AI Regulation Talk and Tesla AGM

From Marhart. We're Innovation, Money and Power Collie in Silicon Vallet NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.

Ed Ludlow here in San Francisco. Caroline Hyde off today. This is Bloomberg Technology. Massive show coming out. Full coverage on artificial intelligence. We speak to someone who testified before lawmakers just twenty four hours ago on the risks of the technology, as well as the CEO of character AI

But first it's going to check on these markets.

There's a lot of attention from Wall Street on what's happening in DC and the debt ceiling, a smaller group trying to accelerate negotiations. There's fighting talk from the President and Chuck Schumer as well.

How that looks in markets?

Now's that one hundred up half a percentage point outperformance in semiconductors. You look at names, I can video AMD a number of names in that basket up in the high single digits, some of it AI related, I am sure. In terms of the bomb market, US Tenure, Yeald three point five six percent a little higher, and Bitcoin interesting. We're back now below twenty seven thousand US dollars per token.

He will remain as CEO.

He's going to really focus now a lot more on Tesla, having of course been distracted by Twitter in recent weeks and months. Let's stick with a Tesla story. Yesterday, CEO Elon Musk held that company and your shareholder meeting, and while taking questions from investors, he excited the crowd basically by saying this.

And although there's there's obviously a lot of people that follow like to say the Tesla count and the you know my account whatever on Twitter, to some degree, it is preaching to the choir, and the choir is already convinced. So I think what you're saying does does have some merits, and you know what, I believe in taking taking suggestions. So we'll try a little advertising and see how it goes.

Let's get into Tesla and his ad shift with Tasha Kini Ark invest director of Investment Analysis. That's choir as convinced Tasha, does advertising convince others that aren't in the choir?

Yeah, I mean, I think it's certainly the point that everyone is harping on here. You know, I think generally it's not a bad idea to at least try advertising, right I mean from our research, we know that on both a sticker price basis now and a total cost of ownership basis, evise are better cars. Right, They're cheaper, they're more performant. So you know, if you're not buying an electric vehicle, the question is why. Maybe you know that information just hasn't reached you yet. Maybe an ad will.

I want to get into a five year forecast. But let's react to the other announcements, which is JB. Strubble being added to the board. And also you know the comments from Elon Musk about his focus on Tesla remaining as CEO, particularly to get the company through its next focus on artificial intelligence. What did you make of that, Tasha, Yeah, you know, I think JV.

Strubble is a great addition to the board, right you know, right now he's working with his own company on battery cycling. We know that's crucial to scale the battery industry as a whole. They're seeing great efficiency, I think over ninety percent and recycling. You know, we've always thought that it's important for Elon to stay on as CEO as they reach full autonomy again because we think that this is

Investors or shareholders rejected a proposal for Tesla to publish a key person risk report, and Tessa's argument was, well, if we put all of our talent in the shop window, our competitors will try and take them. But do you still have a key man risk concern around Elon Musk. I guess, you know, a new CEO at Twitter goes some way to allaying those concerns.

Yeah, you know, I think there's a lot of focus on this question. What I what I'd broadly say is I'd be a lot more concerned if he said he was stepping away from Tesla. Right again, I think he's crucial to cross that autonomy finish line. You know, autonomous driving lowers the cost per mile of ride hill significantly invites a lot of people that are not currently in the red hill market into it. You know, it's going to be a multi trillion dollar industry over the next

There was a demonstration of progress, apparent progress in Optimus that the humanoid.

Bolts.

When you saw that, did it give you any feeling that they are making progress in the field of AI in that use case at least?

Yes?

I think Optimist is really interesting. So it's definitely out of our five year forecasting window. You know, our our price target for Teslas that our expected value is roughly two thousand dollars per share in twenty twenty seven. That actually doesn't include Optimists because I think that you know, by the time it's a meaningful contributor. Again, it could be further into the future. But I think the important thing to look at here is you know why Tesla,

So your twenty twenty seven coal is two thousand dollars per share, which I'll give you an opportunity to explain. But the question is, did anything in that presentation or in the interview with CNBC afterwards move the needle for you guys change the course of where you see this company going.

Yeah, I think again, since we're so focused on the long term horizon, that five year view, you know, I would stick to that two thousand dollars per share estimate that we put out, And you know, I think again, what I'm more looking forward to is everyone else realizing the opportunity and autonomous driving, because I actually think that Tesla does not get enough questions about this opportunity, given

Yeah, it's interesting because ahead of you coming on, a number of people tweeted at me saying, actually they wanted to hear a little bit more about the plan for autonomous driving or at least the robotaxi vision of the future are Thanks to Tasha Kini Promark invest for that reaction, to Tesla's AGM before a Senate Judiciary subcommittee on Tuesday. Open AI CEO Sam Outman praised AI's potential, but warned that the emerging technology is powerful enough to change society

What was the net result?

I thought the hearing was actually fantastic. It far exceeded my own expectations that I think probably most others. It was really bipartisan, and I think we all agreed there. Almost everybody except the IBM executive all agreed that we need to have some kind of national agency governing AI, and probably want some global agency doing that. Sam Altman was supportive of that. That's an idea I've been pushing

You can't just release something to one hundred million people.

So there's lots to discuss, but I thought it was a very positive atmosphere, very bipartisan, and people recognized how serious the problems were.

And also I think there was a lot of.

Sense from the senators that they feel like they didn't do the right thing yes with Section two thirty in the Internet, and that they wanted to do better this time in there here a lot faster. You know, it took them like fourteen years after social media before they really did anything, and you know, it's only six months after shat GPT made it big that they're trying to yes handle it. So I saw a lot of seriousness on the part of the senators.

Gary.

I invited our audience to put forward questions. A lot of people interested on you coming on the program, We'll give you a second to take on some water. There are many that tweeted at me saying that what you were doing was scare mongering. Is that a fair accusation that they've led at you.

I don't think so.

I mean, it's true that I'm trying to raise alarms about things that I think are genuinely risky. But I think scare mongering is if you don't actually think that there's a risk.

And you're just trying to manipulate people. And I think the real risk.

I've put all my own effort, I'm not getting paid for this into trying to help us address those risks because I think they're real. Sam thought they were real too, you know. Sam agreed with me. Yes, there were risks to our elections and possibly much graver risks in the long term if we don't figure out how to control our AI systems.

One of the proposals that Sam put forward was to establish, at least here in the United States, an agency to license or have some sort of license seeing system for the development of AI. There are many that believe that would basically centralize activity control power among the biggest tech companies.

What's your response to that, I mean, just to clarify.

Even before this meeting, I wrote our ed and Economist, and I gave a TED talk on April eighteenth about having an international agency to regulate AI, and.

Sam was supportive of that.

He emphasized licensing, and he emphasized excuse me, sorry about the cough. I've been doing so many interviews. He emphasized licensing for large scale models, not necessarily for small models. I think we all agree that we don't want to cut off research. We don't want to cut off small companies from having a role. But the larger the model, the larger the impact, the more we might need licensing.

One of the questions from our audience is for you to explain what is the difference between fooling a human with artificial intelligence and fooling a system with artificial intelligence.

I'm not sure what you mean by fooling a system with artificial intelligence, but I think.

What I mean is that if you're a consumer and you're confronted by information from a generative a tool and it's false, you have fooled. But you can also use llms and foundation models to automate all kinds of processes from SaaS through to internal workflow, whatever it will be. And I think the root of that question is what is the greater risk about human interaction with AI or broadly automation that comes from those tools.

That's a good question, I guess. You know, there are different risks of different timescales. The thing that I'm most currently worried about is the risk to democracy, and the risk to democracy actually comes both from kind of accidental mistakes from these systems. We know they can fabulate, or some people call it hallucinate. They do that automatically without human intervention. They're just not a very reliable technology, and then bad actors can deliberately use them to make enormous

Gary, why is the large language model approach not the right approach to achieve AGI in your opinion?

Well, I just saw other words on your screen safer and more relied, more aligned. Excuse me, These systems aren't that safe. They're not that sophisticated. They don't have a model of the world. They don't understand what's going on, and so, for example, they make stuff up all the time. They up a sexual harassment charge. They said Elon Musk was dead when he's alive. I mean, all kinds of craziness.

They're just not.

Systematic, trustworthy bits of AI. You know, when we look back twenty years ago, I mean twenty years from now, it'll be like looking back at cell phones from twenty years ago. It's like they had a phone that big. We're going to say they used AI that was that unreliable?

Like, what were they.

Thinking, Gary, what do you want to happen next? You know, you actually quite praising or complementary of the hearing itself it being bipartisan. But if there is a concrete step for law makers or regulators to take, what does it look like to your mind?

I think the next step is to actually figure out what regulation would look like. I think we probably need a cabinet level agency and I think we should start drafting plans for how that would work. And there's lots of complications in terms of how it would work with existing agencies, how it would work international. I think we should start, you know, taking the consensus that we've got and try to represent what that might look as actual legislation.

And finally, Gary, you talked about the need for a global regulator or a global agency. Do you recognize a sort of multi speed approach what Europe is doing, what China is doing when it comes to the regulation and development of AI technology.

So I think we have an opportunity here to do something rational rather than just sort of arbitrary. In Balkani so it's not actually in the interest of the AI companies if we have like one hundred and ninety three or one hundred and ninety five rivers. You know, many different places where you have to train your own language model. So as you probably well know, it's very expensive to train these models. It's very costly in terms of climate impact.

And so I think the.

Companies themselves would like some kind of alignment here, some kind of systematic.

Way of doing business.

And then you know, there's all this talk about global tension and stuff like that, and some of it is of course real, but in terms of AI, like, no country wants their citizens to be completely overwhelmed by misinformation, nobody wants to be completely overwhelmed by cybercrime, and nobody wants, you know, robots to take over the world, which is not an immediate concern, but in the long term we do have to make sure we get that right. So I think even if you know some countries are going

M YU Professor Emeritis Gary Marcus, also the host, of course, of the podcast Humans Versus Machines, were very grateful for your time.

Thank you. Out of Washington, d C.

Now sticking with AI, Goldman Sachs says artificial intelligence offers the biggest potential long term support for US profit margins. AI can boost net margins by nearly four hundred basis points over a decade, but the Goldman team notes that predicting AI's impact is tricky due to the large number of unknown factors surrounding it, such as as we just

This is Bloomberg.

Welcome back to Bloomberg Technology, imed Love in San Francisco. It's got a quick check in on the markets as you want to pay pretty close attention to bitcoin. We're down now below twenty seven thousand US dollars per token, off six tens of a percent in a session.

Remember we're trading twenty four seven.

When it comes to bitcoin, there is some technology news out there in terms of engagement between platforms.

No real news driver.

There isn't really a close correlation between the trading we see in bitcoin and other risk assets, particularly as it relates to the debt ceiling.

Although I would say.

We've kind of traded in this range from twenty six to twenty eight thousand US dollars per token over the last couple of weeks or so.

In terms of the.

Specific equity moves, there is newsflow that is driving particular names. We're thinking of course about Amazon dot Com. They're out with a new range of eco device and we'll give you those details in just a moment. But when we consider AI, a lot of commentary right now from the companies themselves about how they're taking the R and D side of what they've done in the field of afterivisial intelligence and putting it into products. Alphabet continuing to see momentum.

We're actually now.

Flat on the stock, but it has seen a lot of gains in recent sessions based on the announcements that were made.

At Google io I teased it.

Let's talk a little bit about Amazon introducing an updated slate of e co devices and pledging to bring chat GPT style AI to Alexa powered gadgets. Amazon Senior vice president of Devices and Services Dave Limp said the new more conversational capabilities will roll out incrementally with a few things to solve along the way. Now it's not just Alexa, and it's not Alexa, but it does offer personalized AI assistance.

Noah, welcome to the program.

We wanted to have you on Bloomberg Technology for a little while. It's interesting to see the engagement with character RAI, and I start by asking you this. You have a history and a story in the development of AI. But character AI is a pretty simple tool. Why did you start it?

Well, I mean, I've been involved in inventing a lot of the technology behind large language models. But like, this is a technology that has like a billion use cases, and you know it's something where you will no longer need a developer to invent like a billion new applications. Users can just talk to the thing and come up with new value and so, like the most important thing is get it to the users, like right right now.

Okay, so I've been using character AI in recent weeks. You have the choice, right, you can use a pre created app Baitar, which we'll show an example of in just a second, or you can create your own. But it's interesting. You offer an avatar in the likeness of Elon Musk and you can interact with it. You can ask questions. We're showing that on the screen right now. He starts by saying, you're wasting my time. I literally rule the world. You ask if you could go back

Well, it's not our job to tell you what to use it for. Like our job is to put out something general and have users figure it out. And what we're seeing is a lot of fun, a lot of entertainment, and the huge amount of emotional support. We see testimonials of people saying like I have no friends, I was depressed to save my life, like all kinds of wonderful stuff that we just had never imagined and and it's happening.

And I should point out again that is a generative AI avatar is not the real Elon Musk, But therein lies the point of the platform. Does this show the limitations of where we are with large language models? You know, respectfully, the character AI is a platform is a simple interaction for the user. Right is that where large language models are?

Right?

Now?

Yeah, I mean this is what it's good for now, So let's let people use it for now, Like we have on every page it says. Everything the characters say is made up, so users understand that this is fiction, but it's still bringing a huge amount of value from what is really the very very beginnings of this technology. This is like iteration, like zero point zero point one, you know, relative to to you know to what's coming next. And we're just going to keep making this thing better.

So how do you monetize this platform?

Now, Well, we are we are starting with you know, with the freemium model, but you know what we you know, we're convinced that the real value is to consumers and end users, and so we will continue to as things get better, you know, monetized to users.

You you were at Google Brain and I know you've talked about this idea of the twenty percenters, in other words, people who were kicking around Menlo Park at the time and working on AI in their spare time in the working day, right, And I wondered when you saw Google at Google Io make all of these product announcements and put their work in AI into the real world, what your reaction.

Was, Oh, that's one, It's wonderful. Google's an incredible company. Google has been bringing trillions of dollars of value to the world, you know, directly to consumers for you know, for decades, and very excited to see that continue.

What did you make of yesterday's here of Sam Outman, Gary Marcus and the conversations that we.

Had, Well, I mean, I mean, like we don't even know what the best use cases are. It's it's the actual users, like the individual like every individual person on earth, who can actually unlock the value in this stuff. So I am kind of dubious about the ability of the federal government to you know, to regulate and to tell people what the thing is good for, because you know, they just don't have the capacity.

All right, No, I'm She's a founder and CEO of Character AI, at one time a member of Google Brain.

Thank you so much for your time. Thank you, ed Now.

In other news that we're following, Elizabeth Holmes lost her final request to remain free on bail while she appeals her fraud conviction. The ruling means the Pharaenos founder will soon have to report to prison to begin her more than eleven year sentence after being convicted of defrauding investors last November former farahno's president Ramesh Sunny Balwani's similar request was also denied, and he reported to prison last month

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Let's head out to Sault Eye Connections. The Global Finance, Tech and Public Policy Forum happen over in New York right now Bloomberg. Shnali Bassak there with our next guest, M thirty one Capital founding partner Patrick Jong, just off a panel way discussed globalization of bench capital and tech entrepreneurship.

Shnali, thank you Ed, and thank you Patrick for joining us because I understand that this is your first trip back to New York since COVID.

What has that been.

Like and what has the reopening been like in China?

Well, it's been a long time.

I used to before COVID, I travel as much as like one hundred and ninety seventy six days a year globally, but COVID and kind of hold everybody's back and in China right now, I think on the ground, there are a lot of activities going on. I think the consumer is very eager to you know, embrace the world, embrace new life.

And so there have been.

Kind of doing all kinds of interesting activities. And so let's just see, you know, what's going to happen and in the second half of the year and for the economy. But so far, I think everybody is so eager to go back.

You know, it's interesting when you think about globalization, the panel that you were just on, there's a lot of questions about how quickly the world may be deglobalizing in the wake of China, in the wake of geopolitical tensions, in the wake of COVID. What are you seeing in terms of technology companies in particular, is it more competition or are you seeing just little flights of cooperation here?

You know, I think everybody to be frank uh. You know, a lot of my friends had talked to being the investor entrepreneurs, they're all worried. And it's actually the same here with American investors and entrepreneurs as well between the two countries. But I have to say this, I think

Another interesting aspect of this is kind of the competition to develop technologies faster, harder, stronger than the other. And I'm wondering how you see that playing out in the world of AI. A lot of American investors here are talking about how AI will push the market so much faster. Is there anything China is doing when it comes to artificial intelligence that the US is not particularly doing.

First of all, I think if you talk to the AI community, I mean, there's certainly a community in the US, there's a community in China, there's a community in Europe. And this guy's they work in the virtual world. They actually talk to each other quite a lot. And I wouldn't say it's a competition. If it's a competition, it's a competition amount different technologies, or a competition among different entrepreneurs,

Out of it.

By the way, when we think about internet, how many of us remember who actually invented the internet? How many of us, you know, kind of remembered who invented refrigerator. But it is the Amazon, the world is Coca Cola. The world benefited from this great invention. So the bottom line is, I think a great entrepreneurs when they have this kind of new technology wave, they're going to leverage it to create something very exciting for consumer or businesses.

Patrick, thank you for your time. I'm here on Bloomberg Technology. There is a debate about US domicile vcs putting money into Chinese technology companies. What are you seeing in terms of the LP appetite US institutional money and LPs wanting to invest in China technology companies.

I think for right now, I feel like everybody kind of put it on hold because of the duo political concerns. You know, as I said, listen, I mean this is the first trip I did to America since COVID. I think many of the LPs in America, many of the company are CEOs in America, haven't traveled to China. And they used to travel to China like once a quarter,

Prior to COVID.

So there's a lack of interactions, lack of communication.

So people kind of tend.

To think everything in a very abstract way when you actually don't meet, don't talk.

When you were at Wellington, you held some of the top China tech names as an institutional investor. How attractive right now are the USA drs for some of these China tech names.

You know, there's been a.

Lot of back and forth on the listing delisting, but they are still giants of technology globally.

Yes, you know, I think they are still working very hard. And by the way, and the China or the companies for the last twenty years, they have accumulated a lot of nohas. They have a world class engineering force working there. And you know, I think the world, to be honest, is a or sad because we do politics, people don't talk to each other.

But I feel these.

Companies that are doing real work, and they're ones who come up with real and exciting products, especially writing on this the next wave of AI. And again I think on the application side, I think the Chinese companies potentially can do really really well.

For a couple of months, there were fears there from US investors investing in Chinese check giants because of crackdowns regulatory crackdowns. How much is that a concern for you as a local.

Investor, So I think, you know, we're venture capital investors, so we have to think everything a little bit longer term, and we look at the technology, how the company is sort of organized. We compare them to the best of companies in the world, into the companies in Silicon Valley. We actually see some of the companies they're really really competitive, and so it's investors job to help them to bridged the gap and helped them actually even grow globally.

Patrick, thank you so much for your tank. Ed back to you.

Yep, that was thirty one Capital founding partner Patrick Johng and of course INVOTIONALI BASSEG infrastructure software company diner trace out with earnings, beating expectations and offering an upbeat forecast which came in above analyst expectations for the full year. Dina Tray CEO Rick McConnell with us now that full year guidance coming in strong, Rick, how much of that was to do with euphoria around AI?

Well, first, thanks so much for having us again, I appreciate it.

Actually, none of it.

We see generative AI as a fascinating and very compelling technology, but we didn't factor any of that into our guide for half way twenty four.

It's all side.

That's a quite candid and fresh response rate, because what we've heard for weeks is the AI is everything that said. You know, it seems like there is actually some potential upside. Just what are you doing to integrate generative AI tools to boost your infrastructure offering as it is well.

We do think that generative AI is highly synergistic with the observability space, the fifty billion dollars observability and application security space in which we dine a Trace participate in lead.

And the way that.

Generative AI is going to foster itself in this environment is it is going to generate massive gains in productivity. And that productivity isn't just from writing text, it's also from writing source code. And more code means more productivity, means more applications, more workloads, more cloud and stantiations. As you get through all of that, you need more observability capabilities, which is precisely what we do to make sure that that environment works perfectly.

And that's what Dina trace is all about.

So huge synergy and generate.

Of AI with the capabilities from Dynatris.

You know, the kind of enterprise cloud area is really interesting. Barkley's had a note out and response to your numbers saying that it hints at improving macro conditions. Are you hearing that from your customers that things are getting better out there?

We didn't say that in our comments today. In fact, our guidance assumes no change in the macro environment through FA twenty four for US, which just began on April first, so we are not factoring that into our guidance. Again, any macro upside would be an opportunity potentially for accelerated growth in our performance.

Turning off way twenty four.

You know you've talked about what the potential generative AI is. How are you hiring to ensure that you can harness that potential?

Well, we continue to bring new engineer design globally to take advantage of inordinate increase is an opportunity in our market. As we look at the hyperscalers aws as your GCP one hundred and seventy five billion dollars of annualized revenue they just reported in their latest quarters. All of these cloud and santiations really benefit from observability. So the observability attach raate to overall cloud deployments should be substantial and

As we look to f y twenty four, quickly, geographically, where is the most activity for your business right now?

Where is the strength globally?

It's interesting, Ed, as you and I talked about last quarter we had we had an answer that we were seeing more track in the America as last order, more traction.

In Europe the quarter before that.

We really saw a very balanced geographic distribution with really strong growth in each of our geos in year every year arr last quarter. So we were really pleased across the board with the results.

All Right, Rick McConnell, Dinah Trace CEO, good to catch up. Another quarter in the bag. Thank you for your time, Thanks to you, Ed, Thank you. That does it for this edition of Bloomberg Technology. Don't forget to check out our podcast. We are only three days into a monster week, so so much to consider. Wherever you get your podcasts, Apple, Spotify, iHeart.

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