts.
Speaker 5: Are a little late to the game.
Speaker 11: Here, the issue is not necessarily the iPhone sixteen, Apple
Speaker 11: and AI or the iPhone seventeen in a vacuum. I
Speaker 11: think this is a company that is slowly pushing away
Speaker 11: from the momentum and the innovation it had so many
Speaker 11: years under Steve Jobs, in so many years under Tim
Speaker 11: Cook and Johnny I've after Jobs, but now it feels
Speaker 11: like we're at a point where maybe at least for
Speaker 11: the next couple of years, they're running out of these
Speaker 11: these big ideas. They're behind in AI, they're behind in
Speaker 11: mixed reality right, They've been behind in the smart home.
Speaker 11: But they do have these core competencies that continue to
Speaker 11: keep the business humming. The iPhone, the iPad, the back,
Speaker 11: the Apple Watch. And I think that looking at the
Speaker 11: phone just as the issue is a little bit too narrow.
Speaker 11: This is a company that's been searching for a next
Speaker 11: big idea in a next big product category. And there's
Speaker 11: really two sides of the coin here.
Speaker 7: One are they going to find.
Speaker 5: That in two?
Speaker 11: Does that thing exist? Is there really another iPhone? At
Speaker 11: this point, I'm thinking the iPhone is not really something
Speaker 11: that you're able to replicate right once in a generation.
Speaker 11: And I'm not talking about a ten to twenty year generation.
Speaker 11: I'm talking about a fifty year generation product, right, And
Speaker 11: so maybe expectations for.
Speaker 5: Summer are too high unless it's a different form factor
Speaker 5: from a smartphone, which we'll get into later in the show.
Speaker 5: The umbrella point of your newsletter is that Apple has
Speaker 5: been releasing a new generation of product annually, and it's
Speaker 5: moved away from that. But there were advantages to doing
Speaker 5: it annually. The team knows what's coming, investors know what's coming,
Speaker 5: and there's like a holiday PR marketing campaign that can
Speaker 5: go on. Right. What is the advantage of not doing
Speaker 5: it annually? Yeah, go ahead.
Speaker 11: Well, it's slowly inching away from that, right, And I
Speaker 11: think there's two reasons. One, there's so many products now
Speaker 11: in their pipeline. There's so much stuff. And the way
Speaker 11: that they're functionally organized as an engineering organization makes it
Speaker 11: so every team has to touch basically every new product
Speaker 11: before it's released. There's no iPad division or Apple Watch division.
Speaker 5: Right.
Speaker 11: This is a very cross functionally desig organization. That's the
Speaker 11: way Steve Job set it up. That's why they've been
Speaker 11: so successful.
Speaker 10: Right.
Speaker 11: That leads to product delays, that leads to software delays.
Speaker 11: Now they know that's what's happening, and so they have
Speaker 11: to roll these features out over several months. They can't
Speaker 11: just do it at one time, and so Apple Intelligence
Speaker 11: that's rolling out between September and June. Right, it's not
Speaker 11: all coming out in September. It didn't all come out
Speaker 11: last month. It's not all going to come out on
Speaker 11: October twenty eighth when I expect Apple Intelligence to be released.
Speaker 5: You saw with the Apple.
Speaker 11: Watch Ultra two, right, they retain that model for two
Speaker 11: years in a row, simply add some new bands and
Speaker 11: a black color option. This year, dive that Apple Watch
Speaker 11: SE wasn't updated. The iPhone SE is updated every two
Speaker 11: to three years. You're seeing the iPad pro now updated
Speaker 11: every year and a half to two years. So they're
Speaker 11: slowly inching away from that annual cycle, which is something
Speaker 11: they just simply couldn't keep up anymore. The good news
Speaker 11: is you're getting more polished products, you're getting bigger upgrades
Speaker 11: generation over generation potentially, and you're getting fewer bugs and
Speaker 11: more unpredictability from Apples. So I think overall it's a
Speaker 11: mixed bag, but I lean towards these bigger generational updates,
Speaker 11: being a good thing. The one product that I don't
Speaker 11: think is going to be necessarily impacted by this is
Speaker 11: the iPhone. They are so locked into that twelve month
Speaker 11: cycle on iPhone hardware. You really can't back your way
Speaker 11: out of it. It's too important to the company and
Speaker 11: the stock price. It's marketing in the holiday season, so
Speaker 11: it's really the peripherals around their main breadwinner.
Speaker 5: Bloomberg's Mark Gunman and I would say it is a
Speaker 5: must read power on from the weekend. Thank you very much.
Speaker 5: Let's get more and let's talk deeply on Apple. MISSOO
Speaker 5: analyst Jordan Klein is with us, and there's a lot
Speaker 5: of noise this morning from the cell side, Jordan about
Speaker 5: what is iPhone sixteen? Over hype the Jeffreson I even
Speaker 5: mentioned seventeen, which is fictional at this point. It doesn't
Speaker 5: exist at least as far as we know. When you
Speaker 5: sit down at your desk and you get the phone
Speaker 5: calls from clients, how do you react to all of that?
Speaker 12: Well, I mean this is a rite of passage for
Speaker 12: Apple and the investment community. Every Tember October when they
Speaker 12: launch a new phone. Everyone loves to go out and
Speaker 12: do their checks for how long does it take, you know,
Speaker 12: to get a phone once you place the order, and
Speaker 12: that's you know, the lead time analysis to trying to
Speaker 12: judge demand.
Speaker 3: I think it's kind of nonsense.
Speaker 12: I mean, yeah, people like to do those, the press
Speaker 12: and media pick it up, but at the end of
Speaker 12: the day, you won't really know how well this cycle
Speaker 12: is till you know, next spring, and then by then
Speaker 12: everyone's looking at the next version, right, so it's always
Speaker 12: kind of on to the next thing. And I think
Speaker 12: from the standpoint of where I'm focused is no one
Speaker 12: really expects the sixteen to be some game changing iPhone cycle.
Speaker 12: It's not going to outperform. I don't think expectations of anything.
Speaker 12: It's expected to underperform. That's why the stock's been lagging.
Speaker 12: But most importantly is kind of the seventeen, you know,
Speaker 12: the next phone next fall. That would be the second
Speaker 12: iteration of you know, their AI software, which hopefully is
Speaker 12: then going to drive more of a replacement cycle and
Speaker 12: get people excited.
Speaker 5: Generally, Could you summarize what investor attitudes are toward Apple holistically?
Speaker 2: Right now?
Speaker 12: They're not good. I think every day you get another
Speaker 12: cell side report that is negative or cautious in terms
Speaker 12: of our checks, suggests demand is weaker than it was
Speaker 12: a year ago.
Speaker 5: The phone isn't selling well.
Speaker 12: They're going to start cutting unit production by December, and
Speaker 12: that permeates across the investment community, and most people are like, yeah,
Speaker 12: it's a major stock.
Speaker 3: I have to pay attention.
Speaker 12: I have to have some waiting in my portfolio relative
Speaker 12: to my benchmark. But most people just take a view
Speaker 12: that unless I think this product's going to surprise, I
Speaker 12: can underweight the stock and not worry about missing any alpha.
Speaker 5: And that's what they're doing.
Speaker 12: They're going into other names, particularly the mag seven that
Speaker 12: you know, the setup looks better. So all I'm saying
Speaker 12: is that the sentiment couldn't be that much worse than
Speaker 12: it is.
Speaker 4: Now, could be that much worse, but it's actually only
Speaker 4: about four percent off of its record high in terms
Speaker 4: of that share price still worth more than three trillion dollars.
Speaker 4: Is this just going to be sideways trading there? For Jordan,
Speaker 4: we sort of priced in some of that anxiety.
Speaker 12: Yeah, that's a great point, and that's kind of what
Speaker 12: I was noting today that you know, who would have
Speaker 12: guessed Apple's shares are up seventeen percent this year. It's
Speaker 12: a little below the market, but it's better than a
Speaker 12: lot of other names, particularly in software. It's better than Google,
Speaker 12: It's actually better than Microsoft. So I think again that
Speaker 12: shows you positioning and sentiment is already down, and every
Speaker 12: time we get a new update or we get closer
Speaker 12: to the earnings report later in October, I think the
Speaker 12: surprise to the downside factor gets more and more priced
Speaker 12: in or expected. So again, yeah, it could be an
Speaker 12: underperformer and a laggard, but I don't think it's going
Speaker 12: to all of a sudden derate and trade down Materially.
Speaker 12: I think there's a lot of people who might buy
Speaker 12: the stock of it.
Speaker 5: Ever got closer to two hundred dollars Mizooo.
Speaker 4: Jordan Kline getting a lot calls thanks for answering Areth today. Meanwhile,
Speaker 4: hon Hi Tech Day twenty twenty four is kicking off
Speaker 4: tomorrow and the company plans to showcase how the group
Speaker 4: has introduced AI applications into their platforms.
Speaker 3: It makes Anamal Drudez has.
Speaker 13: More iPhones that kindle, Nintendo switch even ring doorbells. FOXCN
Speaker 13: is making these and more. Assembling the devices, mostly in
Speaker 13: China has allowed the company to build an enormous business,
Speaker 13: generating nearly two hundred billion dollars in revenue last year,
Speaker 13: but the market for many types of electronics and particularly smartphones,
Speaker 13: is maturing. Fox Con wants to move up the value
Speaker 13: chain to products that generate better profits. AI servers is
Speaker 13: one area where it's making progress. Sales have risen as
Speaker 13: FOXCN works with the likes of Nvidia, Microsoft, and Amazon
Speaker 13: on artificial intelligence infrastructure. Semiconductors is another field, with the
Speaker 13: focus right now mostly on older, less sophisticated chips. At present,
Speaker 13: these mostly go toward in house needs, including EVS. This
Speaker 13: is an additional space where the Taiwanese company wants to
Speaker 13: compete with a value proposition similar to what a one
Speaker 13: stoled Apple. Fox con can build part or all of
Speaker 13: your car in less time and at lower cost.
Speaker 14: We believes that this contractive and design manufacturing service go
Speaker 14: same away as smartphones laptops, so we will have forty
Speaker 14: to forty five percent machumer features.
Speaker 13: Goldman Sachs says e the outsourcing could be worth more
Speaker 13: than one hundred and forty billion dollars by the end
Speaker 13: of the decade, but with fox Con still to sign
Speaker 13: on a major customer, its grandest auto ambitions are yet
Speaker 13: to be realized.
Speaker 5: That was Bloomberg's Annabel drowlers on on hiblically traded arm
Speaker 5: of the company we all know as Fox Common. Now
Speaker 5: coming up, ar glasses maker x Reel expands its retail
Speaker 5: footprint around the world. We're going to speak to its
Speaker 5: CEO Chizu. That's coming up next. This is Bloomberg Technology.
Speaker 5: The lack of a rebuttal in Ubersoft's response to recent
Speaker 5: takeover speculation by Tencent suggests the door is open to
Speaker 5: a potential buyout. How a Bloomberg Intelligence research points to
Speaker 5: potential regulatory hurdles given the current geobilistical backdrop. Let's get
Speaker 5: out to Bloomberg's Benoir Bertilo, who's in Paris and actually
Speaker 5: ben war I think this morning we have heard from
Speaker 5: Ubisoft who have issued a statement about the reporting. Just
Speaker 5: summarize what they said.
Speaker 15: Yeah, so they basically said that the ubisoftis used to
Speaker 15: review its strategic options.
Speaker 2: That's options plural.
Speaker 15: And they didn't say more on the report and now
Speaker 15: talks for take a private report with ten cents, but
Speaker 15: they just said that they are indeed basically working on options.
Speaker 15: They also said the management was working on its current strategy.
Speaker 4: And remind us of what the strategy might be when
Speaker 4: share price has halved, and that's obviously why perhaps it
Speaker 4: assesses options.
Speaker 15: Yeah, they said they would focus on the open world games.
Speaker 15: That's a point that's been difficult for them recently because
Speaker 15: they released the Star Wars game that was an open
Speaker 15: world game that didn't work very well, and the next one,
Speaker 15: the big one assa since scret Shadow has been pushed
Speaker 15: back to February. So it doesn't say much on their
Speaker 15: strategic options right now. Just we understand that the talks
Speaker 15: are underway and today actually the company didn't really lose
Speaker 15: the gain that he'd saw on the markets on Friday,
Speaker 15: which says a lot. But now everyone is sort of
Speaker 15: waiting for the next step.
Speaker 4: We keep an eye currently. Was just finishing the day
Speaker 4: a little bit lower three point eight percent. Benuir Bertilo,
Speaker 4: We thank you so much.
Speaker 2: Now.
Speaker 4: Shares of Nikon surging the most in two months, after
Speaker 4: it was disclosed that Esselo Luxotica has taken a five
Speaker 4: point one percent steak now.
Speaker 3: According to a.
Speaker 4: Filing, the iewear maker began accumulating Nikon shares in early August.
Speaker 4: The move marks a backing of lens technology as the
Speaker 4: rise of smart wearable emergers now. Earlier this year, Nicon
Speaker 4: said it plans to invest more than six hundred million
Speaker 4: dollars by twenty thirty to bolster it's lenses and.
Speaker 3: Other offerings.
Speaker 5: Stay in the realm of smart wearables AR glasses make
Speaker 5: at x Reel has announced it will expand its in
Speaker 5: store retail presence offering sales across Europe, Asia and the
Speaker 5: United States. Here with more is chi zoo x Real
Speaker 5: CEO and co founder. And what we're talking about is
Speaker 5: the air to pro and beam, which is basically the
Speaker 5: puck that goes with it to connect whatever compute device
Speaker 5: you want into the augmented reality glasses. Let's start with
Speaker 5: the news, which is you're backing physical retail. Do you
Speaker 5: want people to go into a store, pick up the
Speaker 5: glasses and buy them? Why? Why that strategy?
Speaker 16: Okay, so previously you know our product is available on
Speaker 16: Amazon or some other online channels. Right, this is such
Speaker 16: a new kind of cool gadget. We want the people
Speaker 16: actually can go to their nearby store and try it
Speaker 16: for themselves.
Speaker 5: I see that pin on your lapel. Yeah, I know
Speaker 5: where that's from. Meta connect, That's right. So you know,
Speaker 5: I've tried the Orion Meta A glasses. The technology difference
Speaker 5: between what Meta announced last week and what you're doing
Speaker 5: is that basically you can cast another device into your glasses,
Speaker 5: it doesn't have its own operating system. Yep. How much
Speaker 5: of a limitation is that for you? You know, where
Speaker 5: do you want to take x reel to compete with oryan,
Speaker 5: which isn't going to be sold in its current form?
Speaker 1: Right?
Speaker 5: That's right? Yep.
Speaker 16: So first of all, you know, you have to give
Speaker 16: a lot of credit to Meta and even Snapchat, you know,
Speaker 16: from those big tech companies get into this space. This
Speaker 16: is very important. That kind of validates the future of
Speaker 16: the entire AR market. On the other hand, you know,
Speaker 16: what we are trying to do is can we actually
Speaker 16: deliver some kind of product that people can use.
Speaker 5: Today, not the future, not several years ahead.
Speaker 16: So that's why the kind of product strategy we're taking is,
Speaker 16: you know, instead of giving a fully spatial computing display
Speaker 16: that is more complicated running their own operating system, can
Speaker 16: we ist provide maybe a spatial display kind of a
Speaker 16: philosophy who can easily use our glasses like air to
Speaker 16: pro like also just look like a sunglasses this way right,
Speaker 16: so they can easily plug into your cell phone, your tablets,
Speaker 16: or your even laptop handhold gaming devices. So does instantly
Speaker 16: turned into in my opinion, a much bigger high resolution
Speaker 16: virtual display, and feedback has been phenomenal. I mean I
Speaker 16: saw people actually going from those traditional two D flat
Speaker 16: screens to those kind of virtual displays.
Speaker 3: What's interesting, people are buying these in numbers.
Speaker 4: Four hundred thirty thousand I think was the number we
Speaker 4: shared on the screen. You've got forty seven percent of
Speaker 4: market share. Where are they buying them? Where is the
Speaker 4: consumer for you? Is it more China based, Asia based
Speaker 4: or is it in the US too?
Speaker 5: Oh?
Speaker 16: Actually this is a global footprint. So yes, as you mentioned,
Speaker 16: we're nearly half of the entire global market share, and
Speaker 16: people are using that for media consumption, so they can
Speaker 16: stream like movies and also they can play games. Connecting
Speaker 16: this to steam deck or switch is a good way
Speaker 16: to go. And actually people are even there is too
Speaker 16: laptop for productivity and some other activities.
Speaker 4: Okay, so what then of manufacturing? Where are these being
Speaker 4: made At the moment. You are headquartered over in China,
Speaker 4: but you are a global company with a global footprint,
Speaker 4: but where exactly are these being supplied from?
Speaker 16: So right now this is a manufacturer actually in the
Speaker 16: same kind of a plant, adds the hypor vision prole
Speaker 16: They're manufacturing in China, and you know, we want to
Speaker 16: leverage that kind of manufacturer capability and the efficiency being
Speaker 16: in China especially, you know, for this kind of a
Speaker 16: new industry at a very elesage.
Speaker 5: Chizu y CEO of x Rael, really great to have
Speaker 5: you here with us in San Francisco. A mixed out
Speaker 5: look for Netflix on Wall Street. The streaming giant was
Speaker 5: downgraded to underweight from equal weight of Barkley's, but upgraded
Speaker 5: to overweight from neutral at Piper Sandler. Barkleays is questioning
Speaker 5: the company's valuation as Piper sand gets bullish on momentum
Speaker 5: from its advertising strategy. Netflix reports earnings next Thursday.
Speaker 4: Carol tak into the theaters because boy, it was a
Speaker 4: rough start for the Joker sequel. The Warner brother film
Speaker 4: opened at forty million dollars in sales, much lower than
Speaker 4: the projected sixty million dollars and the film cost, of course,
Speaker 4: Warner Brothers one hundred and ninety million to make. Let's
Speaker 4: discussed bluemokes Hannah Miller with what went wrong?
Speaker 3: Why did no one rush to go and see it?
Speaker 17: Yeah, so they really gave director Todd Phillips free reign
Speaker 17: with this movie, and it seems like it went a
Speaker 17: bit over the top. There's been a lot of negative
Speaker 17: word of mouth reviews and critics are not liking it.
Speaker 17: So we think that cut into people seeing it in
Speaker 17: theaters this past weekend.
Speaker 5: The bar was high because the First Joker almost hit
Speaker 5: one hundred million in its opening weekend and did eventually
Speaker 5: gross a billion. So there's that. If anyone watching bluemog
Speaker 5: Technology saw it and loved it, you know where to
Speaker 5: find us. We welcome your feedback. Is it the whole
Speaker 5: movie theater versus streaming debate, the battle for eyeballs in
Speaker 5: a busy weekend?
Speaker 17: You know, I think we have seen some successes in
Speaker 17: recent months, you know, June two, Beetlejuice, Beetle Juice, you know,
Speaker 17: those were both Warner Brothers movies that did really well.
Speaker 17: You know, there obviously is this fight to get eyeballs
Speaker 17: away from streaming and people back into theaters.
Speaker 5: And this was a huge miss.
Speaker 17: You know, people were expecting this to live up to
Speaker 17: the expectations that Joker set in twenty nineteen.
Speaker 5: People also have short attention spans. I think the film's
Speaker 5: more than two hours long, isn't it?
Speaker 2: It is?
Speaker 17: And I think people were taken aback that this is
Speaker 17: a musical that Lady Gaga is going to be singing,
Speaker 17: and there are songs and it's not as gritty as
Speaker 17: maybe the first one was.
Speaker 3: You were saying that to everyone's surprised that it was
Speaker 3: a musical at all. But there is some fist competition.
Speaker 3: People are going and seeing other stuff what has got
Speaker 3: people electrified?
Speaker 17: Yeah, I mean people are into the Wild Robot film.
Speaker 17: I think people are kind of looking for more positive
Speaker 17: stuff that they can enjoy go to with their families.
Speaker 5: Yeah, so it'll be interesting.
Speaker 17: To see, you know, as we get closer to the
Speaker 17: holiday season, how movies fare in theaters.
Speaker 4: And this comes obviously as Hollywood itself reels from strike action.
Speaker 4: A lot of that to do with what we talk
Speaker 4: about day and day out artificial intelligence, and they're like,
Speaker 4: where did this movie get made and how and was
Speaker 4: it a synonymous to that issue.
Speaker 17: Yeah, So with this film, there was a lot of anticipation,
Speaker 17: you know, around it. It was filmed in New York,
Speaker 17: Los Angeles and even New Jersey. There was a lot
Speaker 17: of excitement. People loved Joaquin Phoenix as the Joker in
Speaker 17: the first one, and I think it just kind of
Speaker 17: got out of proportion. You know, it's very dramatic. There's
Speaker 17: a lot of courtroom drama scenes versus you know, the
Speaker 17: crime that we saw in Gotham in the first one.
Speaker 17: So I don't think it's appealing to people the same way.
Speaker 4: Anamella, resident critic for US and everything about the movies. Now,
Speaker 4: that does it for this edition of New By Technology.
Speaker 5: And yeah recap on the podcast. You know exactly where
Speaker 5: to find it. Big thanks and shout out to the
Speaker 5: team in New York City and the crew out here
Speaker 5: in San francisc Go. This is Bluembo Technology
Speaker 12: M