Bloomberg Technology 07/20/2023
>> I'M CAROLINE HYDE AT BLOOMBERG'S WORLD HEADQUARTERS. ED LUDLOW IS OFF. FULL EARNINGS COVERAGE AHEAD. NETFLIX SET FOR ITS WORST DAY OF THE YEAR AS ITS OUTLOOK FALLS SHORT OF ESTIMATES. LET'S LOOK AT TESLA'S RESULTS. ELON MUSK WARNS OF MORE BLOWS TO THE COMPANY'S PROFITABILITY. TSMC DROPS AS IT WAS THE AI FRENZY MAY NOT LAST. THAT AND
MORE AHEAD. LET'S GET YOU UP TO SPEED WITH A LACKLUSTER DAY IN THE MARKETS. OVER TO ABIGAIL DOOLITTLE. ABIGAIL: IT IS LACKLUSTER. FEELS LIKE THE WORST FIRST DOWN DAY FOR MANY MAJOR INDEXES. SOME OF THE BIG TECH REPORTS
WHILE PUTTING A BIT OF A WRINKLE ON THAT. TESLA DOWN 6.42% ON ITS REPORT, THAT IS WHERE PROFITABILITY IS AN ISSUE. ELON MUSK TALKING ABOUT THE IDEA THAT IF -- RATES CONTINUE TO RISE, THEY WILL HAVE TO BRING PRICES DOWN. MEHTA, ALPHABET, AND APPLE ALL LOWER AHEAD OF THE REPORTS. SO MUCH MOVEMENT TO THE UPSIDE. IF WE FLIP UP THE BOARDS, WE WILL SEE THAT WHAT THIS MEANS FOR THE S&P 500 AND THE NASDAQ, WE ARE LOOKING AT A DOWN DAY.
THE BANK INDEX DOWN MORE. THE STOCKS ARE NOT IMMUNE FROM THIS. NVIDIA DOWN. AMD DOWN. IF YOU LOOK AT THE OTHER BIG EARNINGS, NETFLIX.
I THINK WE HAVE A CHART OF THAT. THE WORST DAY. THERE IS A CONTINUED PUZZLE. I'M SURE YOU WILL SOLVE IT ON THIS SHOW. RECORD BLOWOUT SUBSCRIBERS. WHERE IS THE REVENUE? THEY ARE TALKING ABOUT KEEPING THE DOUBLE DIGIT FOR THE END OF THE YEAR.
PUTTING PRESSURE ON THE FOURTH QUARTER. CAROLINE: BANK OF AMERICA LOOKING OPTIMISTIC. FOR NOW, THE REVENUE NOT QUITE FOLLOWING THE UPTICK IN SUBSCRIPTIONS. LET'S GO BACK TO TESLA. IT IS FALLING HARD. WARNING OF MORE HITS TO ITS
PROFITABILITY. ELON MUSK SAID THE COMPANY WILL HAVE TO LOWER PRICES IF INTEREST RATES CONTINUE TO RISE. >> IT DOES MAKE SENSE TO SACRIFICE MARGINS IN FAVOR OF MAKING MORE VEHICLES.
WE THINK IN THE NOT-TOO-DISTANT FUTURE, THEY WILL HAVE A DRAMATIC VALUATION INCREASE. THE TESLA FLEET VALUE INCREASE -- APPROVED BY REGULATORS WILL BE THE SINGLE BIGGEST STEP CHANGE IN ASSET VALUE IN HISTORY. CAROLINE: SEAN O'KANE IS IN AUSTIN. WHY IS THE MARKET SO SURPRISED BY THIS? THE PRICE CUTS, FOCUS ON VOLUME OVER PROFITABILITY HAS BEEN A TEAM ALL YEAR. WILL HAVE SOME SORT OF CHANGE? >> IF YOU LOOK AT THE CUTS THEY HAVE MADE AND SUBSEQUENT ADJUSTMENTS, THERE HAVE BEEN PRICE BUMPS OVER THE LAST MONTH OR SO. THEY HAVE FLAT AND OUT A BIT,
NOT AS VOLATILE AS THE FIRST QUARTER. I THINK WE HAVE INVESTORS WHO WERE EXPECTING THAT TO BE COMPLETELY CLOSED. GIVING THE FACT THERE WAS A CHANCE MAYBE WE WERE DONE WITH INTEREST RATES, MAYBE THIS WAS ALL OVER. ELON MUSK SAYS IF INTEREST RATES GO UP, THEY ARE WILLING TO CUT. HE SAID LAST QUARTER AND REINTEGRATED -- REITERATED. HE BELIEVES IN SO MUCH THE ABILITY TO DELIVER FULL AUTONOMY AND WHAT IT WOULD DO TO TESLA'S MARGINS.
HE'S SO BOUGHT INTO THE IDEA THAT HE DOESN'T CARE ABOUT THE MARGINS. IT IS PART THAT, AND THEY'VE ADDED LIKE $500 MILLION TO THE MARKET CAP. THEY'VE HAD A BIG RISE THE LAST COUPLE OF WEEKS AND MONTHS. >> GOOD CONTEXT. WHAT IS INTERESTING ABOUT THE FOCUS, THE SUPERCOMPUTER DOJO TAKES LIMELIGHT. $1 BILLION IN TERMS OF
INVESTMENT IN THAT AREA. THAT SURPRISED PEOPLE, EVEN THOUGH THE CFO TRIED CALMING NERVES. >> IT WAS PROBABLY ONE OF THE MORE LIVELY MOMENTS OF THE CALL.
ELON COMING OUT AND SAYING HOW MUCH, OR AT LEAST IN THE BALLPARK OF WHAT THEY WANT TO SPEND ON A SUPERCOMPUTER FOR THE NEXT YEAR. IT IS IMPORTANT TO REMEMBER IT IS A SPECIFIC USE CASE TYPE OF SUPERCOMPUTER. HE'S NOT USING IT TO BE SOMETHING THEY CAN THROW AT HIS AI EFFORT THAT HE JUST ANNOUNCED. HE SAID IT IS VERY TAILORED TO PROCESSING VIDEO AND IMAGES, SPECIFICALLY MADE TO HELP IMPROVE THE SOFTWARE ON TESLA'S CARS. IMMEDIATELY AFTER WE GOT THIS LAWYERED UP RESPONSE SAYING IT SOUNDS IKE A LOT OF MONEY, BUT WE BAKED IT INTO THE GUIDANCE. YOU MIGHT HAVE MORE CLARITY ON
HOW WE ARE SPENDING SOME OF THAT, BUT DON'T GET SPOOKED. IT IS A NEW EXPENSE. >> EXPENSES RACKING UP WHILE THE PROFITABILITY, THE MARGIN UNDER PRESSURE ARE 18.1%. THANK YOU. LET'S GET THE INVESTOR TAKE. SYLVIA JABLONSKI IS HERE.
TESLA ONE OF YORKIE HOLDINGS IN YOUR PURE ELECTRIC VEHICLE ETF. WERE YOU UPENDED BY THE FOCUS OF VOLUME OVER PROFIT OR DID YOU ANTICIPATE IT? >> I ANTICIPATED THE EARNINGS ANNOUNCEMENT CALL WOULD GO LIKE THIS. THERE WAS FOCUS ON WHAT PROFIT MARGINS LOOK LIKE WHEN YOU TAKE OUT THE TAX CREDITS AND DIFFERENT TYPES OF INCENTIVES COUPLED WITH LOWERING PRICES. I THOUGHT IT WAS A GREAT CALL. I UNDERSTOOD THERE WERE CALLS
FOR THE STOCK TO RALLY. WHAT ELON MUSK IS DOING IS CONTINUING TO CORNER THE EV MARKET BY MAKING EV VEHICLES ACCESSIBLE. WHILE YOU ARE SACRIFICING MARGIN IN THE NEAR TERM, YOUR INCREASING CAPACITY TO PRODUCE MORE VEHICLES, INTEREST IN PURCHASING VEHICLES BECAUSE THEY ARE AFFORDABLE, AND TAKING THAT WHILE EVERYONE IS TRYING TO CATCH UP. I THINK THERE IS ENOUGH SHOTS TO FIRE. THE CYBER TRUCK COMING OUT. THAT IS ARGUABLY GOING TO BE AN INEXPENSIVE TYPE OF VEHICLE THEY ARE SEEKING AND WAITING FOR. WITH DAYS LIKE THIS WITH A
STOCK LIKE TESLA FALLING IN ONE DAY FROM WHAT LOOKS LIKE BAD NEWS, BUT IS GOOD NEWS, AND THE OTHER EV MAKERS FALL IN LINE, IT IS A GREAT AVERAGING DAY ON THE TOP EV STOCKS. >> BUYING IN ON THE WEAKNESS, EVEN THOUGH IT IS STILL PRICED 80 TIMES FORWARD EARNINGS. HOW DO YOU VINDICATE THAT VALUATION? ARE YOU THE PERSON IN A ROWBOAT TAXI, THAT ULTIMATELY THERE IS A BIG BUMP IN VALUATION? >> I AM. YOU HAVE TO BE IF YOU ARE BUYING STOCKS AT THOSE VALUATIONS. THERE'S A LOT OF EVIDENCE THE R&D IS MOVING IN THE RIGHT DIRECTION. INVESTORS WANT EVERYTHING TO HAPPEN MORE QUICKLY THAN IT USUALLY DOES.
THEY ARE WORKING ON THINGS THAT DO NOT YET EXIST. THIS IS WHAT YOU WANT WHEN YOU INVEST IN INNOVATION. THE EV MARKET WAS 14% OF SALES GLOBALLY. EXPECTED TO BE BY 26%. WE KNOW TESLA HAS 60% OF THE MARKET NOW.
THEY GET MORE ORDERS AND VOLUMES. I THINK THEY WILL CONTINUE TO BENEFIT. NUMBER TWO IS THE NEW VEHICLE, THE CYBER TRUCK.
YOU MENTIONED THE DOJO BEFORE. THE POTENTIAL FOR AI. THE SELF-DRIVING DATABASE COMPUTER, THE TECHNOLOGY LOOKS LIKE IT IS BEING SET UP TO SUPPORT THEM. IF ANYONE WILL GET IT DONE, IT WILL BE TESLA. WE HAVE NO REASON TO BELIEVE HE'S NOT GOING TO GET IT DONE.
>> WHAT ABOUT THE GLOBAL NATURE OF THIS COMPANY? THEY ARE TALKING ABOUT PERHAPS SLOWING DOWN FACTORY OUTPUT AS THEY UPDATE THEM. EXPOSURE IN BERLIN AND THE U.S., BUT ALSO CHINA. LEE AUTO REALLY MANAGING TO RAMP UP THEIR OWN DELIVERIES AT THE MOMENT. WHAT IS COMPETITION LIKE GLOBALLY? >> WHEN YOU ARE INVESTING IN THE EV SPACE, IT MAKES THE ARGUMENT OF ALL OF THESE NAMES. YOU WANT TESLA AND ALSO THE TESLA OF CHINA. IT IS GOOD TO HAVE THAT BROAD-BASED DIVERSIFICATION. I THINK THESE ARE ALL GOING TO
BE WINNERS. THE ENTIRE PIE OF EV IS GLOWING -- GROWING GLOBALLY. MASSIVE UPSIDE FOR ANYONE WHO GETS IT RIGHT.
IN TERMS OF TESLA, THE FACT THEY ARE TALKING ABOUT BUILDING WHAT IS LARGER. IN GERMANY, THE HOME OF GERMAN AUTOS, THE MICHIGAN OF EUROPE, IS MIND-BOGGLING TO ME. THE DEMAND WILL CONTINUE, AND THE OPPORTUNITY FOR CAR SALES GOES THERE. IF YOU LOOK AT EV SALES, 50% OF EV'S COULD -- CARS SOLD WERE EV.
IN EUROPE, THAT NUMBER IS CLOSER TO 60%. HE'S FOLLOWING THE LINE OF INTEREST. >> AT A TIME WHEN MACRO HEADWINDS ARE THERE. WHERE ELON MUSK STARTED.
THE FOCUS ON INTEREST RATE RISING AND IMPACTING THE CONSUMER. HOW ARE YOU FEELING ABOUT THAT PICTURE RIGHT NOW? >> I'M A LITTLE MORE BULLISH ON THE MACRO PICTURE. WE TALKED ABOUT THE STOCK PICKS GETTING CRUSHED LAST YEAR IN 20 WITH INTEREST RATES RISING. THAT IS PLAYING OUT. THERE WAS A BEAR MARKET AND INTEREST RATES WERE RISING.
WE ARE COMING TO THE END OF THAT. IT IS MANAGEABLE, WE ARE ALREADY THERE. IN TERMS OF RATES SPECIFICALLY AND OTHER GOODS AND SERVICES, I DON'T THINK ANYTHING IS COMING DOWN. BUT INFLATION IS COMING DOWN. TO TAKE ON DEBT FOR INNOVATION FOR COMPANIES. I THINK WE HAVE SOME VOLATILITY. IT WILL BE LOWER TO THE YEAR
END. IF EARNINGS HOLD OFF, I THINK THE RALLY CONTINUES. CAROLINE: A LITTLE BIT OF DEFLATION. REALLY GREAT TO HAVE YOUR TAKE, CEO AND CIO OF DEFIANCE ETF'S. COMING UP, WE HAVE TO KEEP GOING WITH EARNINGS. NETFLIX PROJECTING
THIRD-QUARTER REVENUE SHY OF WHERE WALL STREET WANTED TO SEE. WE WILL DISCUSS WHY. DIGGING IN ON ONE OTHER SET OF SHARES. TAIWAN SEMICONDUCTOR CUTTING ITS ANNUAL OUTLOOK FOR REVENUE. ALSO SUSPENDING THE START OF KEY PRODUCTION EXPECTED IN ARIZONA.
THE PROJECT SET TO 2025. KEY SETBACKS FOR A CHIPMAKING >> ONLY A SMALL PERCENTAGE OF OUR MEMBERS, EVEN WITH THE MOVES, GROWTH IN THE ADS TIER. WE ARE REALLY EARLY IN TERMS OF PAID SHARING IMPACTS, INCLUDING EXTRA MEMBER, FOR THE REASONS GREG MENTIONED. THAT WILL BUILD UP OVER
MULTIPLE QUARTERS. CAROLINE: NETFLIX'S CFO. TRYING TO ARTICULATE WHY THE SHIFT TOWARDS THE ADVERTISING MODEL. IT WAS A REALLY INTERESTING SET OF NUMBERS. THE FACT NETFLIX IS DOWN THE MOST SINCE APRIL 2022. CLEARLY PEOPLE HAD ANXIETY AROUND THE FACT THE REVENUE DOESN'T SEEM TO BE FOLLOWING THE UPTICK IN SUBSCRIPTIONS. >> LET'S BE CLEAR, NETFLIX HAD A REALLY STRAIGHTFORWARD -- WHEN WE ARE LOOKING AT THEIR PREVIOUS QUARTERS, THIS IS THE KIND OF UPTICK WE WERE HOPING TO SEE. THE SOFTER REVENUE IS
CONCERNING. ONLY CONCERNING IF WE THING ABOUT THIS IN TERMS OF THE AVERAGE REVENUE PER MEMBER. THE AVERAGE REVENUE PER USER. WE SEE THE 3% DECLINE
YEAR-OVER-YEAR. AS NETFLIX TRIES TO ONBOARD THESE NEW SUBSCRIBERS, WE SEE THE NICE SUBSCRIBER GROWTH, WHAT REVENUE ARE THEY GENERATING THROUGH THESE CUSTOMERS THAT HAVE DIFFERENT PRICING OPTIONS? THEY CAN COME IN AT A CHEAPER AD TIER, WHICH IS BETTER FOR NETFLIX BECAUSE ADVERTISING REVENUE ALONGSIDE SUBSCRIPTION REVENUE IS STRONG. A LOT OF THESE COUNTRIES WHERE THEY ARE EXPERIMENTING WITH THE PASSWORD SHARING CRACKDOWN AND HOW TO INCREASE SUBSCRIBERS AND LEADING INTO THIS IMMENSE DEMAND ACROSS THEIR PORTFOLIO, ARE THE MEMBERS COMING IN AT A CHEAPER PLAN THAT DOES NOT INCLUDE SUBSCRIBERS? WE KNOW NETFLIX INCLUDES OPTIONS FOR LATIN AMERICA, SOME SUBSCRIBERS ARE GETTING KICKED OFF OF THEIR PARENTS PLANS, FRIENDS PLANS TO SAY I WANT TO COME IN AT A CHEAPER TIER. HOW MUCH REVENUE IS NETFLIX GENERATING ON AVERAGE ACROSS THESE DIFFERENT SUBSCRIBERS WILL BE THE LONG-TERM QUESTION.
THAT IS WHY YOU SEE SPENCER, GREG AND TED SARANDOS SPEAK TO THIS IMPORTANT ASPECT OF PUSHING PEOPLE TOWARDS THE ADVERTISING TIER. TAKING AWAY CERTAIN PLANS LIKE THE BASIC AD FREE PLANS AND HAVING AN IDEA WITH A BETTER POSITIONED PRICING POWER TO GENERATE THE REVENUE THEY NEED. ESPECIALLY AS THE LEVEL OF SPENDING. >> THEY DID DO THAT IN THE U.K. AND U.S. COUNTRIES WHERE PEOPLE CAN AFFORD THE UPTICK AND DECIDE I WILL GO FOR THE AD SUPPORTED CHEAPER MODEL OR PAY MORE TO GET AD FREE. WHAT DO THEY DO ABOUT EMERGING
MARKETS? HOW DO THEY ENSURE THEY CAN HAVE THE REVENUE THEY NEED FROM AREAS THEY ARE STILL ABLE TO GROW IN? >> I THINK WHAT IS REALLY SMART ABOUT NETFLIX'S PLAN, I THINK THERE WILL BE MORE OF A CONCERN IF THE ARM DID NOT CHANGE. IN PART BECAUSE NETFLIX WAS NOT EXPERIMENTING WITH PRICING POWER. THE FACT NETFLIX IS SAYING WE WILL EXPERIMENT WITH PRICING POWER, IN MARKETS THAT WE KNOW CONTENT IS IMPORTANT AND CUSTOMERS DON'T NECESSARILY HAVE THE DISPOSABLE INCOME CUSTOMERS IN THE U.S., U.K., AND CANDIDA HAVE. WE WENT TO FIGURE OUT TO BE THE LOCAL DOMINANT SOURCE IN ALL OF THESE COUNTRIES.
NETFLIX IS TRYING TO MONOPOLIZE ATTENTION, NOT JUST A GLOBAL DISTRIBUTOR, BUT BEING A LOCAL POWERHOUSE. AND SO WHEN WE THINK ABOUT THAT, WITH NETFLIX'S BUILDING IS HAVING A PRESTIGE PLATFORM FROM A PREMIUM PLATFORM. THE CASUAL PLATFORM AND PREMIUM PLATFORM WHILE THAT MIGHT BE LIMITED TO CERTAIN TITLES, WHERE IT MIGHT BE THE INABILITY TO ACCESS CERTAIN THINGS ON THE PLATFORM.
YOU THINK ABOUT HOW PEACOCK HAS PREMIUM PLUS, HBO MAX -- MAX DIFFERENTIATE BETWEEN THE AD FREE PLATFORM AND SUPPORTED PLATFORM. NETFLIX IS TAKING IT INTO IF WE GET RID OF THESE BASIC PLANS AND WE CAN MAKE THAT AVERAGE REVENUE PER MEMBER BY BRINGING PEOPLE TO THAT SUPPORTED PLAN, AND CONTINUE TO BUILD UPON IT AND BRING ADDITIONAL REVENUE, KEEPING THE PRICING REALLY LOW, ESPECIALLY IN MARKETS LIKE PARTS OF EUROPE WHERE THE LINEAR AND PAID TV SYSTEM IS FUNDAMENTAL. WHERE PEOPLE DON'T NECESSARILY NEED STREAMING, INTERNET ACCESS IS STILL BEING DEVELOPED IN MANY WAYS. NETFLIX IS SAYING WE KNOW WE NEED TO PENETRATE AND THAT IS OUR FIRST GOAL. THEY ARE TAKING IT AT A STRONGER LOSS. UNLIKE DISNEY, WHO IS SUGGESTING WE MIGHT MOVE OUT OF THIS MARKET A LITTLE BIT, YOU HAVE NETFLIX SAYING WE WANT TO DOUBLE DOWN. HOW CAN WE USE TWO DIFFERENT
PRICING POWER PLANS TO ENSURE OUR REVENUE DOESN'T SEE THIS CONSISTENT SLOW DOWN AS WE BRING ON THESE NEW CUSTOMERS? >> WHAT ABOUT CONTENT? WHAT IS INTERESTING IS PERHAPS NETFLIX IS LESS EXPOSED TO SOME STRIKES IN THE U.S. BECAUSE THEY CAN MAKE MORE CONTENT LOCALLY IN THESE LOCAL MARKETS. >> SOME QUICK DATA POINTS FROM OUR FIRM, NETFLIX LEADS WHEN IT COMES TO ON PLATFORM DEMAND SHARE. IT SUGGESTS THIS ABILITY TO RETAIN CUSTOMERS. THIS IDEA THAT WHEN PEOPLE ARE LOOKING AT AN ENTIRE PLATFORM ACROSS ORIGINAL LICENSE PROGRAMMING, WHERE THEY SPENDING THE MAJORITY OF THEIR TIME? NETFLIX HAS BEAT OUT HULU, THEN IT BEAT OUT MAX WITH THE COMBINED ASSETS. NETFLIX STILL IS KIND OF THE HOME IN MANY WAYS, ESPECIALLY IN THE U.S. WHERE NETFLIX IS MOST
INSULATED, NETFLIX HAS THREE MAIN ADVANTAGES. THIS GLOBAL PIPELINE. WE HAVE SEEN DEMAND FOR GLOBAL CONTENT INCREASE. THE STORY OF SQUID GAME'S SHOULD NOT BE THAT NETFLIX CAN CREATE MULTIPLE HITS ON THE FLY. IT SHOULD BE THEY CAN CREATE REALLY STRONG LOCAL HITS THAT MIGHT BE ABLE TO FIND AUDIENCES OUTSIDE OF THOSE TERRITORIES AND INCREASE THE REVENUE THEY HAD PLANNED FOR THAT.
>> WITH TECH EARNINGS UPON US, HOW MUCH WILL WE CAI A DRIVER OF REVENUE? AND WHAT ARE THE RISKS STILL POSED BY THE TECHNOLOGY? TALKING ABOUT ALL OF THIS AND MORE WITH CATHIE WOOD. TAKE A LISTEN. >> ONE OF THE QUESTIONS WE GET A LOT IS ABOUT THE DISPLACEMENT OF JOBS. I THINK YOU ARE WORRIED ABOUT THE NEFARIOUS USES OF ARTIFICIAL INTELLIGENCE.
>> THE END OF HUMANITY, PEOPLE SEEM TO BE TALKING ABOUT. >> ON THE SECOND. ALL TECHNOLOGIES CAN BE USED FOR NEFARIOUS PURPOSES. WHAT IS SCARING PEOPLE IS THIS
ONE IS EVOLVING SO QUICKLY. ONE OF THE REASONS IT IS EVOLVING SO QUICKLY IS THE RATE AT WHICH COSTS ARE DECLINING. AI TRAINING COSTS ARE DROPPING 70% PER YEAR. >> WHY IS THAT? >> IT IS ACTUALLY TWICE AS FAST AS MOORE'S LAW.
IT IS THE LEARNING CURVE ASSOCIATED WITH THIS TECHNOLOGY. TO HELP PEOPLE UNDERSTAND WHAT THIS MEANS, CHATGPT CAME OUT OF GPT3. IF THAT MODEL HAD BEEN DEVELOPED IN 2015, IT WOULD HAVE COST $800 MILLION. INSTEAD, IT WAS 2020, IT COST $4.5 MILLION.
>> IN TERMS OF ENERGY USAGE, GPU'S. >> IN TERMS OF DEVELOPING THE MODEL, HARDWARE AND SOFTWARE. TODAY -- $800 MILLION EIGHT YEARS AGO. 2.5 YEARS AGO, $4.5 MILLION. TODAY, LESS THAN $400,000. NOW WE ARE BUILDING BIGGER MODELS. BUT THE COSTS ARE COLLAPSING. THE OPPORTUNITIES ARE EXPLODING.
>> IS IT EXPLODING JUST FOR PRIVATE COMPANIES, BUT CLOSED SOURCE FOUNDATIONAL MODELS -- ARE YOU THINKING OPEN SOURCE, WHICH IN MANY WAYS THE ART WORLD IS TRYING TO STRUGGLE WITH THIS SORT OF OWNERSHIP VERSUS SHARING MODEL, AS WELL, WHAT DO YOU THINK WILL END UP BEING THE AI MODELS, OR CAN THEY ALL LIVE TOGETHER? >> WE WERE STUDYING THIS VERY CAREFULLY. FOUNDATION MODELS, THE OPEN AI, META'S LLAMA, NOW WE HAVE AJAX. THE FOUNDATION MODELS WE THOUGHT WERE GOING TO COMMODITIZE. WE STILL THINK THEY WILL. YOU DO HAVE OPEN AI AND MICROSOFT TOGETHER FOR ALL OF THESE. BUT YOU HAVE CHALLENGERS, YOU HAVE META SAYING NO, THIS IS OPEN-SOURCE. YOU HAVE ACADEMIC RESEARCHERS. YOU'VE GOT PEOPLE IN THE
TECHNOLOGY COMMUNITY WHO ARE PASSIONATE ABOUT THIS OPEN SOURCE MOVEMENT. CAROLINE: WE WILL TALK MORE ABOUT OPEN SOURCE. CAROLINE: WELCOME BACK TO "BLOOMBERG TECHNOLOGY." I'M CAROLINE HYDE IN NEW YORK. A CHECK OF THE MARKETS HALFWAY THROUGH THE TRADING DAY. WE ALSO NEGATIVITY WORRIES, PARTICULARLY IN THE TECH SPACE.
THERE IS EARNINGS LOOKING LACKLUSTER FOR SOME OF THE KETEK NAMES. HOW MUCH CAN WE JUSTIFY OUR RECORD FIRST HALF FOR THE NASDAQ 100? THIS IS FALLING THAT LITTLE BIT LOWER. JUNE 7 FOR THIS INDEX, TWO-YEAR YIELD. MOVING AWAY FROM THE BOND MARKET. THE BASIS POINTS MOVE, NINE
ALMOST 10 BASIS POINTS. WE SEE THEM TACKLE INFLATION COME MORE WHAT IS ULTIMATELY HAPPENING IN THE SELLOFF WE HAVE SEEN IN TERMS OF YIELDS PUSHING LOWER OVER THE PAST FEW WEEKS. LOOKING FORWARD TO OTHER INFLATIONARY PRINTS OVER THE U.K. WE ARE SEEING A BLOOMBERG COMMODITY INDEX .6%.
FEEDING INTO ANXIETIES WHY THE FED MIGHT HAVE TO CONTINUE TO INCREASE INTEREST RATES. WE'RE THINKING OF WHEAT PUSHING HIGHER. MOVING ON THE INDIVIDUAL NAMES WHEN IT COMES TO OUR SECTOR. I FOCUSED ON ONE OF THE VERY FEW BIG TECH NAMES. IBM UP MORE THAN 3%.
RELIEVED SOME ANXIETY ABOUT THE FORWARD GUIDANCE IN TERMS OF THE SECOND QUARTER NOT MATCHING EXPECTATIONS ON CURRENT REVENUE. PEOPLE NEED TO FEEL IT IS A TURNAROUND STORY THAT THEY ARE BRINGING IN CASH FLOW. SAP, I'M SHOWING THE AMERICAN DEPOSITORY RECEIPTS OF THE GERMAN COMPANY. THE SOFTWARE COMPANY IN EUROPE. EVEN UPGRADING THE OUTLOOK FOR PROFITABILITY.
WORRIED ABOUT SPENDING ON I.T. OVER IN EUROPE. AND TESLA DOWN BY MORE THAN 7%. A CRUSHING DAY. REMEMBER HOW FAR IT VALUED ON THIS PARTICULAR STOCK.
THE COMPANY FOCUSES ON VOLUME AND PROFITABILITY. A SUPERCOMPUTER DRIVING THE AUTONOMOUS DRIVING. $1 BILLION BEING SPENT THERE. MOVING ACROSS TO ANOTHER
SUPERCOMPUTER. CEREBRAS, KNOWN FOR ITS AI COMPUTE PROCESSES AND SERVICES, OPERATING AND MANAGING ONE OF THE LARGEST AI SUPERCOMPUTERS IN THE WORLD. IT IS CALLED CONDOR GALAXY 1. HOUSE IN SANTA CLARA, CALIFORNIA, IT CAN BE BUILT TO HELP TRAIN GENERATIVE AR MODELS AT A FASTER RATE THAN BEFORE. MODELS AT A FASTER RATE THAN BEFORE.
IT HAS ALREADY BEEN PURCHASED BY ONE OF THE STRATEGIC PARTNERS IN ABU DHABI. DOMESTIC , AND THE U.S. WE ARE SEEING IT GLOBALLY. WE THINK WE CAN BUILD A CONSTELLATION, NOT JUST ONE, BUT NINE. AI SUPERCOMPUTERS AND FUNDAMENTALLY CHANGE THE GLOBAL
INVENTORY OF COMPUTE. >> RIGHTLY OR WRONGLY, MANY HAVE PUT THEIR EGGS IN THE NVIDIA BASKET. AND YOU SAY THAT IS NOT TRUE. WE DON'T NEED TO JUST FOCUS ON SOME OF THESE LARGE BIG TECH AMERICAN PLAYERS. >> THAT IS EXACTLY RIGHT. ALL YOUR EXIT ONE BASKET HAS BEEN POOR STRATEGY. I THINK DEPENDENCE IS ANYWHERE
IN YOUR SUPPLY CHAIN, PROBABLY NOT THE RIGHT STRATEGY. VISIONARY COMPANIES LIKE G42 AROUND THE GLOBE. WE SEE MODELS FOUNDATION AND CLOSED SOURCE AND OPEN SOURCE COMING FROM THE MIDDLE EAST, ABU DHABI, SINGAPORE, JAPAN, FROM SOUTH KOREA. THIS IS A PHENOMENON THAT EXTENDS WELL BEYOND THE SIX OR SEVEN U.S. HYPER SCALERS.
THIS IS A NEED TO COMPUTE THAT WE THOUGHT A PARTNERSHIP WITH G 42 WOULD HELP WITH GLOBAL DEMAND. >> WE WERE TALKING WITH CATHIE WOOD ABOUT CLOSED SOURCE-OPEN SOURCED. BASICALLY HELPING TRAIN GPT MODELS AND PUTTING THEM INTO THE OPEN SOURCE COMMUNITY. WHAT DO YOU THINK ULTIMATELY
THE AI LANDSCAPE LOOKS LIKE IN FIVE YEARS OR SO? >> ONE OF THE THINGS SHE SPOKE ABOUT IN HER SESSION WAS HOW FAST THE AI COMMUNITY IS MOVING. MOVING THAT QUICKLY IN PARTS OF THE OPEN SOURCE, NOT JUST OPEN SOURCE, OPEN PUBLISHING MENTALITY. PEOPLE HAVE PUT IDEAS INTO THE SPACE AGAIN AND AGAIN. WITHIN WEEKS AND MONTHS, THOSE IDEAS ARE BUILT ON, IMPROVED, FURTHERED.
THIS IS PRODUCED, WE HAVE BEEN LEADERS IN PUTTING LARGE MODELS INTO THE OPEN SOURCE COMMUNITY. OUR PARTNER THROUGH ITS COMPANIES HAS BEEN PUSHING OPEN SOURCE MODELS INTO THE COMMUNITY. AND MANY OTHERS HAVE WHERE WE ARE NOT ALONE. I THINK THE COMMUNITY, THE ECOSYSTEM IS MORE HEALTHY IF IT IS NOT JUST A SMALL NUMBER OF COMPUTE PROVIDERS, A SMALL NUMBER OF MODEL MAKERS.
>> WHAT ABOUT THE CHINA-U.S. DIVIDE? >> IT IS AN IMPORTANT DIVIDE. WE HAVE TO THINK CAREFULLY THAT THERE ARE NO EASY ANSWERS ABOUT POWERFUL TECHNOLOGY AND THE RIGHT WAY TO MANAGE THE DISTRIBUTION AROUND THE WORLD. IT IS AN EXTRAORDINARILY CHALLENGING PROBLEM. ONE THAT POLITICIANS HAVE TO WORK THROUGH. >> THE POLITICIANS HAVE TO BALANCE THE RISKS WITH THE REWARDS. KEEP REWARDS BEING THE APPLICATION OF AI AND SCIENCE
IN HEALTH CARE. WHAT INDUSTRIES HAVE YOU BEEN MOST IMPRESSED WITH THE WAY THEY ADOPTED AND USED AI? >> THAT IS EXACTLY RIGHT. THE REGULATION HAS BALANCED THE DRIVE FOR INNOVATION. IN LARGE PARTNERS OF START UP LIKE G 42. JUST RECENTLY, WE HAVE SEEN THROUGH OUR PARTNERSHIP WITH G 42 USE OF AI MODELS AND HEALTH CARE. THOSE WHO DO DRUG DESIGN WITH AI MODELS. WE HAVE SEEN DIGITAL
ASSISTANTS, HELPING THE ELDERLY. IN NEARLY EVERY REALM OF LIFE, HOW WE LIVE OR WORK OR PLAY, THERE IS A ROLE FOR AI. YOU ARE SHOWING SOME OF OUR CUSTOMERS, ASTRAZENECA, BAYER, JASPER, ALL USING AI IN PROFOUNDLY DIFFERENT WAYS. G 42 WILL USE IT IN DIFFERENT WAYS, TOO.
THERE ARE UNDERREPRESENTED LANGUAGES. ARABIC IS ONE OF THEM. THERE IS AN OPPORTUNITY FOR TREMENDOUS EXPANSION IN THE ROLE OF AI. I THINK WE HAVE TO WORK TOGETHER , I THINK YOUR POINT ABOUT EXPORT IS REAL AND A CHALLENGE. BUT THE COMMUNITIES COME TOGETHER IN THE PAST. WE BUILD STANDARDS TOGETHER. WE CAN OVERCOME GEOPOLITICAL
CHALLENGES. >> ANDREW FELDMAN, THANK YOU FOR THE TIME. CEO OF CEREBRAS. LET'S TALK ABOUT THE POWER OF ARTIFICIAL INTELLIGENCE. WHAT ARE L U.S. LAWMAKERS DOING ABOUT IT AHEAD
OF THE 2024 ELECTIONS? DEMOCRATS UNVEILED PRETTY MODEST PROPOSALS CALLING FOR MORE TRANSPARENCIES AND CAMPAIGN ADS. BUT REPUBLICANS HAVE BEEN KIND OF SLOW TO SIGN ON. REALLY COMPREHENSIVE UNDERSTANDING.
AND WE UNDERSTAND THE RELEASE MONTHS TO MITIGATE AI'S MOST SERIOUS DISINFORMATION THREATS. LET'S LOOK AT U.S. SOCIAL MEDIA GIANTS ALREADY TAKING ACTION. IN INDIA COMPLYING WITH THE GOVERNMENT.
FACEBOOK, GOOGLE, AND TWITTER REMOVING A VIOLENT VIDEO FROM MAY THAT HAS GONE VIRAL OVERNIGHT. SOME SOCIAL MEDIA COMPANIES BEGAN REMOVING PHOTOS AND VIDEOS OF AN INCIDENT AS IT VIOLATED THE RULES, EVEN BEFORE NEW DELHI ISSUED EMERGENCY BLOCKING ORDERS. YOUR TRIGGERED THE FIRST COMMENTS FROM PRIME MINISTER MODI WHERE ETHNIC GROUPS HAVE CLASHED FOR NEARLY TWO MONTHS.
>> TIME NOW FOR VC ROUND UP. SEQUOIA CAPITAL SHAKING UP ITS TEAM AFTER MARKET UPHEAVAL. A BREAKUP IN AT LEAST FIVE INVESTOR DEPARTURES, AND TWO CRYPTO INVESTORS.
IN THE BREAKUP, THE FIRM ALSO SPUN OFF SEQUOIA HERITAGE. THE WEALTH MANAGEMENT BUSINESS THAT MICHAEL MORRIS WILL BE FOCUSING ON FOLLOWING HIS DEPARTURE. INVESTMENT ACTIVITY AT THE LARGEST LIFE AND SCIENCE FIRMS FINISHED ON A DISAPPOINTING STREAK WITH PENDING AND COMPLETED DEALS DOWN 45%. IT CONTINUES, 2023'S DEAL, CAN BE ONE OF THE LOWEST FOR DECADES. A U.S. CONGRESSIONAL COMMITTEE
INVESTIGATING FOUR VENTURE CAPITAL FIRMS FOR THEIR INVESTMENTS IN CHINESE TECH COMPANIES. THEY WERE ALL BEING PROBED AT THE MOMENT. BOTH THE WHITE HOUSE AND MEMBERS OF CONGRESS. POLICIES TO TRACK AND BLOCK U.S. INVESTMENTS IN CERTAIN FIELDS
IN CHINA. LET'S GET MORE INTO THE MICRO OF WHAT CHECK IS BEING WRITTEN IN VENTURE CAPITAL. I'M PLEASED TO BRING IN JERRY CHAN, WHOSE FOCUS, I'M SURE WITH A LOT OF YOUR COMPADRES, HIS ARTIFICIAL INTELLIGENCE. HOW MUCH OF YOUR PORTFOLIO COMPANY IS MANAGING TO EMBRACE AND PIVOT TOWARDS IT? THANK YOU FOR HAVING ME.
EVERYTHING IS AI TODAY. IT IS AI OR DIE. IT IS NOT LIKE MI AIVC. PRETTY MUCH AI IS TOUCHING HEALTH CARE, FINTECH, CONSUMER TECH, SECURITY, PRETTY MUCH EVERY PARTNER AT GREYLOCK FOCUSES ON AI, MYSELF INCLUDED. >> CAN YOU HELP US UNDERSTAND WHERE THE IMMEDIATE OPPORTUNITIES ARE? THERE HAS BEEN VARIOUS REPORTING ON HOW JASPER HAS HAD TO CUT BACK ON ITS HEADCOUNT. EXPERIMENTAL CEOS, ENGINEERS WITHIN BIG COMPANIES ARE WILLING TO ADOPT OPEN FORCE MODELS, EASIER PLUG-INS ANYONE ANTICIPATED GOING FIRST. HOW ARE YOU SEEING ACTUAL ADOPTION OF THE COMPANIES YOU ARE INVESTED IN? >> TWO THINGS, ONE, THEY ARE SPOT ON.
15 YEARS AGO, EVERY CUSTOMER HAD A CLOUD STRATEGY. HAD TO TALK ABOUT HOW TO MOVE TO AMAZON. BIG AND SMALL, HAS TO HAVE AN AI STRATEGY.
EVERY PORTFOLIO COMPANY IS BENEFITING FROM AI. THE SECOND QUESTION IS THE DIFFERENCE BETWEEN PLUG-INS, MODELS, OPEN-SOURCE. THAT IS A QUESTION WE HAVE BEEN ASKING. WHERE ARE THE BUSINESS MODELS IN AI GOING FORWARD? CHATGPT, PALM FROM GOOGLE, WHAT THEY DO TO BUILD A MODE AROUND THE AI MODELS. ONE HAND, YOU TALK ABOUT SYSTEM ENGAGEMENT, LIKE CHATGPT. IT HAS ALSO BECOME THE WAY TO INTERACT WITH AI.
INVESTORS ARE GOING TO BE CALLED PIE. -- THIS IS ALL ABOUT USING CHAT TO TALK TO AI. THERE'S INFRASTRUCTURE LAYERS TALKING ABOUT TAKING YOUR ENTERPRISE DATA, INTERACTING WITH OPEN SOURCE MODELS. IT IS A DEFLECTION WITH THESE FUNDAMENTAL MODELS THEMSELVES. IT IS PRETTY COOL, BECAUSE WE ARE INVESTING UP AND DOWN ON THE STACK. TRYING TO FIGURE OUT WHERE THE
MONEY WILL ACCRUE TO. >> DO YOU THINK SOME OF THE MONEY IS BEING SPENT WRONGLY? HAVE WE GOT A MINI BUBBLE ON OUR HANDS IN TERMS OF WHERE IT IS BEING ALLOCATED? >> I DON'T THINK IT IS RIGHT OR WRONG, WE WILL LOOK BACK TO SAY THAT WAS A MISTAKE. I THINK THERE'S A LOT OF EXPERIMENTATION GOING ON. WE ARE EXPERIMENTING AT THE FOUNDATION MODELS, THE CHAT LATER, INFRASTRUCTURE LAYER. A LOT OF EXPERIMENTATION ON HOW AI WILL CHANGE CONSUMER TECH ENTERPRISE TECH SECURITY.
IN THE NEXT TWO OR THREE YEARS, WE WILL FIGURE OUT WHICH MODELS WORK, WHICH VERTICALS MAKE SENSE. I THINK WE WILL FIGURE IT OUT OVER TIME. AS INVESTORS, LEARNING WHAT BUSINESS MODELS MAKE SENSE.
MY SPOILER ALERT IS THE OLD MODES AROUND NETWORK EFFECTS, GO TO MARKET STRENGTH, BRAND MARKETING, ALL OF THOSE WEAPONS YOU EMPLOY AS A STARTUP FOUNDER APPLY EVEN MORE GOING FORWARD. AI IS GREAT, BUT THE THINGS THAT MADE MONEY IN THE PAST WILL MAKE MONEY IN THE FUTURE. >> WHERE ARE THOSE FOUNDERS? >> I THINK THE FOUNDERS TODAY ARE LARGELY COMING OUT OF TWO AREAS. COMING FROM RESEARCH AROUND AI.
A CLUSTER OF AI RESEARCH FROM OPENAI, META, GOOGLE, FOLKS WHO KNOW THE DEEP TECHNOLOGY. NUMBER TWO, THE CLUSTER OF FOUNDERS COMING IN, PEOPLE THINKING I WANT TO APPLY AI, BUT NO HEALTH CARE LEGAL CRM CUSTOMER SUPPORT REALLY WELL AND MARRY THEM TOGETHER. WE ARE INVESTING IN DEEP TECH FOUNDERS WHO ARE ACADEMIC RESEARCHERS, INVESTING INTO MAIN EXPERTS WHO SAY I UNDERSTAND WHAT THE PROBLEM IS. I CAN SOLVE THIS PROBLEM WITH
AI. AI IS UNLOCKING TO DO THINGS THEY COULD NOT DO THREE OR FOUR YEARS AGO. >> WITH THE APPLICATIONS OF AI TRYING TO COME TO GRIPS, REALLY INTERESTING TEST OF TIME.
THANK YOU. STICKING WITH THE WORLD OF VENTURE CAPITAL. EMILY CHANG SAT DOWN WITH BILL GURLEY TO DISCUSS THE KEYS TO HIS SUCCESS AS A TECH INVESTOR. HIS TAKE ON WHAT IT TAKES TO BE A GREAT VC.
>> TO BE GREAT AT IT REQUIRES A LEVEL OF HUSTLE THAT IS REALLY HARD TO EXPLAIN. THE REASON IS YOU ARE TRYING TO MAXIMIZE THE OPTIONALITY YOU GET IN FRONT OF A HOMERUN PITCH. TO DO THAT, YOU HAVE TO LOOK UNDER EVERY ROCK YOU POSSIBLY CAN. IF YOU ARE NOT STUDYING SOME NEW BUSINESS MODEL OR NEW PLATFORM, IF YOU ARE NOT JUST IN EVERY MEETING, YOU ARE LOWERING THE CHANCE YOU WILL BE SUCCESSFUL.
>> GOING TO HAVE A PROFOUND IMPACT ON VIRTUALLY EVERY HOME AT THE GLOBAL ECONOMY. SOME AREAS MORE THAN OTHERS. THERE ARE BUSINESSES THAT WILL BE MORE VULNERABLE. IF YOU THINK ABOUT LOWER VALUE EDGE SERVICES, A CALL-CENTER BUSINESS, THERE WILL BE BUSINESSES LIKE DATA CENTERS WHERE YOU SEE A STEP FUNCTION INCREASE IN DEMAND. CAROLINE: THE IMPACT OF AI, STICKING WITH IT. ARTIFICIAL INTELLIGENCE. THE INFRASTRUCTURE THAT POWERS IT. TSMC OUT WITH EARNINGS.
CHIPMAKERS CUTTING THE OUTLOOK FOR REVENUE. FOR MORE, LET'S BRING -- FROM BLOOMBERG INTELLIGENCE. IT SEEMED WE HAD FIRST AND FOREMOST A HIGH PROFILE EXECUTIVE STAND. WE DON'T KNOW IF IT WILL STAY, IF THE FRENZY IN DEMAND WILL BE LONG-TERM. >> I THINK FROM TSMC, WITH THE GUIDANCE SUGGESTS, ESPECIALLY DEMAND WEAKNESS IN CHINA, IS EXPECTED TO BE A CONTINUED SLOWDOWN IN CONSUMER MARKETS LIKE SMARTPHONES AND PCS, WHERE WE SEE IT PLAYING UP. ON THE POSITIVE SIDE, IT WAS A POSITIVE TAILWIND, BUT NOT ENOUGH TO OFFSET THE GLOBAL WEAKNESS IN OTHER MARKETS.
>> THERE WAS THE DOUBLE WHAMMY OF SLOWDOWNS SUDDENLY FOR CONSUMER BASED CHIPS, BUT THE FACT THEY ARE TRYING TO BOOST SUPPLY, PARTICULARLY IN THE U.S. AND ARIZONA, BUT CANNOT GET THE RIGHT LABOR, SPIRALING COSTS. THE SUPPLY CHAIN ISSUE IS CLEARLY A HEADACHE. >> DEFINITELY IS. THE ARIZONA PROJECT IS SUPPOSED
TO COME OUT IN THE FUTURE. IT DOESN'T IMPACT THEIR SUPPLY CURRENTLY. GOING BACK TO THE QUESTION OF AI, SHORT-TERM OR NOT, I THINK WE ARE IN THAT CYCLE.
I DON'T THINK IT IS A SHORT-TERM FRENZY. WE ARE SEEING VERY STRONG DEMAND FOR THE DATA CENTER AND THE SHIFT TOWARDS AI. WHAT WE ARE LIMITED RIGHT NOW IS THE SUPPLY. >> WHAT DO YOU THINK WOULD GIVE THEM THE CONFIDENCE TO SEE AND GAIN THE OPTIMISM GENERATIVE AI IS IN ITS EARLY INNINGS, THAT WE SHOULD BE FOCUSED ON SUPPLY THAT IT IS ULTIMATELY DEMAND THAT IS STEADY FOR THE LONG-TERM? >> ONE WOULD BE ORDERS FOR THE CHIPMAKERS, THE BACKLOGS OF THE CHIPMAKER. WE ARE SEEING SIGNIFICANT
DEMAND FOR THE AI CHIPMAKERS LIKE NVIDIA. JUST NOT ABLE TO SHIFT ENOUGH. IT IS A GOOD POINT THAT GIVES TSMC SUPPLY. IT DOES NOT HAVE BEEN A QUARTER. I DON'T EXPECT TO SEE A SIGNIFICANT REVENUE STEP UP AS WE SAW IT LAST QUARTER. IT WILL BE STEADY GROWTH UNTIL SUPPLY CATCHES UP. CAROLINE:
TO THAT END, DO YOU THINK MORE SUPPLY WILL BE IN THE U.S., DO WE SEE MORE OPENINGS DESPITE THE HOLD UP? >> WE SHOULD, THERE MIGHT BE SOME DELAY IN THE TIMING. DEFINITELY DON'T THINK IT WILL BE POSTPONED OR CANCELED. AND WE HAVE PLAYERS LIKE INTEL, WHICH ANNOUNCED THEIR STRATEGY AND ARE GOING ALL IN. DEFINITELY SEEING STEPS TAKEN IN THAT DIRECTION.
>> GREAT PERSPECTIVE CONTEXT. THANK YOU SO MUCH. ALL THINGS IN THE CHIP AND AI SPHERE. THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY." DON'T FORGET TO CHECK OUT OUR PODCAST. FIND IT ON THE
TERMINAL.
2023-07-21 12:37
