Bloomberg Audio Studios, podcasts, radio news 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.
Live from New York. This is Bloomberg Technology. Coming up. Google heads back to court to take on the Department of Justice over a search monopoly fix.
Plus in an era of tariffs.
Netflix stands out why Wall Streets is the stock as recession proof, and TSMC warns there will be challenges limiting China from its AI chips. Details this hour, but first we check in on the markets, which once again are under pressure. The Naza bears the brunt when NASAK one hundred off by more than two point three let's call it two point four percent on the day. We are worried about the macro, about the future of j. Powell at the Fed, and we see the impact on the Magnificent seven.
Not though on crypto.
We see bitcoin bounce that as gold gets once again that desire to get into a haven trade, so too. There's a shorter end of the treasuries, but Bitcoin up three point seven percent, the high sets we've seen since the beginning of March eighty eight thousand, Move on and have a look at some individual stocks, because Tesla, on the downside, what off by more than six percent, one of the key contributors in terms of points. Apple's falling
in video is falling, but Tesla too. Will dig into why we're concerned kind of all important earnings this week come Tuesday. Remember we've got a whole raft of earnings, but we've already got a little bit of sentiment. Check on what seems to be resilient in the face of macro pressure. Netflix up two point eight percent, the best performer on the Nasdaq one hundred from a points perspective. But let's get to Ryanvstelica, who can join us now
on the weight that mag seven is feeling today. Seems to be a macro one, seems to be one of the fed. There are some standouts when it comes to earnings.
Hey, good morning, thanks for having me.
Yeah, there's still a lot of uncertainty out there, and the new news surrounding you know, is Powell potentially at risk? That is just adding to the level of uncertainty out there. There's so much polity uncertainty in this broader sense that maybe the US isn't the sort of safe haven economy that it has been viewed as really for decades. So that is a massive shift out there and causing a lot of uncertainty.
Netflix is, from an equity perspective, deemed a haven.
We are going to hear from so many.
CEOs this week, whether it's well some that have to face the court but also have to fase earnings. I mean, we know that we're going to be hearing from the CEO of Google in that capacity.
It's to capacity that being alphabet too.
But also you've got intell, You've got IBM, you've got Texas instruments.
There's a lot that we can take a gauge of. Ryan.
Yeah, absolutely so Netflix is maybe a little bit of an anomaly compared to those other names you mentioned, not quite as subject to the tear of risk as some of the chip makers and hardware companies out there, which have really been driving a lot of the selling this year. It is also seen as a recession resistant company, given the idea that you know, if people are pulling back, by which I mean consumers, they're not likely to cut their Netflix subscription in the way that they might be
pulling back on other kinds of discretionary spending. So it seems like it has both offensive and defensive characteristics. That's what one of the analyst notes I read this morning said. So obviously a pretty positive company, a pretty positive earnings report, and that stock has been doing well this year, especially relative to the rest of the mag seven, the old fangs, just the broader market.
Certainly, and the moment only five names on the nasat one hundred are in the green. One of the micro strategy, the other Netflix, Key ran Vasselica.
We thank you so much.
Let's get more on the tech market sell off more broadly, Scott Labner's with US Horizon Investments, and just at this moment, Scott, within this uncertainty from a macro perspective, do you want to be buying in some of this weakness and tech?
Hey, Caroline, Yeah, I think you actually do.
I mean, I think this is one place where you can start putting some some money to work and some some new money to work. Probably I'd be a little careful, you know, as you guys are just talking about it's probably not the time for the chips because of all the tarif uncertainty. But you know, something more like like an equal weight sort of tech play. You know, you
get you know, catch on the themes with AI. You know, like if you remember, you know, the starting place before all the tarif stuff, we're all talking about AI.
Still because it was still a really big deal. It will continue to be a big deal.
It's just being overshadowed currently, and so you know, this is probably a pretty good time to start putting money to work towards that sector and towards that theme.
Okay, but if it's not chips, how are you thinking about the AI opportunity.
Yeah, look, I think it's a little bit more nuanced right now.
You know that this is you know, you can think about the AI trade as being or you know, the AI investments broadly, as as following a couple of different phases.
You know, we've been in mostly sort of.
The infrastructure phase and that's and that's dominated obviously by chips, by the hard work kind of kinds of things, just like routers dominated the first part.
Of the Internet cycle.
We're getting now into more of the prove it stage of AI, which is where you know, we're comps.
You're gonna have to figure out and prove to the market that hey, I'm using this stuff. I know how to make it.
I know how to use it in my company to dry productivity, dry processes, and to get higher margins ultimately, which is really the name of the game for this. And so you know, finding those companies that can help deliver that type of margin expansion through through productivity growth using AI is really is what we think is kind of the next trade. And so that's why that that more equal weight treatment we think is probably a better play.
When we think about this week, though, Scott and the amount of guidance we might get from earnings from CEOs, whether it's the telecom sector that comes thick and fast, whether you've got some of those chip names, whether it's Intel or Texas Instruments, Are you expecting the guidance to be lower?
We expect the guidance to be completely fuzzy, Like, look, I'm not sure who's who's gonna leave guidance.
You know.
Yeah, United Airlines come out, you know, last week and say, look, here's our guidance for a recession. Here's our guidance for non recession. Like that's not guidance, I mean, that's actually it's just fairly useless. And so you know, what we're really going to be focusing on is like how are
companies thinking operating? So, you know, in terms of the guidance, like the numbers aren't really going to mean anything, nobody's gonna believe them, But in terms of like philosophically, like how are you operating in this environment through this uncertainty? How are you thinking about cappex What sort of contingency plans do you have in place? It's really gonna be those types of things that the people are going to
be looking for. It's it's going to be a you know, a kind of a tip of the cap towards good management. You know, good management and thoughtful management will probably you know, get a premium through this kind of cycle. Yeah, but it's you know, it's gonna be really those types of more squishy qualitative things that folks can be looking for rather than focusing on the hard numbers this quarter.
Let's go to the squishy CAPEX then, Scott, because what.
Are you expecting in terms of companies commitment to continue to spend? We're all questioning it from well, the hyperscale is when it comes to in video investment, for example, you.
Know, I think I think it's going to be a time scale type of type of argument. So, you know, I don't think like nobody's very confident in the next few months, Like nobody has any visibility into what these policies.
Are actually going to look like, what these serves are actually going to look like.
What we're really focusing on is like, what are folks thinking about for the next two to three years and are they actually being are they going to start executing
on some of those plans? So, you know, again, it's it's just a tip towards the towards of management, towards the guide you know, towards uh, you know, teams that are proven that they can think through some of the short term issues, manage through some of the short term issues, and really focus more on the medium term stuff that will like you know, that can have the benefits accrue to them through time. It's you know, again, it's not
going to be a easy charge. I mean, this is not going to be an easy earning season to figure out and sort of bottom line for folks. It's really going to be kind of a company by company, hand to hand battle.
What about global exposure versus domestic exposure? I think of the telecoms names, and they've weathered relatively resiliently because they're focused on a.
Consumer here in the US.
How do you think about opportunities to invest abroad or companies that have exposure abroad right now?
Scott, Yeah.
I mean, look, if you're thinking about investing in broad you know, it's really about two things right now for US. One is, you know, we do think the dollar down trend is going to be fairly strong and and fairly persistent for the next couple of years.
And you know that that in and of itself, it gives.
You a pretty to a tailwind if you're an international investor investing international equities. So you know that's that's a starting place and so you've got to get the dollar part right for that, and we do think that dollar trend is lower.
The other thing, though, is importantly the fiscal expansion.
You know, like on fiscal thrust is now the realm of internationals and not the realm of the United States, you know, companies and or the United States governments. Sorry, and you know that the market definitely rewards fiscal expansion.
We saw that through COVID, We've seen that over the last ten years.
Really and so you know, the sort of the dual thing of fiscal expansion internationally versus the US, and you know, and and the dollar trending lower against most major trading partners. You know, we think those two tailwinds are going to you know, really really be to be to the benefit of international equity investing for the next probably year or so.
Most major trading partners.
I don't know if you count China as one of them any more, Scott, but what about China's investment the fiscal stimulus and whether or not you want to me in some of these Chinese internet names for.
Example, yeah, Karion Lens.
Really, it's obviously a pretty tricky one, you know. You know, China we think is going to get it's kind of getting bullied, just like Europe is kind of getting bullied in into doing the fiscal expansion thing. We think China's gonna get bullied a little bit by Trump into doing uh sort of countercyclical fiscal expansion, countercyclical policies, which.
They've really been resistant to for the last couple of years.
You know, one thing that we think is pretty important, especially for Chinese tech though, is you know, you premiere she he's dropped the common prosperity language. We've not heard common prosperity come out of his mouth or or in written for him for many months now, and that you know that when that common prosperity the language just started to take hold, it's really the death note towards Chinese,
so towards Chinese equities and Chinese tech in particular. And so you know that that language being dropped, we think is important. And so you know, the combination of that language being dropped, so he's signaling a changed uh, you know, changing his mindset towards capitalism, changes his mindset towards those
Chinese tech companies. Plus what we think is going to have to be some sort of fiscal countercyclical uh you know response by the Chinese governments, you know, you know, makes those you know, probably probably okay to invest in. But man, that is a tricky one.
Scott Ladner, Horizon Investments, thanks so much for joining us today.
Coming up, Alphabet heads to.
Call as the government continues its push to split up Google.
This is Blue Meg Technology today. Alphabet's Google.
Well, it's in court of a US government prosal to split up the company. It follows a ruling last year that Google has an illegal monopoly in web search. Lumeg's Michael Shepherd has the details in Washington, and last week it was all about that landmark ad.
Tech monopoly ruling.
This week, when we're reminded of the search ruling, what are the remedies that likely to be discussed?
Chat Well, Carol, you're right that this is another front in a broader antitrust push against Alphabet and a number of other tech companies. But here we're talking about search, and what the government is saying is that, look, Google has this illegal monopoly per judges ruling back in August, and these are the remedies that we would like to see. This is the so called penalty a remedy phase, and before the same judge who made that rolling back in August,
they are calling for a couple of big changes. One is that Google should sell off its Chrome browser. Another is that it should be licensing more data to its competitors, and then finally, it should stop making all those billions of dollars in payments to companies like Apple and others to guarantee a good position on those platforms for its search engine. Something that the judge found signaled anti competitive behavior.
Now Google has countered with saying that, look, making changes like this will hinder innovation, it will put us at risk, put the US at is at risk of losing a competitive edge on the global stage. In essence, they are saying that, look, the Justice Department's proposed fixes would seek to break something that doesn't need fixing.
What's really interesting is just the time that it's been more than forty years since we got the breakup of marbll AT and t is in twenty five years since Microsoft was under the microscope chev What do we think will actually be an outcome in any sort of time horizon here.
Well, they're talking about perhaps August to actually learn what the judge's decision as far as the remedy goes. But this will go on for years to come. This case is not over now or in August. No matter what happens, either a ruling in favor of the government again or against the government, it will head to the Supreme Court Foreign Appeal. Both sides have a lot at stake here, and the US government is not showing any signs of letting up in its anti trust push against the major
tech companies. We saw the Meta trial being pushed in the case being pushed by the Federal Trade Commission proceeding last week with testimony from Mark Zuckerberg and Cheryl Sandberg about the company's alleged anti competitive behavior there and then
here in Google. As we were talking at the top about the two front push there from the government against Alphabet, and then there are other companies as well, Apple for instance and Amazon are also under pressure over competitive practices that the government has singled out is potentially harmful to the market.
Care not to mention on the EU's been looking at too. Greenberg's Michael Shepherd with all things from Washington, let's discuss this further the former Nebraska Attorney General Doug Peterson with US currently at Keating O'Gara and Doug, it's really interesting as to how much you with AG and Nebraska pushed forward on this particular case or many others that surround Alphabet at the moment, and it was under the previous Trump administration that first kicked off in twenty twenty.
What impact remind.
Us does this have on the consumer, on the tech industry at large, this sort of form of.
Control, I think the biggest issue that as attorney generals.
That we had concerned.
About was that big tech was accumulating so much personal data, and that data really presented the consumer almost as the product, because the data was what fed search, it's what feeds AI. And really we felt as AGS that we needed to step forward because their privacy and the use of their data for profit was a big concern.
Let's talk about that for the consumer in this scenario, because Google would counter that this is going to hurt the consumer if you separate, for example, Chrome off suddenly that seamless approach if you're an Android user, if you're a Chrome user disintegrates. Does that ultimately hold firm in your mind?
You know, I don't think so.
I think one of the biggest concerns we had was that what Google did in maintaining and this is in the judge's August opinion, in maintaining this monopoly, it basically created this ecosystem where they entered into exclusionary contracts with all the important players, had some revenue sharing with us, which were very important, and then as a result they create this basically this feedback loop that keeps everything contained within Google, and the result of that is a disincentivize
anyone from the outside actually being able to get any capital to challenge with a certain type of search engine that may be a better product, may better protect privacy. All of that is pretty much locked out because investors weren't going to invest in someone who's going to go.
Up against Google.
And second of all, all the players within that loop that they had through these exclusionary contracts, you know, we're disincentivized to look at working with any other technologies. So frankly, I think it's put a ten year hold on really developing better search technology.
Interesting.
I mean, eddie q is going to be giving evidence from Apple they get about twenty six billion dollars a year in terms of payments to be offering that exclusive nature of Google as a search option. But there are other companies out there are the search options that actually get money from Google too. What do you think we'll hear in terms of some of the evidence given this week, Well.
I think there's several things.
One.
I think the Court in its August opinion made some really important five feeds about the effects of these revenue sharing contracts. I think the Court also really realized the importance of scale because having that data and Google being able to acquire so much of that just builds a scale that actually makes it very difficult for any competition
to occur. So I think we're going to once again see evidence about how companies who wanted to develop products in general search and also in the area of search advertising text advertising will see evidence of how they've been kept out of the market and how it's necessary, including the divestiture of Chrome is an important element to balance out competition in the market.
Alphabet shares currently act session laws by two and a half percent. They've got their earnings later this week, So Sono Pitch is a busy guy.
Doug.
I'm interested though, in the countering nature from Google also, is this is backward looking. We suddenly got a lot more competition in the search space because open AI is there and all perplexity these other generative AI forms of search.
Is that an interesting argument. Is the timing wrong here?
Well?
No, Actually, I think the timing's really important because I think we both the Department of Justice and the state Attorneys General recognize that technology is moving so quickly. AI
is moving very quickly. But what's the fuel of all of that, once again is data, And so we think actually part of what we're asking for in the remedy is to ask the court to keep a monitoring process going so that we can follow this as we go into the AI world development because really from a vent diagram, there's a lot of overlap, and so having an ongoing monitoring ability by the court will allow us to address some of the new technology challenges that might come forward.
Back in private practice.
But of course, the former Nebraska Attorney General Doug Peterson, wonderful to have some time with you.
Thank you.
You.
Look at Tessa shares.
They're off by or more than seven percent, worst day since April tenth for the stop the company's biggest falls. One of them at least sent a start warning to investors. Wedbush analyst d and I saying that this is code read this moment for Tesla and the elol Musk needs to pivot his focus from the Department of Government efficiency to avoid lasting brand damage. Remberg's David Welch joins us, Now, we've heard this revives before, but earnings come Tuesday.
It's an important moment.
That's right, and I think investors obviously Dan ives among them, he's an analyst, course, but I want to hear that Elon is going to come back. They want to hear that there's a focus again on getting the sales going, that you're going to coo or praise TV coming out.
And I think the big thing too that's kind of kept the narrative going before this sort of politically related route that they've had is what's going on with the autonomous vehicle, with the whole AI and AV business that Eon talked about a while back, and with him in the government and cutting government costs with DOGE, Investors aren't
seeing a lot of that. This is the sort of thing that goes back years right when investors were worried Elon was spending too much time at SpaceX or with the boring company and not enough time at Tesla, And here he's basically spending most of his time at the government. And they want to see that the guy who built the company and who has steered it and made a lot of people a lot of money is back and focused on Tesla.
And on innovation.
Many looking towards other evs, particularly in China that are speeding up with charging in c ATL, maybe having charges that bring us to five minutes or less to full charge. David just move us away from Also, where areas that cars being impacted? Right now, I'm looking at Hurts, a big investment coming into Hurts. Interestingly, they made a poor decision around Tesla investments in the past, but now it looks as though Pershing Square like what they're doing now.
That's right.
And remember in the fourth quarter Hurtz said that they were done sewing down this Tesla bed that really caused like two point nine billion dollars worth of losses last year.
So if that's behind them and the market still isn't rewarding them for that, it was trading down below four dollars a share before Acman bought in, it doesn't take too much in terms of operating improvements for Hurts to really start to move the needle and get things going again in the right direction, assuming that there's no more of a wicked tail here from the Tesla bet and Acman mentioned that in his letter. And the other thing too he's looking at is could this be a tariff
bet here? If tariffs drive up the prices of new cars, it always has an impact brings up the price of used cars as well. Herts has hundreds of thousands of them in their fleets, and if they sell them at a better price than they bottom for, that's just good for the company and will help them pay down some
of their debts. So there are some potential tail winds here and some potential operating improvements for Hurts and Actmen's betting that the Tesla damage is behind the company and it's all at least some kind of improvement going forward.
To nineteen percent bet David Welch, thanks so much, and all the things evs and Auto's welcome back to bloemag Technology and Caroline Hide in New York. A quick check on these markets that are once again on a downdraft. Now we're seeing the NAZNAT one hundred feeling the brunt of the sell off right now. We're off by two and three quarters of a percent. In fact, on the naszat one hundred and only five stocks we're actually in
the green, everything in the red. We move from the micro anxiety of chip stocks, of worries about earnings, but also to the macro perspective, what of J. Powell, what of his future? We're currently on the downside. Move on to some of the individual movers that we're keeping.
An eye on.
Nvidia is one of the key that is on the downside. From the points perspective, we're currently seeing off by more than five percent. For three straight days, we've seen losses. It's wiped out almost four hundred billion dollars worth of market cap in those three days. I'm also looking though at TSMC off by three point three percent. They're putting out a warning in an annual report saying, now, maybe we're going to find it very hard to ensure that
the end users of our chips aren't Chinese. Let's talk about that a little bit more with Ian King who joins us now. And look, this is TSMC saying, look, we hear you US government. We understand you want to be limiting some of the exports to certain Chinese entities.
We don't always know where they're going.
Yeah, I mean this is obviously an attempt by them to try to sort of shift the blame or shift the focus. They're saying, look, hey, we just make these things. You know, the companies that design them, the companies that sell them, they're the ones that kind of should know where they're going. They're the ones that are sort of
more directly involved. And then maybe it's the computer makers who actually take them and then put them in computers or cell phones or whatever that So this is, as you say, there's a heightened environment of like, look, how are these chips getting to China?
We need to know.
And this is TSMC saying, hey, it wasn't us.
What's interesting is TSMC itself has been trying to appease the administration more investment into the United States. I've just come back from Arizona. Is all about the investment they're making in that state, but it's costing.
Them more in yeah, it is.
I mean, this is the whole point behind the Chipsack was to say, look, we need to make the price of doing business in the US of building these giant, massively expensive factories equivalent to what it would be to make them in Taiwan or make them in South Korea or China for that matter. And the delta has always been government support. That's the Chipsack. That's what TSMC wants
more of. But frankly, whether that's absolutely the case, whether it can still get the same level of economics, that's still a challenge.
Ian King always brilliant to have you, thank you more on a semiconductor sector now I'm in this geopolitical uncertainty and welcome back to the show, Michelle geider Kirk Institute for Tech Diplomacy at Purdue CEO there.
Michelle.
Always great to have your voice, and let's just talk about what you're hearing from semiconductor companies at the moment. Are we still seeing the administration getting what it wants.
I think we are seeing a tightening of export controls, which has been the trajectory for the past few years, and I think it speaks to the strategic nature of semiconductors because they're powering consumer technologies and they're also powering defense tech at the same time. So if you look at American chip companies like Nvidia, like AMD, or allied chip companies like TSMC, they have a very strategic role
to play. They're at the front lines of geopolitical competition, and so they are not passive but active players and making sure that the US and the free world maintains technological leadership. And so these increasing export controls are a reflection of that.
When TSMC puts out an annual report saying.
We're going to struggle with this, when they're trying to.
Own the fact that they perhaps don't always understand the exact end user. Of course, there was reports that TSMC chips ended up in Huawei products.
How do you rate that acknowledgement from a company.
Well, I'd say the great opportunity for a company like TSMC is the fact that TSMC produces ninety percent of the world's most advanced semiconductors, and so if you look at the leverage that they have, if they were to issue guidance requiring more disclosure, more transparency and understanding downstream who the end users are of the chips that they're making, I think they would see that their customers would be highly responsive to that because of the leadership role that
they play, and that's an important thing here. Companies can't just be passive bystanders, waiting for governments to issue regulations and then comply. There's actually a leadership opportunity here for companies who are on the ground, who are operating in this environment, to play a key role in shaping what the disclosures need to look like, so we all make sure that these chips don't end up in the hands of our adversaries.
Disclosure is one thing, but designing new types of chips to abide by changing rules is another, and Nvidia has been trying to do that. Every time the rules have changed, they've designed a different type of chip that China is allowed access.
And now the crack down on the H twenty.
How do you think Jensen Wang has navigated this thus far?
Well, I think it's worth taking a step back and looking at the bigger picture here, which is, if you have to modify your product so that a totalitarian customer isn't using it to undermine your country's national security, something's wrong. So how do you take a look at what the overall business strategy is and national security strategy is and start to think about what is a long game here? And for American chip companies in China, it's not going to be a long game because China has declared that
it wants to be self sufficient in critical technology. Semiconductors is one of them in all critical technologies by twenty thirty five. And so the clock is ticking on American
chip companies right now. And whether it is the company leaving the market on its own terms, or it's a US government issuing new export control regulations, or ultimately China creating its own national champions like Huawei and then ousting American companies, the opportunities for a business leader to decide now whether they want to get out on their own terms or have it be dictated by China.
But then Jensenwang, as the crackdown on.
H twenties happened, goes to Beijing, is in China reconfirming his commitment to the country. How did you assess that particular level of diplomacy from the company.
Well, I think it was equally important that he also went to Japan thereafter. And look, China's a significant market for Nvidian, for other chip companies. I think it's their fourth largest by sales, so I'm not surprising that he went there. But at the end of the day, we've got to make sure that American companies, not just chip companies, but companies and all critical tech sectors are working with trusted partners and trusted allies in order to advance our
collective national and international security. And the fact that he was in Japan emphasizing the need for increased energy and resources, Japan's been a trusted partner in technology. Those types of conversations, that type of tech diplomacy is really important, and you know, you see Vice President advances in India today as well. Working with democratic partners like that is going to be even more better news for US national security.
When we have the idea though, that necessity is the mother of all invention, our and indeed innovation, Michelle, are we just pushing China to go and build it themselves at a faster rate?
They're going to do it anyway, So you know, the alternative would be, well, let's hand them our critical technologies and save them some time. The argument doesn't really stand. America's got to be focused on innovating faster and smarter and better and being the leader in all critical areas of technology and addressing what competitors and adversaries like China
or Russia or Iran or doing in these sectors. But the imperative for the United States is to focus on innovation first and make sure we maintain a global leadership position. China is going to continue doing that on its own. So the more that we focus on winning what we do best, which is innovation and enterprise, the better will be.
Michelle. It's great to have you back. Thank you.
Michelle Geider at the Crack Institute for Tech Diplomacy now coming up. Netflix's record profit is giving investors something to cling to amid of all this economic uncertainty and challenges for traditional TV and movie businesses.
More on that.
Next, this is Bluemot Technology quick check in on Netflix shares because they had been holding onto gains and in fact one of the only stocks in the green on the last that one hundred are up two point eight percent after the streaming giant reported.
A record profit to start the year.
And I see the company business as resilient amid a tougher macro environment. Blubogs luca sure can break it down. First, we got the numbers on Thursday evening, and of course then the markets went on holiday. So today they react, Lucas and they like it.
They like it a lot.
I mean, there had been a belief among investors, analysts, and I think everyone that Netflix was a company that was not particularly at because of the current uncertainty, trade war and the like. And it's also just a company that continues to operate on all cylinders.
Right.
It is excelling, even if there are some people who think that it's slowed down in terms of subscribers in the first quarter of the year.
At least in the US and Canada.
The numbers that it is now reporting revenue and profit both look really good. I mean, the thing where Netflix has continued to over deliver for investors has been its free cash flow and its profit over the last.
Couple of years.
It's kind of crazy to think that there was a time in which people were worried that they might collapse under debt.
Are never make any money.
The fact that first quarter earnings are up twenty five percent, the fact that they're talking about resiliency in the face of potentially.
Weakened consumer lucas.
Are they continuing, though, to double down on the commitment to produce abroad, to continue to roll out when new movies, new content.
Yeah, I mean that.
They actually had a whole section in their letter to shareholders last week talking about the investment they're making in international production. I think they said that they're now producing in something like fifty countries.
It might be even even north of that.
You know, they have started to increase their programming budget after it being flat for a couple of years.
I think they're up to eighteen billion dollars a year.
They still produce and release more programming than any streaming service by a mile, and yeah, they see an opportunity. I mean, if people do get more cost conscious and look to cut their streaming services, every service would experience a higher cancelation rate what's known in the industry as churn. But Netflix has the industry best and I think would
continue to because of all that you get for it. Right, Whereas there are other services that if you only watch one or two shows you might say, I can cut this for a month, I think it's a lot harder for the average person to cut Netflix.
Luka sure on all things Arnings, Thanks so much for that, And let's just stick a little bit longer with Netflix.
Bring in Rich Greenfield of light Shed.
You really pointed to the fact that they're producing content in so many countries.
Does that help with the weakening dollar?
I mean, look, I think first of all, you know, having pretuction resources all over the world, I mean, more than anything else, Carolyn, it makes it cheaper to make content. You know, the cost of making an hour drama in the US, I mean you can run, you know, you look at something like you know, take a Yellowstone or an eighteen eighty three like those can cost twenty five
plus million dollars an episode. When you're producing overseas, you're taking advantage of generally far lower cost production environments, but you're also creating content that caters very much to local tastes. And so what Netflix has been really unique about is not just creating great content in the US it's exported around the world, but.
Creating great content all around the world.
I mean, whether it's a squid game or a loop pen in France, like really figuring out how to produce at scale all around the world. And I think that's becoming an increasing advantage versus the peer set. Nobody else is producing the way Netflix is producing around the world, and I think it's becoming a bigger and bigger advantage, especially as you have you know, you just listen to Lucas talk about, you know, sort of the pressure that
everyone's going to be facing from a weakening economy. You know, if you think about the way a lot of these big media companies, legacy media companies are pulling back on their spending, really retrenching, focusing on just their top projects, it's giving Netflix a greater advantage versus the peer set.
And interestingly, they're catering to more than seven hundred million uses worldwide. They get Korean viewers for squid games, but also it becomes an international hit too.
Is that going to be the recipe for the future.
Look, you know, there's no perfect formula for how you get a hit, but I will say when you look at Netflix, whether it's a squid game from Korea, look at adolescents, it's a you know, four episode, it's a few hours of content, it's a global sensation out of the UK. You need to take shots on goal to have successes. I mean there's no doubt, you know, the successes overall. I'd say, you know, huge pieces of content are fewer and further between now for everybody.
But you need to take shots on goal.
And Netflix is taking more shots on goal by a pretty wide margin than everybody else. And I think that has sort of been the key advantage is nobody is spending on this much content the way Netflix is, and.
You can see it.
I mean every quarter, basically, certainly every six months, it feels like there's one big show that sort of breaks out on Netflix. The other services are just struggling to make really big hits, and part of it is they don't have enough users, Like they don't have enough daily engagement. Netflix wants you on Netflix every single day, and so there's always something new bringing.
You back to the service.
And again that point of making it so you have reason a to pay more and be not to churn rich shots on goal?
Now, tell me have the shots been on goal when.
It comes to live content, Because yes, from a grand perspective, everyone's loving ww law, but sometimes just the technology hasn't been there to service the amountious scale of demand to watch all at the same time.
Look, there's no doubt that live streaming of content with mass audiences is not an exact science.
You saw that with the Tyson fight, the Tyson Paul fight last year.
I think if you were to look at, you know, the NFL on Christmas Day, it worked incredibly well.
The WWE has not had problems. But I mean, look, you've seen YouTube TV and Hulu Live.
Those things have certainly gone out at you know, at specific moments. You've seen every one of these services have problems at scale.
Live streaming is hard.
I think Netflix has learned a tremendous amount over the last year and is getting better and better at it. But I don't think anybody who is in the live sports streaming where there is massive instantaneous demand. I don't think you're ever going to see perfection. It's the Internet. It is fallible, it has problems. But I do think that Netflix is building up very strong muscle skills in understanding how to do it.
But I don't.
But I also don't think, Carolyn, I don't think sports is ever going to be the core of Netflix. I think they really see it as a global entertainment service where sports has a place and they live has a place, especially as they build out the advertising side of the equation. But I'd be surprised if sports became critical the way sports is critical to a peacock, or critical obviously to an ESPN.
I don't think sports is going to be the winner.
Lose for Netflix anytime over the course of the next five plus years.
What becomes the win for the shares right now?
Rich Because we're up, as we can see on the screen, more than eleven percent over the course of year to date, we're up close to record highs for the stock in this macro environment.
Are we going to be able to juce any further?
Look, the big growth from here it really comes from two things. I mean, obviously, having pricing power in the US. There's no doubt that whether that's from driving the subscription price higher or whether it's actually being able to put the right ad to the right person at the right time and driving the advertising revenue from the increasingly large
base of advertising supported subscribers on the platform. But the real gwin, Carolyn, as you look at over the next five years, is going to be Asia.
You know, there's still relatively small.
They' stopped proporting subscriber numbers, but we know that the apecific numbers are still small. When you look at the scale, you know they could ten x the size of their subscriber base in Asia and still not be fully penetrated. So there is massive room to run and I think the next the story over the next five to ten years is going to be how they execute and build in Asia the way they've been successful in the US, Latin America and Europe.
Rich, so it's great to check in with you. Thanks so much, Rich. Greenfields of Light shed on all things Netflix, Chat, what arena, the crowdsourced site, ranking AI models, but a sufficient becoming a company betting there's big business in benchmarking for more. Blommerg's Rachel Metz joins us now and before this has been sort of the passion project of academics, and now it's becoming formal.
Yeah.
I mean, this was the project formed by academics at EC Berkeley, and they had been working on this. It had got super popular. Companies use it to test new and unreleased models. A lot of people use it to try out the latest and hopefully greatest models, and.
They wanted to make it more than just an academic project.
They wanted to scale up. To do that, you need to get money. To do that, you often need to be a company. So yeah, it's growing up in a sense.
Growing up, and more and more people are using it. You've got on this graphic two p eight million user votes. How are people approaching it and making the most of the well the recommendations that it offers.
So people I think who are individuals are using it to try things out, get a sense of what they.
Like what they don't. I mean, really this is sort of vibe spaced ranking.
I guess I would say one of the key things that you can do on this website is try two different chatbots.
You are not knowing what they are.
You type in a prompt and then you rate which answer you like better, and based on that the chatbots will go up or they will go down on the leaderboard there. I think companies increasingly see this as a really important marker of how well users like their models, and so that could be really valuable to them a kind of data. Typically, this data is actually really hard for companies to get on their own, so having it be available publicly is quite useful open ai.
I think GPT four oh it released it on the arena before it went out more broadly.
Right, So what some companies are doing is they will put models on there and they'll have code names, so you won't know exactly what they are.
Perhaps, I mean, you might be able to guess pretty well.
I mean there have been some that I've seen on there that I'm like, I know where you're coming from.
But yeah, it's really increasingly valuable and open.
Ai has done this a number of times, put up models that are unreleased and people can try them out. They might not know where they're coming from, but they might be from open ai.
And just tell us about the people that you see Berkeley that are behind this, and whether they become the executives and now what will be a company.
A formal one.
Yeah.
So this was a the project out of Jan Stouyker's Sky Computing Lab at UC Berkeley, and a bunch of graduate students worked on it and undergraduate students helped with it as well. And a number of the graduate students along with Yan are going to be the co founders of it.
And I think they're still trying to figure.
Out who's going to have what role in the company, but yeah, some of them will have sea level titles.
Rachel Mattz, it's a great story. Thanks for bringing it to us on all things general to AI. And that does it for this edition of BlueBag Technology. Let's just keep our eyes on these markets though, because it is once again another day down day for the nastat one hundred, off by more than three percent. Now we're hitting session lows. Nearly every stock is in the red. TESA in particular, off by more than seven percent. Earnings coming out Tuesday, remember,
are thick and faster with earnings throughout the week. We got Alphabet coming Thursday, We've got Texas Instruments, We've got Intel IBM. Much to be digested from these CEOs and executives but Tesla. On the downside, we've got bitcoin up though three point four percent, eighty eight thousand, hitting the high since March. This as we see a move into havens such as gold. Maybe digital gold is being seen
as the haven choice when it comes to bitcoin. And indeed you're seeing money move into short term treasury, so the two year gets to the bid.
The ten year is still being sold off.
But do check out of Bloomberg Technology podcasts as well.
You can find it on the terminal as well as online on Apple, Spotify, and iHeart. From New York, this is Blue Beg Technology