Trade War and Tech, Tariffs Could Hurt Trump’s AI Goals | Bloomberg Technology
>> FROM THE HEART OF WHERE INNOVATION, MONEY, AND POWER COLLIDE IN SILICON VALLEY AND BEYOND, THIS IS "BLOOMBERG TECHNOLOGY." WITH CAROLINE HYDE AND ED LUDLOW. CAROLINE: LIVE FROM NEW YORK AND SAN FRANCISCO, THIS IS "BLOOMBERG TECHNOLOGY."
TARIFF ANXIETIES ARE NOT GOING AWAY. PRESIDENT TRUMP’S GLOBAL LEVIES GOING INTO EFFECT INCLUDING 104% TARIFFS ON CHINA. CHINA AND THE E.U. FIGHT BACK WITH COUNTERTARIFFS. WE CLING TO GAINS. WE ARE ONLY UP .1% ON THE NASDAQ AFTER WE MANAGED TO SELL
OFF YESTERDAY. IT FEELS AS THOUGH THE MAGNIFICENT SEVEN HAVE BEEN TRYING TO CLAW UP BUT NO LONGER. ED: I WANT TO GO TO A STORY THAT BROKE IN THE LAST 30 MINUTES. AMAZON HAS STARTED CANCELING ORDERS OF INVENTORY ON SPECIFIC PRODUCTS MADE IN CHINA. I AM TALKING CONSUMER ELECTRONICS, HOUSEHOLD GOODS. IT DIDN’T DO MUCH TO CHANGE THE
FORTUNE OF THE STOCK. IT’S HIGHER AS MANY NAMES ARE, BUT THAT IS AN INTERESTING REAL-TIME STORY ABOUT THE IMPACT OF TARIFFS IMPLEMENTED. ELSEWHERE THERE IS BUOYANCY IN SOME OF THE MAG7 NAMES FOR NOW, EMPHASIZE THE FOR NOW, BECAUSE YESTERDAY APPLE WAS HIGHER, CLOSED DOWN DOUBLE THAT, 5%.
THERE IS A FUNCTION ON THE BLOOMBERG TERMINAL, ETCR, OUR MAP, WE CARE ABOUT THE RELATIONSHIP BETWEEN U.S. AND CHINA. THERE IS A TRADE DEFICIT. THE U.S. HAS A TRADE DEFICIT WITH CHINA. LATER IN THE PROGRAM WHEN IT COMES TO TECH, IT IS SO IMPORTANT TO DISCUSS THAT NUMBER. $260 BILLION IN 2023. WE KNOW IT WENT UP IN 2024. WE ARE TALKING ABOUT U.S.
RELIANCE ON CHINESE COMPUTERS, CONSUMER ELECTRONICS, HAIR DRYERS, HEATED BLANKETS. THAT TIES INTO THE AMAZON STORY. CAROLINE: AM JOHN JUST -- AMAZON JUST TURNED NEGATIVE. CHINA, THE E.U. RETALIATING AGAINST U.S. TARIFFS. THIS THIS AS PRESIDENT TRUMP
AIMS TO BRING BACK MANUFACTURING IN AMERICA SETTING ALL HIS EYES ON APPLE. >> THE PRESIDENT IS LOOKING AT ALL OF THOSE. HE WANTS THEM TO COME BACK HOME. >> IPHONES, THE TECHNOLOGY CAN MOVE TO THE U.S.? >> ABSOLUTELY. HE BELIEVES WE HAVE THE LABOR,
THE WORK FORCE AND THE RESOURCES. APPLE HAS INVESTED $500 BILLION HERE IN THE UNITED STATES. SO IF APPLE DIDN’T THINK THE UNITED STATES COULD DO IT, THEY PROBABLY WOULDN’T HAVE PUT UP THAT BIG CHUNK OF CHANGE.
CAROLINE: AS WE WAIT MORE PRODUCTS, AMAZON CANCELING SOME ORDERS ON CHINESE MADE GOODS. AT THE MOMENT, THE RESPONSES ARE COMING FAST, E.U. AND CHINA. WHAT DOES THE WHITE HOUSE MAKE OF IT? >> THE WHITE HOUSE IS STICKING TO ITS GUNS HERE. PRESIDENT TRUMP, WHILE HE HAS INDICATED HE WANTS TO MAKE A DEAL WITH CHINA, WANTS CHINA TO COME TO HIM. IT DOESN’T LOOK LIKE CHINA IS WILLING TO HAVE THOSE CONVERSATIONS AS THEY HAVE RETALIATED WITH THIS TARIFF AGAINST U.S. IMPORTS IN EXCHANGE FOR THE
LEVIES THE U.S. IMPLEMENTED THIS MORNING. SO OBVIOUSLY AN ESCALATION IN THE TRADE WAR BETWEEN THE TWO LARGEST ECONOMIES AND IT HAS THE ABILITY TO CHOKE OFF THE VAST MAJORITY OF TRADE THAT HAPPENS BETWEEN THE U.S. AND CHINA. ALREADY WE ARE SEEING OBVIOUSLY A REPORT ON AMAZON CUTTING OFF ORDERS ON THINGS LIKE AIR CONDITIONING UNITS OR BEACH CHAIRS.
THAT IS CHANGE IN COMPANY BEHAVIOR IN TERMS OF WHERE THEY WANTS TO SOURCE THEIR INVENTORY FROM, BUT IT ALSO HAS THE POTENTIAL RAMIFICATION TO AFFECT WHETHER OR NOT AMERICANS CAN ACCESS SUPPLY OF THINGS THAT DON’T EASILY HAVE ALTERNATIVE SUPPLIERS TO CHINA AT THE MOMENT. ACCORDING TO DATA FROM THE U.S. TRADE COMMISSION, THINGS LIKE LAPTOP COMPUTERS, P.C. MONITORS, GAMING CONSOLES, ALL OF THAT HAS ABOUT A 70% OR MORE SHARE OF IMPORTS THAT COME FROM CHINA SPECIFICALLY. SO THAT IS WHERE YOU COULD START TO SEE SOME GAPS EMERGING AS THIS -- DEPENDING HOW LONG THIS CONTINUES. THE ADMINISTRATION ARGUES ALL OF THIS HAS AN AIM AND THAT AIM IS TO BRING BACK AMERICAN MANUFACTURING AS WE JUST HEARD FROM THE WHITE HOUSE PRESS SECRETARY, KAROLINE LEAVITT. WE HAVE HEARD FROM OTHERS IN
THE ADMINISTRATION AS WELL. IF YOU RECALL THIS PAST WEEKEND ON TELEVISION, THE COMMERCE SECRETARY TALKED ABOUT THE ARMY OF MILLIONS OF PEOPLE SCREWING IN TINY SCREWS IN PHONES. THAT’S THE THING THEY’RE BRINGING BACK TO AMERICA. ED: THAT AIM IS SO INTERESTING BECAUSE I LISTENED TO EVERYBODY ON BLOOMBERG TELEVISION, READ EVERY STORY, AND I THINK THE MARKET STILL THINKS WHAT IS THE AIM HERE? IS IT REVENUE GENERATION FOR OUR COUNTRY, BRINGING MANUFACTURING BACK? I DON’T USUALLY LIKE TO GO INTO THE POLITICS. I THINK PRESIDENT TRUMP HAS NOT YET SPOKEN TO PRESIDENT XI AT ANY POINT SINCE HE TOOK OFFICE.
AM I RIGHT? >> HE HAS SPOKEN TO PRESIDENT XI AND HE INVITED HIM TO HIS INAUGURATION, BUT THERE HASN’T BEEN A CONVERSATION SINCE THIS ESCALATION OF THE TRADE WAR, THE INITIAL TARIFFS THAT WENT INTO PLACE REGARDING FENTANYL WHICH WAS 10%, THEN 0 -- 20%, THEN 84%. THERE HAVE NOT BEEN DIRECT HIGH-LEVEL TALKS BETWEEN THE TWO LEADERS. I GUESS WE WILL SEE IF THE PHONE CALL IS SCHEDULED BECAUSE THE PRESIDENT AND OTHERS IN THE ADMINISTRATION AND WHITE HOUSE HAVE MAID CLEAR -- MADE CLEAR HE IS LOOKING TO MAKE A DEAL WITH CHINA. WE UNDERSTAND BASED OFF OF OUR REPORTING AS WELL AS WHAT THE WHITE HOUSE IS SAYING THAT THERE ARE 70 COUNTRIES THAT HAVE CALLED TO TRY TO BEGIN NEGOTIATIONS.
IT’S NOT CLEAR AT THIS TIME THAT CHINA IS ONE OF THEM. THE ADMINISTRATION IS ARGUING THAT CHINA FUNDAMENTALLY HAS BEEN MESSING WITH THE U.S. ON TRADE AND HAS BEEN ENGAGING IN UNFAIR TRADE PRACTICES FOR YEARS AND THAT IS WHAT THEY ARE TRYING TO REVERSE, WHICH IS ONE OF THE REASONS THEY USE TO JUSTIFY TARIFFS, THAT IT’S NOT JUST ABOUT BRINGING BACK AMERICAN MANUFACTURING. THEY THINK IT’S ABOUT LOWERING TRADE DEFICITS WITH THE U.S. IN ADDITION TO THE REVENUE RAISING ASPECT THEY ARGUE WOULD BE A BENEFIT.
THE THING IS, IF YOU HAVE TARIFFS OF THIS LEVEL, LIKE 104%, THAT IS LIKELY TO REDUCE IMPORT VOLUMES ACCORDING TO MOST ECONOMISTS YOU WOULD SPEAK WITH. THAT MEANS LESS IMPORTS THAT YOU ACTUALLY CAN TARIFF, WHICH COULD MEAN THAT YOU NOT BRINGING IN THE KIND OF REVENUE LEVELS YOU WOULD THINK THAT YOU WILL. BLOOMBERG ECONOMICS ESTIMATES IF TARIFFS ARE INTACT AS IT STANDS NOW, THEY COULD BRING IN $300 BILLION A YEAR BECAUSE OF THE REDUCTION IN IMPORTS. THAT’S HALF OF WHAT THE WHITE HOUSE HAS ARGUED IT COULD GENERATE. ED:
THANK YOU VERY MUCH. LET’S GET MORE ON THE GLOBAL TECH MARKET PERSPECTIVE AMID AN ACTIVE TRADE WAR. SEEMA SHAH, CHIEF GLOBAL STRATEGIST, JOINS US NOW. WHEN YOU THINK ABOUT THE MAG 7, ARE YOU PREPARING FOR THAT SCENARIO, THE ON SHORING OF JOBS IN THIS COUNTRY OR IS THIS MORE ABOUT PRICING IN, MODELING IN A FUNDAMENTAL CHANGE IN HOW THE WORLD DOES TRADE EFFECTIVELY? SEEMA: I THINK EVERYTHING IS ON THE TABLE AT THE MOMENT. ONE OF THE THINGS KAILEY WAS TALKING ABOUT, THE OTHER JOBS THAT GO INTO MAKING THE PARTS, ONE OF THE CLEAR IMPACTS IS THE U.S. HAS GOT A -- HAS GOT MUCH HIGHER WAGES THAN PART OF ASIA SO YOU WOULD BE LOOKING AT SIGNIFICANT INCREASES IN THE IMPACT ON THEIR MARGINS AND EARNINGS GROWTH POTENTIAL.
THERE ARE SO MANY OFFSETS OF THIS, IT MAKES IT QUITE DIFFICULT TO EVEN FATHOM THAT YOU COULD SEE THIS COMPLETE ALTERATION AND CHANGE IN THE WAY THAT I THINK THE WORLD IS GOING TO THINK ABOUT TRADE AND PRODUCTS. THIS IS ALL ENCOMPASSING. IT’S NOT JUST TECHNOLOGY. THIS IS ABOUT EVERY PRODUCT THAT YOU THINK ABOUT BECAUSE OF GLOBAL TRADE, EVERY PART WILL HAVE ELEMENTS OF DIFFERENT COUNTRIES ABOUT THEM AND SHIFTING IT BACK TO THE U.S. IS VERY INFLATIONARY. ED: I WANT TO SHOW THE EARNINGS CALENDAR AND THOSE NAMES THAT HAVE ASTERISKS ARE TENTATIVE. BUT THERE IS A SPLIT IN THE MARKET I SEE THIS MORNING.
MANY BELIEVE WE WON’T SEE A BOTTOM IN EQUITY MARKETS UNTIL WE HAVE EARNINGS CALLS AND A REVISION TO GUIDANCE THAT’S BEEN GIVEN OR COMPLETE REMOVAL OF GUIDANCE. OTHERS SAY THE EARNINGS AND GUIDANCE IS NOT IMPORTANT. ALL WE NEED IS A STRONG, POSITIVE PIECE OF POLITICAL NEWS. WHERE DO YOU STAND? SEEMA: I THINK WE NEED ONE OR THE OTHER. EITHER ONE WOULD BE IMPORTANT. PROBABLY THE MOWS IMPORTANT WOULD BE IF THE ADMINISTRATION WALKS BACK FROM TARIFFS VERY SIGNIFICANTLY. THEN YOU WOULD SEE THE MARKET SENTIMENT IMPROVING AND YOU WOULD SEE MARKETS RISE -- RALLY. PROBABLY NOT A SHARP RALLY.
BUT SARYNL RALLY. IN TERMS OF EARNINGS GUIDANCE, WE ARE WAITING TO SEE IF RECESSION IS IN THE CARDS WE NEED A SEE A MORE REALISTIC EARNINGS OUTLOOK FOR COMPANIES ACROSS ALL SECTORS INCLUDING TECHNOLOGY. IT’S ONLY ONCE YOU HAVE THAT REALISTIC FORECAST, THE GUIDANCE, TALKING THROUGH WHAT THE IMPACT OF TARIFFS IN THIS NEW GLOBAL ENVIRONMENT IS, ONLY THEN CAN YOU START TO THINK ABOUT WHERE THE FLOOR IS. ONCE YOU KNOW WHERE THE FLOOR IS, YOU CAN START THINKING FORWARD. CAROLINE:
WHY ARE PEOPLE BUYING IF WE ARE NOT SURE WHERE THE FLOOR IS? WHY IS APPLE IN THE GREEN, FOR EXAMPLE? SEEMA: ONE OF THE THINGS WE HAVE BEEN SEEING THAT’S BEEN REALLY INTERESTING, FROM A PORTFOLIO PERSPECTIVE, IT’S DIFFICULT TO BE TACTICAL WHEN THERE IS SUCH AN UNCERTAIN ENVIRONMENT SO YOU GO BACK TO YOUR STRATEGIC POSITIONING. FROM A STRATEGIC PERSPECTIVE, WE STILL LIKE BIG TECH IF YOU ARE LOOKING OVER A FIVE, 10 YEAR HORIZON. CERTAINLY THE OUTLOOK HAS DETERIORATED EVEN ON THE LONG TERM HORIZON, BUT IT’S STILL IMPORTANT FROM A GLOBAL OR U.S.
GROWTH PERSPECTIVE. THE OTHER PART OF THIS IS THAT TYPICALLY IN THIS KIND OF ENVIRONMENT WHEN THERE IS UNCERTAINTY, WHEN THERE ARE FEARS ABOUT WHAT IS GOING TO HAPPEN, YOU WANT COMPANIES WHICH HAVE BIG BALANCE SHEETS, POSITIVE CASH FLOW, THE LARGE NOTES AROUND THEM AND THE MAAING 7 HAS COME INTO PLAY, IN THE PAST COUPLE OF MONTHS WHICH MEANS AT LEAST THE BIG TECH COMPANIES ARE A LITTLE AHEAD OF THE GAME IN TERMS OF HAVING A SLIGHTLY MORE REALISTIC PICTURE ATTACHED TO THEM. CAROLINE: IT HAS TO BE SAID APPLE HAVING ITS WORST SELL-OFF SINCE THE YEAR 2000. MANY SAYING IT WAS OVERSOLD THIS MONTH BE THE POINT AT WHICH YOU PICK UP SOME OF THESE SHARES. SEEMA, WHO ARE THE INVESTOR BASE RIGHT NOW WHO ARE WILLING TO BUY INTO BIG TECH? YOU YOURSELF ARE IN LONDON.
ARE INTERNATIONAL BUYERS COMING IN? ARE WE SEEING IT FROM PEOPLE IN THE UNITED STATES? SEEMA: WE HAVE STARTED TO SEE PEOPLE DIP THEIR FEET IN. I THINK THAT’S WHAT YOU ARE SEEING, A DIP BY, BUT AS I SAID THE OTHER THING TO CONSIDER IS THAT ONCE YOU DO START TO SEE -- IF WE SEE POSITIVE HEADLINES COMING THROUGH, WHICH CAN BE SUSTAINED, THESE ARE THE COMPANIES WHICH HAVE THE LONG TERM EARNINGS POTENTIAL. I THINK PEOPLE HAVE GOT AN EYE ON THE IDEA THAT THERE COULD BE A WALK BACK AT ANY TIME. IT MAY NOT COME BUT IT COULD HAPPEN AT ANY MOMENT. PEOPLE STILL WANT TO HAVE EXPOSURE TO THESE COMPANIES THAT CAN RIDE OUT WHAT WOULD MOST LIKELY BE A CHANGING ECONOMIC ENVIRONMENT FOR THE COMING MONTHS. ED:
THERE IS THIS NOTE FROM BANK OF AMERICA OUT THIS MORNING THAT SAYS A U.S. BUILT IPHONE COULD COST 90% MORE THAN IT CURRENTLY DOES. BUT THAT IS A GOAL OF THIS ADMINISTRATION, RIGHT? BRINGING JOBS, MANUFACTURING JOBS AND TECH BACK TO THE UNITED STATES OR TO THE UNITED STATES FOR THE FIRST TIME. IS THERE ANY UPSIDE OR SORT OF
SILVER LINING OR BRIGHT OUTCOME THAT YOU SEE WITH THIS TARIFFS PROCESS? SEEMA: I AM NOT SURE IF -- LOOK, OVER A LONG TERM PERSPECTIVE, A FIVE-YEAR PERIOD, MAYBE THERE COULD BE SOME POSITIVE, YOU WOULD HAVE A U.S. ECONOMY THAT IS A BIT STRONGER. YOU HAVE LESS RELIANCE ON EXTERM PARTNERS, SO THAT WOULD BE THE POSITIVE.
BUT IT REALLY COMES DURING THE LONG SIDE. IT’S REALLY IN THE SHORT TERM YOU SEE THIS ADDITIONAL PAIN COMING THROUGH. I THINK IT’S CHALLENGING TO SEE SOME REALLY GOOD POSITIVE NEWS COMING THROUGH. THE ONE THING IS THOUGH THAT TO THAT POINT WHERE AN IPHONE COULD BE SIGNIFICANTLY MORE EXPENSIVE THAT INFLATION PRESSURE PUTS PRESSURE ON THE YIELDS CURVE.
WE HAVE SEEN THAT PLAY OUT. FROM OUR PERSPECTIVE, THAT MAY BE THE PRESSURE POINT FROM THE TRUMP ADMINISTRATION. THEY HAVE REPEATEDLY TALKED ABOUT THE FOCUS ON TREASURY YIELDS. SO MAYBE THIS IS WHAT NECESSARILY PUSHES THEM BACK FROM THE EDGE AND YOU COULD SEE SOME NEGOTIATIONS COMING THROUGH IN THE NEXT COUPLE OF DAYS. CAROLINE: MORE OF A BUY STREAK ON THE BOND MARKET.
SEEMA SHAH, THANKS SO MUCH FOR JOINING US. COMING UP, AS COMPANIES RACE TO ADJUST PLANS AMID THE TRADE TENSIONS, NEITHER THE U.S. OR CHINA APPEARS TO BE BACKING DOWN. WE WILL HAVE MORE ON THE IMPACT FOR THE TECH SECTOR. THIS IS "BLOOMBERG TECHNOLOGY." ♪ >> CHINA HAS PAID ALMOST $200 BILLION IN TARIFFS AND THEY SAY DONALD TRUMP HASN’T BEEN TOUGH ON CHINA. CAROLINE:
APPLE HAS LOST ABOUT $700 BILLION OF ITS MARKET CAP SINCE THE TARIFFS WERE IMPOSED. LET’S GET MORE ON WHAT THE 104% TARIFF ON CHINESE GOODS COULD MEAN FOR THE TECH WORLD. AND THE COUNTERTARIFF. REVA BHALLA GOUJON IS WITH US. IT’S REALLY INTERESTING TO UNDERSTAND HOW SUPPLY CHAINS WILL BE IMPACTED BY ALL OF THIS BECAUSE WE KNOW THAT IN MANY WAYS CHINA IS THE ASSEMBLY POINT FOR APPLE. SOME OF THE PRODUCTS IN THE PHONE ARE MADE IN KENTUCKY AND SHIPPED TO CHINA AND SHIPPED BACK TO US, BUT ULT ULTIMATELY ARE WE IN A GAME OF CHICKEN WHEN IT COMES TO U.S. AND CHINA? REVA: YEAH, AT 104% TARIFFS, I WOULD SAY SO. SO YEAH, THERE ARE LOADED
ASSUMPTIONS ON THE U.S. AND CHINESE SIDES OVER THIS TRADE WAR, EEMP SIDE BELIEVES THE OTHER IS IN THE WEAKER ECONOMIC POSITION THAT THE OTHER ONE WILL FOLD AND BEIJING AT THIS POINT IS BASICALLY SAYING BRING IT. THEY’RE COUNTING ON U.S. INVENTORIES TO GET SHAVED DOWN. PEOPLE CHECKING THEIR AMAZON ORDERS AND SEEING THEY’RE NOT COMING THROUGH, GOING TO WALMART, SEEING THEIR SHELVES EMPTY OUT. SO AT THAT POINT, THIS IS
OBVIOUSLY GOING TO FORCE A CONVERSATION, BUT TO WHAT END? THERE IS NOT MUCH FODDER FOR REAL NEGOTIATION HERE. YOU COULD HAVE SOME SORT OF A RESET, MAYBE GETTING BACK TO SAY 54% TARIFFS. BUT THAT’S NOT MUCH OF A WIN HERE AFTER THIS SCALE OF DISRUPTION. ALREADY SUPPLY CHAINS, AS YOU MENTIONED, ARE GOING TO BE GREATLY DISRUPTED. CAROLINE: WE HAVE HEARD TIME AND TIME AGAIN THAT THE U.S. THINKS CHINA WANTS TO MAKE A
DEAL. DO YOU THINK ULTIMATELY IT DOES? DO WE EVER GET TO A BETTER OUTCOME? THERE ARE COMPANIES CURRENTLY LOCKED NOT KNOWING WHAT TO DO IN THIS SCENARIO AS TO WHETHER THE TARIFFS ARE SHORT TERM OR LONG TERM. REVA: CHINA WOULD LOVE A REAL NEGOTIATION WITH THE U.S.
THAT SPANS INTO OTHER DOMAINS AS WELL, TO SAY, FOR EXAMPLE, OK, IF THE U.S. WANTS TO REDUCE ITS TRADE DEFICIT WITH CHINA, THEN FINE, LET’S TALK ABOUT LARGE SCALE PURCHASES. LET’S TALK ABOUT IMPORTING MORE IN SEMICONDUCTORS WHICH WOULD IN PATTER BLOW APART THE IKS PORT CONTROL -- EXPORT CONTROL REGIME.
YOU COULD SEE HOW BEIJING WOULD BE ANGLING FOR THAT. WOULD IT HAPPEN? LOW LIKELIHOOD. WE ARE TALKING ABOUT A CONFLICT SPIRAL IN THE TRADE DOMAIN RIGHT NOW.
THERE IS A WHOLE OTHER LAYER HERE WHEN IT COMES TO THE TECH CONTROLS TRAJECTORY, ESCALATION ON THAT FRONT, ALSO HOW CHINA IS GETTING MORE CREATIVE WITH ITS OWN RETALIATORY TOOL KIT WHICH WILL PUT MULTINATIONALS IN CHINA PARTICULARLY TECH COMPANIES IN A VERY DIFFICULT POSITION IN THE MONTHS AHEAD. ED: I WANT TO STAY ON THIS POINT BECAUSE THE TECHNOLOGY INDUSTRY, TARIFFS ARE ONE TOOL OR POLICY POINT, AND THE EXPORT OF TECHNOLOGY AND CONTROLS ON THOSE EXPORTS AS YOU POINT OUT WERE THE MOST SIGNIFICANT PRIOR TO THE LAST WEEK. DO YOU EXPECT BOTH TO INCREASE? IN OTHER WORDS, WILL WE SEE FURTHER SPECIFIC CONTROLS BY THE UNITED STATES ON CUTTING EDGE G.P.U.’S AND OTHER TECHNOLOGY? REVA: ATTENTION SPAN IS A QUESTION FOR THE CURRENT USE ADMINISTRATION. WE WILL HAVE TO SEE AS B.I.S. UNDER COMMERCE IS STARTING TO RAMP UP. IS IT GOING TO HAVE THE LATITUDE TO PATCH UP EXPORT CONTROLS, FOR EXAMPLE, THERE HAVE BEEN PENDING CONTROLS TO EXPAND CHIP CONTROLS, TO COVER FOR EXAMPLE NVIDIA CHIPS IN THE WAKE OF DEEPSEEK’S BIG BREAKTHROUGH. THERE IS A BIGGER CONVERSATION
AROUND HOW DO YOU EVOLVE ECONOMIC SECURITY STANDARDS THAT EFFECTIVELY EXCLUDE CHINA FROM A.I. INFRASTRUCTURE BUILDOUTS GLOBALLY. SO THERE’S A LOT MORE THAT’S COMING ON THE TECH FRONT AND MEANWHILE CHINA IS LOOKING AT A NUMBER OF RETALIATORY TOOLS WHERE IT’S SINGLING OUT U.S. BIG TECH COMPANIES AS WELL. ED: HOW DO YOU INTERPRET CHINA’S RESPONSES, CHINA’S ACTIONS IN THIS? REVA: SO A FEW THINGS. SO WHEN YOU LOOK BEYOND THE TIT FOR TAT ON THE TARIFFS, CHINA IS DOING SOME INTERESTING THINGS WHERE IT’S IMPLEMENTING PROVISIONS FOR THE ANTI-FOREIGN SANCTIONS LAW.
IT’S TALKING ABOUT COUNTERMEASURES THAT INCLUDE SUSPENDED I.P. RIGHTS FOR U.S. COMPANIES IN CHINA. THAT’S EXPLOSIVE. IF CHINA GOES DOWN THAT PATH, THAT’S A SLIPPERY SLOPE. THAT’S SOMETHING THAT WILL SPREAD ALARM NOT JUST TO U.S. COMPANIES BUT JAPANESE,
EUROPEAN, EVERYONE, ONCE YOU START TO BREAK APART THOSE NORMS. MOREOVER, CHINA HAS ITS ANTI-MONOPOLY ARM THAT HAS VETO POWER OVER A NUMBER OF STRATEGIC M AND A AROUND THE WORLD. THERE ARE DEALS THAT ARE SUPPOSED TO BE STRUCK AS A RESULT OF THESE TRADE WARS. WE STILL DON’T KNOW FOR EXAMPLE WHAT WILL HAPPEN WITH INTEL AND TSMC AS INTEL HAS BEEN STRUGGLING. DO YOU REALLY THINK THE U.S. IS GOING TO RECOGNIZE THE CHINESE VETO OVER A MAJOR MERGER THAT IS BASED ON NATIONAL SECURITY ARGUMENTS? SO WE ARE ALREADY VEERING TOWARD THIS CONFLICT OF LAW CONUNDRUM ON THAT FRONT AS WELL AS ON THE I.P. FRONT, WHICH AGAIN IS A VERY SLIPPERY SLOPE FOR TECH COMPANIES. ED: REVA BHALLA GOUJON, REALLY
GREAT TO HAVE YOU ON THE SHOW. THANK YOU FOR JOINING US. COMING UP HOW TRUMP’S TRADE WAR TACTICS PLAY AGAINST TRUMP’S A.I. AMBITIONS. WHAT ARE YOU LOOKING AT? >> A BROADER MARKET CHECK, VOLATILITY HAS BEEN SPIKING.
THE VIX CURRENTLY UP 35 POINTS. SLIGHTLY LOWER ON THE DAY BUT BOY, IS IT HIGHER OVER THE COURSE OF THE LONG TERM. THIS IS "BLOOMBERG TECHNOLOGY." ED: PRESIDENT TRUMP’S A.I. PROMISES STARTED STRONG WITH THE ANNOUNCEMENT OF AN INFRASTRUCTURE PROJECT BACK IN JANUARY, BUT HIS NEW LIBERATION DAY AGENDA LOOKS SET TO UNDERMINE THOSE EARLIER A.I. AMBITIONS. DAVE LEE WRITING THE TRUMP TARIFF AGENDA RISKS A CASCADING EFFECT THAT WILL DRAG DOWN THE AMERICA A.I. EFFORT.
THE NEW ECONOMIC ORDER COULD FORESEE AMERICAN A.I. INDUSTRY TO COMPETE ON CHINA’S TERMS. DAVE LEE IS WITH US NOW. WHEN YOU SAY COMPETE ON CHINA TERMS, ULTIMATELY IT’S ABOUT FORCING THEM NOT TO HAVE ACCESS TO THE MOST SOPHISTICATED G.P.U.’S AND DO MORE WITH LESS. >> ABSOLUTELY. EXACTLY LIKE DEEPSEEK. YOU REMEMBER WHEN THERE WAS A MARKET SELL-OFF WHEN DEEPSEEK MADE ITS ARRIVAL BECAUSE EVERYONE THOUGHT WOW, CHINA KNOWS HOW TO DO THIS MORE CHEAPLY AND SO ON.
BUT THE AMERICAN RESPONSE AND THE RESPONSE WE GOT FROM THE LIKES OF MICROSOFT WAS DON’T WORRY BECAUSE OUR DIFFERENTIATORS CAN DO THIS ON A BIGGER SCALE WITH MORE COMPUTING POWER. WE CAN SERVE MORE PEOPLE. THE POWER OF A.I. IF ALL OF THAT GETS MORE EXPENSIVE WHICH THESE TARIFFS SEEM SET TO DO, THEN ALL OF A SUDDEN THAT ADVANTAGE DOESN’T GO AWAY COMPLETELY, BUT IT BECOMES HARDER TO DEPLOY AND COULD TAKE LONGER AS WELL. I HAVE SPOKEN TO A NUMBER OF PEOPLE WHO SAID MAYBE IF YOU ARE A SMALL START-UP, YOU MIGHT BE THINKING MAYBE WE COULD TRY TO BECOME MORE OF A DEEPSEEK THAN AN OPEN A.I. FOR EXAMPLE. ED: YOUR CORE POINT IS THAT THE ABILITY OF A META OR AMAZON OR A MICROSOFT TO INVEST WAS BUILT ON ITS CORE BUSINESSES, AND THAT IS WHERE THE UNCERTAINTY IMPACT COMES, I THINK. DAVE: ABSOLUTELY.
LAST EARNINGS SEASON, ALL OF THESE COMPANIES CAME OUT AND SAID -- SHARED THEIR PLANS FOR THE YEAR AND THEY WERE HUGE. MORE THAN $350 BILLION WILL BE SPENT ON DATA IS CENTERS AND GETTING MORE ENERGY AND SO FORTH. THAT MONEY, EVEN IF THEY KEEP IT AT THOSE LEVELS WHICH IS IN QUESTION, IS NOT GOING TO GO AS FAR BECAUSE BUILDING THESE DATA CENTERS GOT CONSIDERABLY MORE EXPENSIVE EVEN THOUGH THE CORE COMPONENT RIGHT NOW ISN’T SUBJECT TO A TARIFF ALTHOUGH SOME SPECTACULAR LATE DISTRICT SPECULATING IT MIGHT BE IN THE NOT TOO DISTANT FUTURE. SO YES, AND ALL OF THAT
SPENDING WAS CONCOCTED AND AGREED -- BACKED BY INVESTORS ON THE BASIS THAT COMPANIES LIKE APPLE HAVE THE IPHONE AND IT WAS A GROWING BUSINESS WHILE COMPANIES LIKE META HAVE THIS GREAT ADVERTISING BUSINESS THAT PRINTS MONEY. THAT MAY NOT BE THE CASE ANYMORE. ED: DAVE LEE OF BLOOMBERG OPINION, IT’S A MUST READ TODAY, LIBERATION DAY. THANK YOU VERY MUCH. COMING UP ON THE SHOW, TRUMP’S TARIFFS ARE FORCING TECH COMPANIES TO RETHINK THEIR GLOBAL SUPPLY CHAINS. WE WILL GO ON A DEEP DIVE WITH SOMEBODY WHO KNOWS SUPPLY CHAINS INSIDE AND OUT. YES, THAT INCLUDES SHIPPING AND
CONTAINERS. THAT’S COMING UP NEXT. STAY WITH US. THIS IS "BLOOMBERG TECHNOLOGY." ♪ >> THIS IS UNCHARTED TERRITORY WE ARE TALKING WITH HERE. >> I THINK THE MOST SIGNIFICANT AREA THAT IS AFFECTED IS THE ASIAN NATIONS. >> OBVIOUSLY APPLE IS MORE OF A FOCUS BECAUSE OF THE TARIFFS AND WHAT THEY MANUFACTURE IN CHINA.
THE REST OF THE MAG-7 ARE IN A BETTER SPACE. >> FROM A VALUATION PERSPECTIVE, I THINK THE GOOD NEWS IS WE DON’T HAVE A VALUATION PROBLEM IN TECH. >> SOMETHING LIKE 55% OF PROFITS COMING FROM OVERSEAS. SO WHILE THEY HAVE A LOT OF SECULAR A.I. DRIVEN GROAT, THEY ALSO TEND TO HAVE INTERNATIONAL DRIVEN GROWTH. WE DON’T REALLY SEE MAG-7 COMING BACK TO THE FORE IF THESE TARIFFS STICK.
>> BIG TECH HAS MASSIVE FREE CASH FLOW AND IF WE DISCOUNT SOME OF THAT, THE TARIFF ISSUES AT HAND RIGHT NOW. ED: THAT’S WHAT SOME OF BLOOMBERG’S RECENT GUESTS HAVE HAD TO SAY ABOUT THE IMPACT OF TARIFFS ON THE TECH SECTOR. MARKETS ARE WAY OFF HIGHS. I GO TO THE NASDAQ 100 BECAUSE OF THE CONCENTRATION OF TECH. U.S.
LISTED A.D.R.’S OF MANY CHINESE TECHNOLOGY COMPANIES HAD BEEN HIGHER, 2.5%. NOW LOWER IN THE SESSION. WE ARE TRYING TO DIE JESS CHINA’S RETALIATORY MEASURES.
APPLE CONTINUES TO PUSH HIGHER. CAROLINE MADE A REALLY IMPORTANT POINT EARLIER. PRIOR TO THIS SESSION FOUR STRAIGHT DAYS OF DECLINES WHERE APPLE EXPERIENCED ITS BIGGEST DROP SINCE THE YEAR 2000. THAT’S IMPORTANT.
WE SHOULD KEEP SAYING THAT. CAROLINE: WE SHOULD. WHAT IS INTERESTING, ED, ANOTHER DATA POINT THAT YOU YOU AND I SAW TODAY, THE P.C. SHIPMENT DATA ACTUALLY GREW. FASTEST QUARTERLY PACE IN FOUR YEARS. THAT’S AS COMPANIES STOP AHEAD OF TARIFFS. PORTABLE COMPUTERS ROSE MORE THAN 9%.
FOR MORE ON HOW THESE TARIFFS ARE IMPACTING TECH SUPPLY CHAINS, DAVID WARRICK, EXECUTIVE VICE PRESIDENT AT OVERHAUL, A SUPPLY CHAIN VISIBILITY AND RISK MANAGEMENT COMPANY. HOW LONG HAVE COMPANIES BOUGHT INTO TERMS OF ENTRY BECAUSE THEY SEEM TO SEE THE RISK WHILE INVESTORS DIDN’T. DAVID: I THINK EVERYBODY HAS KNOWN THIS IS COMING AT SOME LEVEL, SO WHAT THEY’VE BEEN TRYING DO IS TRYING TO PREPARE AS BEST THEY CAN. AND EVEN THIS WEEK IN THE LAST
SEVEN OR 10 DAYS, WHAT WE HAVE SEEN IS AN INCREASE IN FARES FOR COMING OUT OF CHINA. PATRIOTISM STILL TRYING TO MOVE AS MUCH PRODUCT AS THEY CAN BEFORE THEY WERE IMPACTED BY TARIFFS. SO I THINK COMPANIES HAVE TRIED TO BE SMART. THEY’VE TRIED TO POSITION THEMSELVES AS BEST THEY CAN, BUT I AM NOT SURE THAT ANYBODY ACTUALLY SAW THE SHEER EXTENT OF THESE TARIFFS AND WHAT IT WOULD MEAN. CAROLINE: YOU ARE CURRENTLY STILL ADVISING THE MICROSOFTS, THE DYSONS. I GO TO THE DATA THAT SHOWS THAT CHINA IS BASICALLY 90% OF ALL CONSOLES, COMING FROM CHINA TO THE UNITED STATES. AND I AM INTERESTED AS TO WHAT
EXECUTIVES DO AT THIS MOMENT, ARE THEY THINKING LONGER TERM WE SHIFT OUR SUPPLY CHAIN FURTHER AWAY FROM CHINA OR DO THEY RIDE THIS OUT IN THE SHORT TERM? DAVID: I THINK THAT IT’S A VERY CHALLENGING SITUATION TO BE IN. I THINK THAT THE ADVICE I AM GIVING A LOT OF COMPANIES RIGHT NOW IS BASICALLY TO HURRY UP AND WAIT. MAKING A STRATEGIC DECISION TODAY COULD FALL APART VERY QUICKLY WITHIN THE NEXT WEEK. AS WE HAVE KIND OF SEEN OVER THE LAST MONTH, CAROLINE, WE SAW THE MEXICO, CANADA DISPUTE. WE SAW THINGS HAPPEN QUICKLY. IF YOU MADE A DECISION TO MOVE EVERYTHING OVERNIGHT, YOU COULD HAVE BEEN CAUGHT ON THE WRONG SIDE OF THAT. SO RIGHT NOW I THINK THAT IT’S
NOT JUST CONSOLES. IT’S NOT JUST P.C.’S. IT’S ACROSS THE BOARD AND I THINK COMPANIES HAVE TO BE REALLY, REALLY THOUGHTFUL IN TERMS OF THEIR IMMEDIATE NEXT STEPS VERSUS THEIR LONGER TERM STRATEGIES. IF THE TARIFFS STICK AND IF WE HAVE TO RIDE OUT THIS ENTIRE STORM, IT’S A DIFFERENT SET OF DISTINCTIONS THAT YOU WOULD MAKE IF YOU KNEW THIS WOULD HAPPEN FOR MAYBE THREE MONTHS AND THEN START TO TAPER OFF. SO IT’S A VERY CHALLENGING TIME FOR SUPPLY CHAINS AND TRYING TO FIGURE OUT SHORT TERM VER SUES MEDIUM TERM VERSUS LONG TERM. ED: DAVID, EXPLAIN TO OUR AUDIENCE HOW AN IPHONE WOULD BE BUILT OR ASSEMBLED IN THE UNITED STATES AND WHAT THE PRICE IMPACT WOULD BE. BASED ON YOUR EXPERIENCE. DAVID: THAT’S A CHALLENGING QUESTION, ED.
I AM NOT SURE THAT I UNDERSTAND THE FULL EXTENT OF THE APPLE SUPPLY CHAIN, BUT YOU HAVE TO UNDERSTAND THAT THIS IS NOT ABOUT JUST MOVING A MANUFACTURING PLANT. THIS IS AN ECOSYSTEM. THE TIER TWO SUPPLIERS, TIER THREE SUPPLIERS HAVE ALL BUILT UP OVER TIME AROUND THOSE SPECIFIC FACTORIES IN CHINA OR IN VIETNAM OR IN INDIA. IT TAKES TIME TO DEVELOP THAT ECOSYSTEM. SO WHAT WOULD IT TAKE? YOU HAVE TO BUILD A FACTORY, THEN YOU HAVE TO DEVELOP THAT ECOSYSTEM TO BE ABLE TO SUPPLY THAT FACTORY. YOU HAVE TO SOURCE YOUR RAW MATERIALS. YOU HAVE TO SOURCE YOUR
SEMIFINISHED GOODS AND BRING ALL OF THOSE IN. SO THIS ISN’T JUST FLICKING A SWITCH AND YOU BUILD A NEW FACTORY AND EVERYTHING STARTS UP AGAIN. IT TAKES TIME TO BUILD THAT ECOSYSTEM AND TO MAKE SURE THAT YOUR SUPPLY CHAIN REMAINS INTACT FROM A QUALITY PERSPECTIVE AND EVERYTHING ELSE. ED: THAT WAS A GOOD ANSWER, DAVID, TO BE FAIR.
I THINK THAT SUMS IT UP WELL. TESLA IN ITS LOCAL SUPPLY CHAIN IN SHANGHAI HAS A SIMILAR SITUATION. WHAT HAPPENS IN FOUR YEARS TIME IF THERE IS A COMPLETELY DIFFERENT ADMINISTRATION IN THE WHITE HOUSE AND ALL OF THE TARIFFS GET UNDONE AND THE EXECUTIVES OF THE COMPANIES YOU ADVISE DECIDED TO DO SOMETHING EXTREME IN ADJUSTING THEIR SUPPLY CHAIN HERE AND NOW? DAVID: I THINK IN THE FIRST CASE, I WILL BE A LITTLE BIT BORED, IF IT ALL REVERSES, I AM NOT SURE WHAT I WILL BE DOING EVERY DAY. BUT I THINK THAT THIS SHORT TERM VERSUS LONG TERM, I THINK THAT IS WHERE WE ARE CAUGHT IN A TRAP RIGHT NOW WHERE IT’S VERY DIFFICULT TO MAKE THAT LONG-TERM DECISION BECAUSE TO YOUR POINT, A NEW ADMINISTRATION COULD DECIDE TO GO IN A VERY DIFFERENT DIRECTION FROM A TRADE PERSPECTIVE. SO SUPPLY CHAINS HAVE TO BE CAUTIOUS. WE WERE TAUGHT SOME LESSONS
OVER THE LAST FIVE YEARS THROUGH COVID. WE REALIZED THAT OUR SUPPLY CHAINS WERE FRAGILE AND WE HAD TO FIND A BETTER WAY TO BUILD RESILIENCE INTO THE SUPPLY CHAINS SO WE DIVERSIFIED A LITTLE BY. WE STARTED TO MOVE MANUFACTURING TO OTHER COUNTRIES. WE STARTED TO DO SENSIBLE THINGS. DID WE DO THAT TO THE LEVEL THAT WE SHOULD HAVE DONE IT? MAYBE NOT. MAYBE THERE WAS MORE ROOM TO ACTUALLY MOVE THINGS, BUT I THINK SUPPLY CHAINS NOW, WE ARE PROBLEM SOLVERS. THIS IS ANOTHER MAJOR PROBLEM,
CALL IT A GRAY SWAN OR BLACK SWAN. IT’S ANOTHER MAJOR PROBLEM THAT WE HAVE TO DEAL WITH. IT WILL FORCE A CHANGE IN TERMS OF HOW SUPPLY CHAINS ARE ENGINEERED OVER THE COMING YEARS. CAROLINE: ULTIMATELY MIGHT HAVE TRIED TO FRONT RUN BY MOVING OUT OF CHINA AS MANY HAVE, TAKING APPLE INTO INDIA AND VIETNAM.
ULTIMATELY THEY’VE BEEN TARIFFED TOO. OF COURSE, TO A LESSER EXTENT WHEN IT COMES TO INDIA. BUT LONGER TERM THEN, ARE WE SEEING COMPANIES WILLING TO HIT THE MARGIN? WHEN YOU’VE GOT A RECORD GROSS MARGIN OF 49% FOR APPLE RECENTLY, IN THE SHORT TERM THEY VAL OWE IT, DAVID. IS THAT WHAT THEY DO, TAKE THE
HIT UNTIL THEY GET LONG TERM CLARITY? DAVID: I THINK IN THE SHORT TERM, ANY SUPPLY CHAIN WILL LOOK AT WHAT CAN BE DONE. SO IF YOU’VE ALREADY DIVERSIFIED TO SOME LEVEL AND YOU’VE MOVED PRODUCTION TO MORE FRIENDLIER TARIFF COUNTRIES, YOU WOULD LOOK NOW TO SAY ISRAELI, CAN I MOVE FROM THE CHINA TO THE PHILIPPINES TO REDUCE SOME OF THE TARIFF BURDEN. HOWEVER, THE LONGER TERM IS GOING TO BE OK, WHAT DOES A TARIFF FRIENDLY COUNTRY ACTUALLY LOOK LIKE? HOW HAVE WE MOVED THE DYNAMICS TOO FAR AND WE ARE ALL HOPING THAT THIS WILL ACTUALLY ROLL OVER. WE ARE ALL HOPING THAT THE
PRESIDENT WILL DO AS HE SAYS AND HE IS OPEN TO NEGOTIATION AND THE COUNTRIES ARE COMING TO THE TABLE, WE HAVE HEARD SOUTH KOREA AND JAPAN ARE COMING TO THE TABLE. WE ARE HOPING COMMON SENSE WILL PREVAIL AND THERE WILL BE A MORE BALANCED TRADING AGREEMENTS PUT IN PLACE IN THE COMING MONTHS WHICH WILL ALLEVIATE SOME OF THE CURRENT PAIN. BUT IT STILL DOESN’T TAKE AWAY FROM THE LONGER TERM STRATEGY, IT NEEDS TO BE FIGURED OUT.
THAT’S WHAT SUPPLY CHAINS WILL BE WORKING HARD TO DO. CAROLINE: DAVID, MANY OF THE EXECUTIVES YOU ARE TALKING TO, ARE THEY TAKING IT SERIOUSLY THAT THEY NEED TO BUILD OR ASSEMBLE IN THE UNITED STATES MORE FULLY? DAVID: A LOT OF EXECUTIVES ARE CERTAINLY HAVING THE DISCUSSION. THEY’RE LOOKING AT THE IMPLICATIONS OF THE CAPITAL COST AND ALSO THE TIMELINES INVOLVED. SETTING AUTOPSY FACTORY IN THE UNITED STATES TO MANUFACTURE IN THE UPS, YOU DON’T DO THAT OVERNIGHT AND AS I SAID EARLY YES -- EARLIER, IT’S THE ECOSYSTEM THAT’S IMPORTANT. HOW LONG WILL IT TAKE TO BRING
ALL THOSE THINGS TOGETHER? I ANTICIPATED A QUESTION EARLIER THIS WEEK IN A DIFFERENT INTERVIEW WHERE SOMEBODY SAID HEY, FOR AMERICAN MADE PRODUCTS HOW ARE THOSE GOING TO BE IMPACTED BY THE NEW CHINA TARIFFS? MY QUESTION TO THAT QUESTION WAS WHAT DO YOU MEAN BY AMERICAN MADE PRODUCTS? YOU ARE TALKING ABOUT CHOCOLATE IN THIS INSTANCE. WHERE DOES THE COCA COME FROM? IT IN ITSELF IS SUBJECT IT A -- TO A TARIFF TO MANUFACTURE IN THE U.S. SUPPLY CHAINS ARE COMPLICATED, VERY COMPLEX ELEMENTS. SO FIGURING THESE PIECES OUT IS EVERYTHING THAT EXECUTIVES ARE DOING RIGHT NOW TO UNDERSTAND THE IMPACT BUT ALSO TO UNDERSTAND WHAT CAN BE DONE NEXT. ED: HAIR DRYERS, TOASTERS ALL COME FROM CHINA AS WELL. DAVID WARRICK, REALLY GREAT
CONVERSATION. THANK YOU FOR JOINING US. CAROLINE: COMING UP, WE WILL GET THE PRIVATE MARKET PERSPECTIVE. BEN LERER IS WITH US. HIPPO CLOSED A MAMMOTH $200 MILLION ROUND FOR A NEW FUND. AMID ALL THIS UNCERTAINTY. HOW DID THIS DO IT? THIS IS "BLOOMBERG TECHNOLOGY." SOMETIMES CONTROVERSIAL WORLD OF ENGINEERING TO COMBAT CLIMATE CHANGE.
THIS IS BLOOMBERG. CAROLINE: THE V.C. FIRM HAS CLOSED A $200 MILLION FIRM, ITS NINTH EARLY STAGE ONE. THEY FACE TARIFF ANXIETY, BUT YET THE CONVICTION IS THERE FROM L.P.’S. LET’S TALK ABOUT WHY. MANAGING PARTNER BEN LERER
JOINS US NOW. BEN, HOW DID YOU GET THIS OVER THE LINE IN THIS CURRENT ENVIRONMENT? BEN: YEAH, I THINK LOOK, ONE OF THE THINGS WE ARE PROUDEST OF IS THAT WE OVER A LONG PIRD OF TIME HAVE BEEN -- PERIOD OF TIME HAVE BEEN REALLY CONSISTENT AND PRETTY DISCIPLINED. WE DO ONE THING, WE DO ONE THING WELL, WHICH IS TRUE EARLY STAGE INVESTING. SO WHILE MARKETS RISE AND FALL AND LOTS OF THINGS OUTSIDE OF OUR CONTROL HAPPEN IN THE BACKGROUND, WE DON’T TEND TO GET SUCKED INTO HYPE CYCLES AND IT’S SORT OF BEEN REFLECTED IN OUR RETURNS. SO WE ARE FORTUNATE THAT L.P.’S CONTINUE TO SUPPORT US AND WE ARE HAPPY TO HAVE THIS BEHIND US IN THIS MARKET. ED: WE HAVE DISCUSSED FOR MANY
YEARS HOW EARLY STAGE COMPANIES AND THEIR INVESTORS ARE MORE LIKE INSULATED FROM PUBLIC MARKETS AND EVENTS UNTIL WHAT HAPPENED WITH SILICON VALLEY BANK AND IT BECAME ABOUT OPERATIONAL CASH FLOW. BUT YOU ARE STILL DOING A NEW FUND, THIS REPORTS, A VERY BIG FUND. TALK TO ME ABOUT THAT ENVIRONMENT MORE SPECIFICALLY AT THE EARLY STAGE. BEN: YEAH, AND ACTUALLY I THINK THE CRISIS WAS FOR CERTAIN FUNDS A WAKE-UP CALL, WHERE THAT WAS SORT OF COMING OUT OF A HYPE CYCLE IN 2021 WHERE MONEY WAS FLOWING VERY FREELY, COMPANIES WERE RAISING LOTS OF MONEY AND CHASING GROWTH AT ALL COSTS. I THINK EVEN FOR US AT L.H., WE TOOK A MOMENT TO BE VERY
INTROSPECTIVE AND SAY ARE WE ON A COMPANY BY COMPANY BY COMPANY BASIS MAKING SURE THAT FOLKS ARE BEING REALLY RESPONSIBLE AND NOT FALLING PREY TO LOTS OF LATE STAGE MONEY CHASING HOT COMPANIES AND DRIVING NOT GRADE BEHAVIORS AND RIGHT NOW AS WE ENTER ANOTHER MOMENT OF CRISIS, I THINK SOME OF THE LERNTION FROM THAT -- LEARNINGS FROM THAT LAST SIGNIFICANT BLIP HAVE SET OUR PORTFOLIO UP IN A WAY WHERE WE FEEL LIKE WE HAVE ARMS AROUND EVERY COMPANY, WHERE COMPANIES ARE BURNING LESS AND LESS, ARE BEING -- ARE TAKING MORE RESPONSIBILITY FOR BUILDING SUSTAINABLE LONG TERM BUSINESSES AND FALLING A LITTLE BIT LESS VICTIM TO GETTING ON THE LATE STAGE C. -- V.C. HAMPSTER WHEEL. ED: WHAT KIND OF COMPANIES, WHERE ARE THE COMPANIES AND HOW MUCH OF AN UNLOCK HAS A.I. BEEN? HERE IS MY INBOX ALL THE TIME, IT’S DISCUSSED THAT YOU DON’T NEED TO LEARN HOW TO CODE ANYMORE.
PREVIOUSLY IF YOU PITCHED IT AND YOU DIDN’T CODE OR HAVE ANYONE ON YOUR TEAM THAT WAS A COMPUTER SCIENTIST, THAT WOULD BE DEAD FOR YOU, THAT AVENUE. I THINK THAT’S CHANGED, RIGHT? BEN: YEAH. OUR GOAL HAS ALWAYS BEEN SORT OF TO FIND GREAT TALENT, TO EARLY STAGE INVESTORS THAT’S THE KEY TO EVERY INVESTMENT WE MAKE. A.I. WILL BE AN UNLOCK IN EVERY INDUSTRY AND FRANKLY IF YOU ARE NOT LEANING IN HEAVILY TO A.I. AS AN EXISTING BUSINESS OR AS A START-UP, YOU ARE MISSING A HUGE OPPORTUNITY TO CREATE EFFICIENCY AND MOVE FASTER. THE TOOLS THAT EXIST NOW IN TERMS OF HELPING COMPANIES CODE AND BUILD PRODUCT FASTER ARE UNBELIEVABLE. THERE ARE COMPANIES IN OUR
PORTFOLIO THAT ARE WRITING LESS THAN 5% OF CODE BY HAND AT THIS POINT AND ARE REALLY JUST PROMPTING AND MANAGING THIRD PARTY A.I. SOFTWARE WHO ARE HELPING THEM WITH MUCH SMALLER TEAMS CREATE UNBELIEVABLE LEVERAGE IN THEIR BUSINESS. IT’S REALLY EXCITING BUT IT’S TERRIFYING BECAUSE IT’S MOVING SO QUICKLY AND WE ARE KIDDING OURSELVES IF WE KNOW HOW THIS ALL SORT OF -- WHERE THIS LANDS AND WHERE THE VALUE FALLS AND WHAT IS OWNED BY THE BIG LARGE LANGUAGE MODELS AND WHAT WILL BE OBSERVED BY -- OWNED BY APPLICATION LAYER COMPANIES. WE TAKE SOLACE IN THE IDEA THAT WE WILL BE BACK INCREDIBLE PEOPLE AND THEY’RE GOING TO NAF NAVIGATE THROUGH THIS CHALLENGING ENVIRONMENT. CAROLINE: BIG PERSONAL FAN, I CAN IMAGINE THAT’S THE SORT OF COMPANY THAT’S HAVING TO THINK ABOUT ITS SUPPLY CHAINS, BEN. MANY ASSOCIATE YOU WITH
CONSUMER FOCUS TECH BUT YOU ARE EXPOSED TO ENTERPRISE. YOU HAVE FINGERS IN THE FIN TECH SPACE. BUT WHEN YOU ARE LOOKING AT THE CONSUMER OPPORTUNITY, BEN, HOW UNNERVING IS THAT? BEN: YEAH, SO I THINK WE HAVE BEEN TALKING TO OUR SORT OF SCALED CONSUMER COMPANIES ABOUT TARIFFS AND WHAT THE IMPLICATIONS OF THIS COULD, WOULD, SHOULD BE OVER THE LAST SEVERAL MONTHS, THE BEST AND MOST MATURE BUSINESSES HAVE BEEN PLANNING FOR THIS AND HAVE SOME MITIGATIONS IN PLACE. BUT THE REALITY IS THAT THERE ARE COMPANIES THAT THIS IS GOING TO PUNCH DIRECTLY IN THE FACE AND IT’S GOING TO BE UNPOLICE AN AND -- UNPLEASANT AND I THINK PEOPLE ARE ALSO -- IT’S SO UNCLEAR THE FLOOR MOVES BY THE HOUR RIGHT NOW. AND SO I THINK PEOPLE DON’T WANT TO OVERROTATE AND OVERRESPOND AND DECIDE THAT THEY’RE ABSOLUTELY PULLING OUT OF CHINA ON A PERMANENT BASIS, BUT IT’S GOING TO BE -- IT’S SOMETHING COMPANIES WILL MANAGE THROUGH. PEOPLE HAD TO MANAGE THROUGH
COVID AND WE SAW THE INVESTORS HANDLE THAT NOT EASILY, BUT SURVIVE AND THRIVE ON THE BACK SIDE OF IT. THE SAME WILL HAPPEN HERE. I REALLY BELIEVE THE BEST FOUNDERS FIND A WAY. CAROLINE: YOU ARE INVESTING IN NEW YORK. IS THAT STILL A THESIS? BEN: WE HUGE BELIEVERS IN NEW YORK. I GREW UP IN NEW YORK. WE STARTED THE FUND IN NEW YORK
ON A HIGH LEVEL BET THAT NEW YORK HAS ALWAYS HAD UNBELIEVABLE TALENT. ABOUT 20 YEARS AGO THAT TALENT MATRICULATED TO WALL STREET AND OVER TIME THAT TALENT WANTS TO WORK IN TECH. THAT’S THE BIGGEST GROWTH AREA THAT NEW YORK HAS SEEN OVER THE LAST DECADE IN TERMS OF JOB GROWTH AND COMPANY GROWTH. WE THINK IT WILL CONTINUE AND WE AGAIN SEE THAT SORT OF OVERLAP OF VERY EARLY STAGE IN NEW YORK AS A COMPETITIVE EDGE FOR US IN A SPACE WHERE WE HAVE A RIGHT TO WIN SO WE WILL KEEP DOING THAT. ED:
BEN LETTER -- LERER, GREAT TO HAVE YOU ON THE BROKE. SOME NEWS. CAROLINE: GOOGLE HAD PLANS TO HELP DELIVERS BUILD A.I. ASSISTANCE FOR A VARIETY OF TASKS. AT ITS ANNUAL CONFERENCE YESTERDAY THE COMPANY SAID IT
WOULD RELEASE A DEVELOPMENT KIT WHICH COULD INCREASE DEPENDENCE ON ITS CLOUD SERVICES. PLUS THE E.U., IT’S JUST PRESENTED A PLAN TO BOOST ITS A.I. INDUSTRY AND HELP IT COMPETE MORE AGGRESSIVELY WITH THE U.S.
AND CHINA. ONE OF THE WAYS EUROPE PLANS TO BOLSTER DEVELOPMENTS IS A COMMITMENT TO BUILD A NETWORK OF A.I. FACTORIES AND CREATE SPECIALIZED LABS TO IMPROVE THE ACCESS OF START-UPS TO HIGH QUALITY TRAINING DATA.
THE ENERGY AND COMMERCE COMMITTEE JUST APPROVED A BIPARTISAN BILL KNOWN AS TAKE IT DOWN ACT, WHICH AIMS TO CURB THE SPREAD OF UNAUTHORIZED DEEP FAKE PORNOGRAPHY. GETTING THE BILL TO THE PRESIDENT’S DESK WOULD MARK ONE OF THE MOST SIGNIFICANT ACTIONS BY CONGRESS TO RESPOND TO RISKS IN HARMS POSED BY A.I. ED: ANOTHER STORY WE ARE WATCHING, A META WHISTLEBLOWER SET TO TESTIFY BEFORE CONGRESS CLAIMING THAT THE SOCIAL MEDIA GIANT THREATENED U.S. NATIONAL SECURITY AS IT COZIED UP WITH CHINA.
THE FORMER EXECUTIVE ALLEGES THAT THE COMPANY BRIEFED MEMBERS OF THE C.C.P. ON EMERGING TECH WHICH INCLUDES A.I. META A DENYING THOSE ALLEGATIONS. WHAT DO WE NEED TO WATCH FOR? THIS WILL HAPPEN SOON.
>> THIS IS COMING LATER TODAY IN WASHINGTON, D.C. WE ARE SEEING THE AUTHOR OF THE BEST-SELLING MEMOIR CARELESS PEOPLE BE ASKED TO SPEAK BEFORE LAWMAKERS ABOUT HER -- WHAT SHE WITNESSED THE DEALINGS BETWEEN META AND CHINA BACK THROUGH HER TENURE IN 2017. THE INTERESTING THING ABOUT HER PREPARED REMARKS, WHICH WE HAVE GOTTEN OUR HANDS ON AT BLOOMBERG, IS THAT SHE’S GOING TO MAKE THE CASE THAT META’S DISCUSSIONS WITH CHINA HAVE ACTUALLY HELPED IT IN ITS A.I. AMBITIONS IN THIS GLOBAL RACE, ARMS RACE THAT SHE’S DESCRIBING AROUND A.I. CAROLINE: WHAT IS INTERESTING IS META’S RESPONSE HAS BEEN CLEAR. FOR EXAMPLE, THEY’VE SAID THAT
MARK ZUCKERBERG HAS BEEN -- DETAILS WERE WIDELY REPORTED BEGINNING OVER A DECADE AGO THAT THE FACT THAT -- WE DO NOT OPERATE OUR SERVICES IN CHINA TODAY. WHAT WILL META’S RESPONSE BE PARTICULARLY IN THIS GLOBAL ENVIRONMENT OF U.S. VERSUS CHINA? >> META IS HOLDING FIRM THAT IT DOES NOT OFFER SERVICES LIKE FACEBOOK, INSTAGRAM IN CHINA. WILLIAMS WILL BE CONTENDING THAT IT CONTINUES TO MAKE A GREAT DEAL OF ITS REVENUE OUT OF CHINA, ABOUT $18 BILLION LAST YEAR IN ADVERTISING REF REVENUE CAME FROM CHINA. SHE IS MAKING THE CASE THAT THIS IS A PRESENT DISCUSSION. WHILE META CALLS THIS OLD NEWS, WILLIAMS IS MAKING THIS ABOUT THE HEARING NOW AND ABOUT THIS ARMS RACE AND ABOUT THE MONEY THAT META CONTINUES TO MAKE.
CAROLINE: WE WILL WATCH FOR THAT HEARING LATER TODAY. THANKS FOR BRINGING IT TO US. LET’S STICK WITH SOCIAL MEDIA. CAN’T LOOK AWAY. IT IS A NEW FILM BY BLOOMBERG ORIGINALS WHICH FOLLOWED A TEAM OF LAWYERS BATTLING TECH GIANTS ON BEHALF OF FAMILIES WHOSE CHILDREN SUFFERED GREAT HARM LINKED TO SOCIAL MEDIA. THE FILM IS BASED ON THE REPORTING BY OUR BUREAU’S VERY OWN OLIVIA CARLISLE. THE REACTION IS TO THE LEGAL BATTLE THAT IS TRYING TO HOLD BIG TECH ACCOUNTABLE.
IS IT MANAGING TO IN THE COURTS RIGHT NOW? >> WE DON’T KNOW YET. THERE ARE POSITIVE SIGNS THAT SOME OF THESE CASES ARE BREAKING THROUGH AND THAT WE MIGHT SEE AT LEAST ONE LAWSUIT -- THE ACT, THE BLANKET FOR BIBBING -- BIG TECH PREVENTING THEM FROM BEING HELD LIABLE FOR USER HARMS LIKE WHAT ARE PORTRAYED IN THE FILM. AND AS IT WURNTLY -- CURRENTLY STANDS, IT LOOKS LIKE WE ARE GOING TO SEE A CASE GO TO TRIAL. IT’S ALL EYES ON THE JUSTICE
SYSTEM RIGHT NOW. ED: CAN YOU EXPLAIN WHAT THE PROCESS OF MAKING THE FILM WAS LIKE? IT’S A DIFFERENT MEDIUM THAN THE REPORTING THAT WENT INTO IT FROM YOU. >> IT’S BEEN A 2 1/2 YEAR JOURNEY TO GET HERE.
I FIRST APPROACHED BLOOMBERG’S DEPUTY HEAD OF MEDIA ASKING IF IT MIGHT BE POSSIBLE TO SHADOW THIS LAW FIRM AND WE REALLY DOVE IN WITHOUT KNOWING WHERE THESE CASES WERE GOING TO GO IF -- OR IF ANY OF THEM WOULD REACH TRIAL. IT WAS A LEAP OF FAITH BY BLOOMBERG AND THE PRODUCTION TEAM PARTICULARLY DIRECTORS O’NEILL AND PELTZ, DOCUMENTARY IS A COMPLETELY DIFFERENT MEDIUM TO PRINT WHICH IS WHAT I AM USED TO. IT’S LIKE A JIGSAW PUZZLE TRYING TO PULL TOGETHER EVERYTHING AND YOU NEED TO HAVE VISUAL SEGUES BETWEEN TALKING HEADS ON CAMERA AND IT’S SOMETHING THAT IT’S BEEN A HUGE LEARNING PROCESS FOR ME TRYING TO UNDERSTAND WHAT IT TAKES TO BRING A DOCUMENTARY TO THE SCREENS. I ALSO THINK THAT THERE NEEDS 0 BE -- TO BE A BROADER MESSAGE IN THE FILM AND FOR US WITH CAN’T LOOK AWAY, THAT IS REALLY THE FIGHT FOR CORPORATE ACCOUNTABILITY. CAN’T LOOK AWAY IS ABOUT
EXACTLY WHAT THAT TITLE IMPLIES, THAT THERE IS A GENERAL REATION -- GENERATION OF KIDS WHO ARE GLUED TO THEIR SCREENS AND CAN’T LOOK AWAY. THE LAWYERS AND FAMILIES FIGHTING TO HOLD THOSE COMPANIES ACCOUNTABLE FOR THIS SITUATION. CAROLINE: PROTECTIONS CONTINUE TO COME, THOUGH, META HAS BROUGHT THOME INSTAGRAM, ALSO TO FACEBOOK, SOME OTHER PRODUCTS. I AM INTERESTED AS TO THE VISUALS THAT MARK ZUCKERBERG HAD TO BE CONFRONTED WITH, PICTURES OF THE CHILDREN, TRAGIC ENDS TO CONSUMPTION OF SOCIAL MEDIA. THEY’RE GETTING IT DO YOU THINK OR NOT? >> I THINK THE WHOLE CONVERSATION AROUND SOCIAL MEDIA HAS SHIFTED IN RECENT YEARS.
WE HAVE SEEN IT MOVE FROM A QUESTION OF CAN THESE PLATFORMS HARM MENTAL HEALTH, ARE THEY GOOD FOR OURS KIDS? AND IT’S MOVED TOWARDS THIS IS A FULL-BLOWN PUBLIC HEALTH CRISIS FOR OUR CHILDREN. THAT’S WHAT I AM HEARING FROM THE EXPERTS BECAUSE WE ARE SEEING BOOKS LIKE ANXIOUS GENERATION, CARELESS PEOPLE WHICH WE WERE TALKING ABOUT ON THIS SHOW. A NETFLIX SERIES REALLY PUSHING THE CULTURAL CONVERSATION TOWARDS IS THIS A GOOD SITUATION FOR OUR CHILDREN? IS THIS WHAT WE WANTS THEM TO BE DOING? 95% OF KIDS USE SOCIAL MEDIA, MORE THAN 1/3 ARE SHOWING SIGNS OF ADDICTION. THIS FILM WAS CHRONICLING THE EXTREME HARMS THAT SOME OF THOSE KIDS HAVE EXPERIENCED IN THE DIGITAL WORLD. CAROLINE:
IT’S BEEN SUCH A LONG JOURNEY OF REPORTING AND NOW TO THE BIG THEATERS AS WELL. OLIVIA, WE THANK YOU SO MUCH. THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY." LET’S CHECK IN ON THE MARKETS FOR A MOMENT.
WE ARE CURRENTLY SEEING A WHIPSAWING ON THE DAY. MAGNIFICENT SEVEN STAYING HIGHER, 1.3%. WHO KNOWS HOW WE WILL CLOSE TODAY. THE NASDAQ REBOUNDING.
2025-04-12 19:49
