From Marhart where Innovation, Money and power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heide of Bloemug's world headquarters in New.
York, and I'm Ed Ludlow in San Francisco. This is Bloomberg Technology coming up.
Apple hit with its second downgrade in a week as analysts cautional slowing iPhone demand more analysis ahead.
A Mobili plunges is its four year revenue forecast, full short of all street estimates, Full coverage on the autonomous driving company's guidance.
Ahead, plus new data painting a bleak picture for Silicon Valley.
Will break down the state of.
Venture capital as startup saw their worst year for funding. This is twenty nineteen, the first let's check in on these markets. And while the good news is bad new the resilient job market means maybe we can't anticipate a FED cut as much as the market had been already pricing in. We're just down only slightly on the NASDAC, but it is five straight days, longest losing streak since October of twenty twenty two.
I'm looking at the ten year yield just.
Backing up again, up seven basis points. Notably, we are seeing a lot of supply coming into the system. Corporate bond sales means supply issues ahead, and that means, of course, some of that pricing does just fade a little bit.
New York crued off by one point nine.
Percent, having seen tensions, of course, red sea concerns, middle least geopolitical concerns. We're actually more worried about a global slowdown at the moment, so supply seems to win out there a little bit at the moment as well. Move on, have a look at what's happening in terms of bitcoin.
Because we're actually getting a little.
Bit more resilience on the day after what had been some big volatility yesterday.
In the price point.
We're at forty nine hundred and sixty, so back up, but not quite at that forty five thousand dollars level ed that we had seen in the run up to what everyone anticipates will be the sign off of these spot bitcoin ETF What if you got it.
Well, one big move to the downside, and that is mobili We're down around twenty five percent in the session. If we close at that drop. It will be the biggest drop on record. The story is actually really clear. Mobilized, maker of advanced chip or chip systems that power advanced driver assistance in cars, think about lane change or cruise control, and their customers have big inventories of these chips, so
they've stopped buying. Mobil has given us an outlook for sales in twenty twenty four, which is about one point eight nine billion at the midpoint. The street looking for two point five eight billion, significantly higher than that. So something has gone wrong here in the cycle for chips as it relates to the automotive sector and advanced driver assistants. We're going to go really deep on this story later in the program. As you mentioned, all eyes on Apple,
this is critically important. We're down for a four straight session, one hundred and seventy billion dollars of market cap shed during that four day period and a second downgrade. Piper Sander's a neutral, and there appear to be basically three things. They're looking at inventories going into the first half of this year, they're worried, they're looking at growth of unit sales going into this first half of the year, and they're worried, and then they're looking at China and the
macro picture. I want to bring in Bloomberg Intelligence and list sanaag Rana for his take. Those were the three kind of key points of Private Sandler. There's some read through from Berkleys who had similar concerns when they downgraded earlier this week. Do you share those concerns?
Yeah, this is the same exact thing we talked about when they last time reported that the big issue is China and China remains a wild guard for them. You know, in my view, there isn't any new information from these downgrades. We already knew China was going to be bad. In fact, we have been hearing about it for almost you know, two and a half months right now, and when they reported,
they really missed that China number by a big amount. So, I mean, I completely agree that sales this year is going to be tepid at the best.
But you know, it's not new news. On jan first.
We have known this for a.
While, and so why the caution now, Anna rag Is it more evaluation questioning a fundamental well a more macro perspective. We're now seeing perhaps the anticipation rates not being cut and we're just questioning valuations across all key tech companies or is there something bespoke to Apple in the here and now?
No, I think you're right about valuations and the big tech names. Last year, they were really the safe heavens for people to go in when they didn't know what was happening in the economy, what was not happening, what was going to happen with eight cuts, I think it seems at this point we're not going to have a hard landing. And if the economy stays okay and rate increases are not going to happen, then you know, people do tend to go out of safe havens into more riskier stocks and a rag.
Apple was the only big tech firm or one of the cy called Magnificent seven that had four straight quarters of sort of decelerating revenue growth. It has the fewest by ratings of any of those megacaps, as per the chart were showing. Now, what is it unique to Apple that it was not able to thrive in twenty twenty three and that there is such a change of set entiment now for twenty twenty four different to those other Magnificent seven.
Yeah, I mean the thing that the most important part is it's an enterprise It's not an enterprise technology company. It's a consumer technology company. You know, when you look at somebody like an AWS or a Microsoft or in video, they're all going you know, they should benefit in the long run or even in the short term because of a lot of the AI investments that are going in or for that matter, a rebound in corporate tite spending.
Apple doesn't work on that end. I mean, that's a consumer technology company and it's completely different from a you know, enterprise technology.
We want to thank you and our ground a Bloomberg Intelligence really just dovetailing all of what feels very fresh and concerning for Apple. But in the long term, nothing has changed in January first, as you put it, well, let's get that broader macro perspective and some of the headwinds that are facing Apple and more broadly the markets. So Christina Hooper, chief Global Market Stretch is over at Invesco.
And Christina, it's always a great talk with you.
In fact, it's luckily enough to speak to you before the turn of the new year, and at that point you were liking emerging markets, but you had some key thoughts in China, and I am interested as to whether you think these headwinds is worry about. For example, Apple's resilience in China is something that you also rewarried about.
Well, I think when we look at China, there are certainly some question marks. We just don't know what policy, what stimulus measures will come out this year.
That could be supportive.
We know that the Chinese economy needs to be stabilized, we need to see more growth coming from it, and I think we will get that. It's a question mark about timing and just how effective the policies are going to be coming out of the gate in twenty twenty four. And so of course it makes sense that those companies that count China as an important part of their revenue, says, an important part of their customer base are worried. But
I think it's a very short term kind of concern. Obviously, it's going to impact earnings, but I don't think it's a long term problem. It's just a matter of getting the stimulus the policies right, improving confidence for consumers and businesses in China because there's a lot of potential there for that economy.
And what about the geopolitics that dovetails into all of that because on the one side, Apple's worrying about the resilience of a consumer, but also a pushback against well, it's ownership of Apple by government related entities, people working within government institutions.
Geopolitics, is that a risk for you? More broadly, well.
Geopolitics can be a fly in the ointment, but it tends to be something that is very short term in nature, so there typically are workarounds. Smart companies can figure out workarounds to policy changes, to changes in you know, particular you know, areas of treatment for company working and selling abroad.
The key though, is that it's a.
Short term problem and you know, typically a workaround will be found, So I don't think it's it's a problem for the long term, but of course it can create headwinds, and investors are looking in the short term right They're reacting and concerned about what earnings are going to look like in the next quarter, the next two quarters, And of course we have seen a nice run up in tech, so it makes sense that we're seeing a bit of a pullback, especially with rates having gone higher.
Christina, Caroline and I have been reflecting on a sense of deja VU this week because the conversations we're having into the new year are basically the same as we had throughout twenty twenty three. And that's so true of the FED. You know, I feel like we started twenty twenty three asking where will the FED go? We're starting
twenty twenty four with confusion about the FED. And we always remind ourselves in this program, higher rates discount the present value of future cash flows in the context of the tech technology sector. Is that the case in your analysis and your outlook for this year?
Ed?
Absolutely, monetary policy has driven markets in general, but the reality is that tech has been particularly affected by monetary policy. It's a long duration asset class and so it's very sensitive to rates, so when they go up, it can be a problem, and that's what we're seeing. But I think we have to look at the root cause of
why rates have gone up. Markets have gotten very easily persuaded by a little FED talk and a little fear and are now convinced that we're going to get a very different FED than they thought we were going to get just a few weeks ago. And I just don't buy it. I think what we are going to see is a FED that cuts rates between one hundred and one hundred and fifty basis points this year, not because the economy deteriorates a lot, but because policy is restrictive
in the face of significant disen inflation. We're going to see progress on disinflation, and so the FED is going to be forced to cut rates, and I don't think that the movement higher for long rates is going to continue.
We use the word technology is a blanket term and learn that not all technology companies are the same. And Ana rag Ran a our Bloomberg Intelligence and it's just made the point on Apple, right, it is not an enterprise company. It's a direct consumer to all intents and purposes. How are you distinguishing within the broad umbrella of technology this year, those you think will thrive and those you think will fall behind.
Well, that's a great question, and I would say that it's not so much whether a company is a consumer based company, but more about what exactly the businesses that they're in, right, and they are going to be areas where we're likely to see significant growth even if economic
headwinds are worse than we think. For example, cybersecurity, that's an area that companies are likely going to spend on no matter what, because it typically ranks among the top fears among CEOs every year, and I think it becomes a real concern in terms of branding issue. It can get very high profile. So I just want to draw
that distinction. It's not about the consumer. It can be more about the regions that companies are selling in that tech companies are selling in, whether it's to businesses or consumers. But I do have to say that in general, when we look at tech, valuations are higher and there is far more sensitivity to rates.
Christina Hooper of Investigo, great to have you on the program, Thank you so much. Okay, this is one of the big movies in the technology sector. Israel's most valuable company by market cap, but US listed Mobili down almost twenty five percent if it closes at that.
Level, biggest drop on record.
It's also impacting other names in the semi space, some of its peers, particularly those that supply chips to the automotive sector. Intel is interesting because remember that mobile I was spun out of Intel, but Intel return retains an eighty eight per cent steak.
This is the story. Let's bring up the numbers.
It came out with prelim financials and Mobilized telling us that in four year twenty four revenue will be between one point eight six billion and one point nine to six billion at the midpoint one point eight nine billion, but the street was looking for two point five six billion. The story is that this is a company that makes chips or systems that power advanced driver assistance tools. Right think about when you're in your car, the lane keeping technology,
the camera technology, the cruise technology. But a lot of the customers that order those types of chips were panicked in twenty twenty when we had a supply crunch. So what did they do. They built up inventories. Now they've stopped ordering and they're working through those inventories. That means that in the first quarter of this year, Mobil's telling us sales will be down fifty percent carrow year on year.
Great setup, great deep dive that we now need to do a little bit more as to why this then call the market so off guard. Blue Mugazine King is here to help it break all down the chip news that we've got of the day, and just starting on mobili and starting on just how hard it is to read the end demand for these sorts of chips for inventory levels.
More broadly, why had we not got more direction from MOBILEI why.
Were we not able to sort of see this coming a little bit clearer.
I think the way to look at this is Mobile Eye is essentially at the top of the stack. Its chips go into the most expensive cars. The cars are the most functions and are probably amongst the most expensive components. They're going to cars, So from my perspective, you want to have them on hand so you can sell those cars.
But all of us sudden if you think, oh, I can't sell those models, I have to cut some of those models, and you know the market is going more towards say, mid range, then you're going to crash your ordering of somebody like Mobile Eye to obviously save on the build up of inventory and the costs that are involved in that.
So that's probably what's going on here.
And we know all about the automakers, particularly in the EV context, telling us we're really scaling back in twenty twenty four. The way that I always look at it is that Mobilie also sells to what we call tier ones, but basically companies that make those off the shelf components and those are the ones that built up the inventores. What's also interesting is the reaction in equity markets. All kinds of chip names, particularly those that sell to the car companies, are down.
What's the read across there?
Yeah, I mean, if you've been looking, if you've been listening to the conference calls for like the last couple of quarters, people like TI, people like NXP have been asked, Hey, the auto markets looking a bit shaky, how can you be so bullish about this? How come your orders are so strong? And what they've been saying is, oh, more chips per car. Don't worry about it, you know, we're not too worried about the you know, the total number
of cars getting sold. Now we're seeing that perhaps they have to worry about the total number of cars being built and being sold. And that's really what's happening here, and.
It's interesting Qualcom getting caught up in that. We're seeing setting pressure on the day is of course put some focus on the auto industry as it diversifies out of just mobile, but it also has an announcement today on how it's really trying to be owning the VRAR space as well.
What's the latest on that?
I in.
Yeah.
I mean, this is, you know, a repeat of a story we've seen several times when Apple get involved in a category that sort of others have been dabbling in, Suddenly it becomes serious. And as we know, Apple's got a major product coming to market in this area. So Whatqualcom's trying to do here is to say, look, let's not repeat the history that we saw with the smartphone
with this smart watch. Let's make sure that our Android based offerings, our Windows based offerings have a chip that really really gives the capabilities that will allow the competitors of Apple to have things out there that can fight back and stop Apple just coming waltzing in and owning the sector.
Apple has its own proprietary chip inside the Vision pro and as carry points out for Qualcom, this is one of the number of areas moving away from the smartphone. Tell me about the XR two plus chip, you know, do we believe it's at the cutting edge in this use case?
I mean, the explanation that we had in the story is up to twelve, maybe even more than twelve cameras, four K projection of visuals in each I sounds pretty aggressive, sounds pretty exciting, But I think, as Qualcom said themselves, everything is in the implementation. We absolutely have to see what its customers will do with it.
Bloomberg's e inking.
We call him mister Chip and it's a great way to kick off the new year character I Meanwhile.
Coming up, we're going to talk Tencent because buying back a record number of shares last month, it seemed to make the most of what was an industry I'd.
Sell off in the name.
More on what triggered, of course, the move gaming moves by China more broadly, and what's the next for investors?
This is remote technology.
Okay, time for talking tech, and first up, Microsoft is adding a new key which will activate its AI copilot function to its Windows keyboard. Microsoft says the shortcut will help users create images, write emails, and summarize text with the help of AI. It's the first addition to the PC keyboard since the Windows Start key was introduced in nineteen ninety four, and in an effort to boost domestic output of legacy semiconductors, the US Commis Department will give
Microschip Technology one hundred and sixty two million dollars. It's second the second such commitment from the twenty twenty two Chips Act, which set aside billions of dollars to bring chip making back to the United States. While legacy chips are less advanced, they're important and essential for everyday use.
Plus.
In the latest show of supports for US sanctioned companies, China's number two leader made an appearance at a YMTC factory, a chip maker that competes with the likes of Micron and Samsung. The trip comes as China attempts to revive its struggling economy and bolster Chinese investments in the technology sector.
Caroline and also perhaps steady some nerves about the direction of travel for policy making more broadly versus tech in China, and we want to delve into that particular area because we want.
To focus on ten cent.
Share repurchases by the company have hit a record one point three billion dollars. That was in December, and of course that was kind of making the most of share weakness after China supprise the gaming industry with some new regulations whom most Henry Wren is in London with more and.
So is it typical for a company to make the.
Most of buying back when shares have been sold off.
Yes, definitely typical move for companies, but for Tencent, it has really been ramping up its efforts for share repurchase. So Bloomberg compiled data showed that recently, on every single trading day, Tencent has been buying back about total worth of one billion Hong Kong dollars of its shares on
Hong Kong trading market. To put that into perspective, before the Chinese gaming regulators issued a set of surprise rules aiming at curbing players playing time as well as spending on video games, Tencent was buying back at a pace of about four hundred million Hong Kong dollars per single day, So that's an increase of more than one hundred percent.
So that really shows that Tencent is ramping up its efforts to restore the market confidence given the recent drops in gaming stocks as well as intents in itself recently.
Exactly that it is the mechanism or the reaction from Tencent to what's happened, which is the new rules or gaming which strictions. As a wonderful line in the Bloomberg story, still, for many investors who remain traumatized by a spate of abrupt rules just remind us where we stand with the regulations that came in just before the new year.
Yeah, so exactly.
So many investors that we talked to have been mentioning about all those memories being involved in the twenty twenty one twenty twenty two regulatory crackdown campaigns where the Chinese government's target fintech giants such as and Financial the gaming giants including Tensent and many others, and in the latest moves in late December, the China's gaming regulators said that it would be issuing a set of drop rules, which is still soliciting opinions from the society that it would
curb video game players playing time it's spending on multiple mobile games as well as video games. Of course, that's been badly received by the market. We've been seeing severe drops in shit, but there have been some signs of easing from regulators recently. For example, they've approved one hundred and five video games domestically, including those being run by
Tencent as well as NAT's. Also, two media reports recently signaled that a senior official overseeing the gaming regulators have been called to step step down.
What I mean, we've got thirty seconds Henry, But what is it that investors need to track their eyes on to ensure that they are reading these tea leaves?
Right?
Yeah, so more signs of easing, for sure, is comforting, but I think investors at this time do need to see the concrete signs that the government is supporting the sector, not just saying that it's supporting its stands on the newspaper, on the state media at this point.
All right, Bloomberg's Henry ran all across the China tech bait. Great, have you on the program. Welcome back to Bloomberg Technology. I'd love low here in San Francisco and.
I'm Karen Hider, New York.
Let's get a quick check on these markets and the names that are on the move. I start with the micro just to keep you on your toes. What's happening in terms of mobile I of course Key Faller on the day this after they guide that their revenue is gonna be down some fifty percent, clearly an inventory back up. And one of course is these chips that are focused particularly on the auto sector.
So ed we dived into that story a little bit.
Earlier with Ian King, but it's still a clear market mover.
To the downside.
Interestingly, Apple is managing to be on the downside too. It's got its second straight downgrade this week. Now, of course this is not to a sell as we've seen previously. Barklays this is at least going neutral over at Pipersanna, and they're once again worrying about China about consumer resilience.
So Apple under pressure.
It's key because it's of course biggest points move are off and on some of these benchmarks. One to the upside, and we're going to dig into this in a moment. Peloton to the higher about nine percent as it strikes up a partnership with TikTok, gonna be able to consuming some of their live fitness applications and indeed some of their classes.
On your TikTok device if you have the app there.
Meanwhile, let's have a look at what's happening not only in the world of sports, but more broadly in the world of macro. I want to focus in on what's happening with NASDAG is in under pressure only slightly, but it is what fifth straight day of losses for the NASDAQ one hundred and longest losing streets It is December twenty twenty two.
That is, as we see question.
Marks of where the Federal Reserve goes, and also into the mixes geopolitics now interesting in McDonald's. I wanted to shine a light on this particular company because it has a macro read across they're posting on LinkedIn the CEO they're saying it is having a meaningful impact of the business. What's happening in the Middle East, So clearly that is having an effect on consumers and on overall big corporate America.
I'm looking at though, at Bitcoin.
Let's end on the green up two point eight percent and actually just pouring back some of those.
Losses that we saw yesterday.
Not forty five thousand, but forty four thousand looks pretty healthy in terms of recent numbers. R this is all about the anticipation of whether we get a spot bitcoin. ETF signed off as soon as January the tenth.
I think there's still a lot to talk about when it comes to bitcoin. I feel like we have consensus on what the catalyst is here.
Let's keep the conversation.
Going with ragu Ya Lagada falcon X CEO, and you know, we're only three shows into the year, but you know, it is not uniform that all of the trading activity is being driven by enthusiasm that the SEC will approve bitcoin spot ETF. There are others out there argue that argue this is either a market functioning an institutional level impact on the market. Where do you stand in this New year's debate?
Yeah, thanks so much for having me ed first and foremost the context of the market. We're seeing some of the highest open interest in the market since the collapse of Teleluna, which is more than the year. So in that context of very high open interest, now, there were a couple of sparks over the last twenty four or
forty eight hours. The one spark was the major export report, seeing that UTF approval is probably not likely, and in the context of very high open interest and leverage, that spark triggered a bunch of quidations, so liquidations all to the tuna of like, you know, two hundred and thirty million dollars in bitcoin and eat alone. Now one of the tier questions, one of the big sentiments that we
are hearing. So we checked again with some of the largest hedge fonds, asset managers, and the crypto native funds. What do you think about bitcoin ETF, And consistently we are hearing that bitcoin ETF is very likely going to be approved. Now, the one very prominent question that's on everyone's mind is Okay, is.
This price then?
Now?
What we're hearing is we've been spending time with a lot of our partners as well on this, including falcon Ex research. What we are hearing is most people are pricing the net inflows into bitcoin ETF in the first week or so at one or two billion dollars. So if the net inflows are less than one or two billion dollars, it will have an adverse effect on the price, and if it's more than one or two billion dollars, it will have much more positive effect on the price.
So that's the sentiment that we're hearing.
But just remind us, Raghu, like for many who come into this and think that there's already a bitcoin ATF, it's a future's ETF.
Why are we going.
To see such seismic move from institutional players retail players to get in on a spot bitcoin etf reser v futures.
Yeah, So we're hearing two main things, Caroline. The first thing is, if you look at the Bitcoin Future CTF and the architecture underneath that there is a future's rollover cost that instrument incurs on a monthly basis, and that's a very profitable trade for people who know that bitcoind futures issuers are going to come transact in the market in a very predictable way, so that the future's rollover
cost is a meaningful cost. So that's one. The second thing we've been speaking to some of the retail investment advisors and also the statistics on the self directed retail there are arias who cannot transact in few space DF.
Now for the first time, the.
Iria market, which is about thirty trillion dollar market, will have access to Bitcoin SPOTDF, which is much more efficient in a very simless way. So those are the two reasons that we are hearing consistently on why is SPOTYDF is better? But granted both have their pros and cons and nuances.
It's really interesting that you've given us this number, Raku. The fact that you're talking to your clients, those big investors and hedge funds.
That already dabble in a world or crypto.
And managing to pull out what what did you say want two billion dollars in terms of inflows over the first same week that the ATF goes live. What if that date is delayed? What if you said it's likely that these spot ETFs do get signed off, but if they're not, does it ultimately matter and the short term.
To the price point.
So I'll bring that into two parts. The first part is like, what are the odds right it is very likely that a bitcoin EDF is going to be approved? Now, then you want there is there could be an approval with caveats that could delay the launch of that could delay the time between an approval an actual instrument traded
in the secondary markets. So that is one plausibility, But we don't expect the delays to be very very long, right given the grayscale wordic that came out in October, there are very little or few reasons where the caveats could delay it by months and months. So that is one part of it. Now the second part, what if this doesn't happen? Right? A fundamentally think twenty twenty four is very well set up for crypto. You have the bitcoin EDF new cycle and the expectation the optimism around it.
You have Harving coming there is a major ethereum upgrade. And earlier in the show, we were talking about the VC funding in general being a little slow, but if you look at Massari's recent report on krypto funding, quarter on quarter, the crypto fundraise grew eighty percent to about three hundred eighty billion. So if you add all these things, even like you know, with EDF, potential dealis it's very
unlikely that it won't be proven. So even with potential dia delias, the year is very well set up, is what we feel.
Yeah mean, I mean you said the year is very well set up for crypto broadly. You didn't say bitcoin. And this is the bit that I'm struggling to understand when it becomes more than bitcoin. So on a market capitalization basis, Bitcoin's forty nine percent of the global dis assets market, right, it almost acted as the proxy for an industry that was about in twenty twenty three scandal,
you know FTX, what happened with binance. Towards the end, do you think other tokens, other distal assets, other use cases will get some limelight this year?
Yeah, the first off the year we think will be dominated by bitcoin. Right, Bitcoin the regulatedly clarity and all the asset the institutional interest that we are hearing and actually seeing right, I mean, we're seeing some record volumes. Everything that happened in the space twenty two to twenty twenty three are volumes tripled, and a lot of it is around the excitement around bitcoin. So the first half of the year we expect a lot of activity around
bitcoin and the bitcoin domination continuing. But towards the later part of the year that's where it gets interesting. Etherium could potentially whiper an DAF approval as well spot DF approval. So the news cycle around Etherium and some of the upgrades coming with Ethereum are things that in social investors are watching, but we think in terms of five to ten years, and back to the core of the show,
which is the technology. The reason why I jumped into crypto is Scrypto is perhaps the first use case of toganization, and if you look at the number of toganization investments and the subtle advances that are happening, it's meaningful. So beyond twenty twenty four, I think the story is going to be about toganization more than just one instrument within crypto.
You're in hardware and Motorola.
You're in Google leading product management over at Cromos, who of course made that diversion into the world of crypto. And thanks for telling us exactly why. Ragu Yo Lagada he joins us falcon X CEO the spot point coin ETF. Meanwhile, coming up, No, we're going to go back to what we were just hearing from Rugu who was talking about the VC community perhaps being a bit down in the dumps. Max Grazer from CDR Capital is going to be on what was he seeing in the world of VC for.
Twenty twenty four.
This is a Bloomberg, yet more data painting the bleak picture for Silicon Valley.
That was twenty twenty three. The value of VC deals in the US last year.
Felt lever has not seen since twenty nineteen, according to Pitchbook, and while investors poured money into AI startups and the rest of the industry pretty much founded. Here to break it all down, Bloomberg, Sarah McBride and I guess we were bracing ourselves some pretty lousy numbers and then living up to expectations.
Yeah, that's right.
I mean the numbers for twenty twenty three were bad. There's no way around it. Then again back in twenty nineteen, we thought the numbers looked okay, and that's back where we are right now. Levels just a little bit higher than in twenty nineteen. So investors at venture firms invested less money in startups and then they also raised a lot less money from their backers. So no matter which way you looked at it, it was a pretty gloomy year.
One tiny bright spot is that the fourth quarter numbers fell less than in the earlier quarters, so it could be an indication that things are starting to stabilize.
That's kind of the dulla measure of the US venture industry. But it's interesting if you look globally because not all markets behaved in this same way. You know, the drop in the US was I think a two thirds dropped from the prior year, but globally half and there were bright spots.
Sarah, what were the bright spots?
Okay, it's a very tiny bright spot because it's such a small part of the overall venture market. But in Latin America funding was actually up, but that's in part because it's so small that one outsize fund can move the market. And last year we saw the announcement of what is a huge fund for Latin America, five hundred million dollar fund run by former SoftBank executive Marcelo Klore and Shuniyata, And that was enough to really boost things
in Latin America. But that's just two billion dollars out of a market that's well over one hundred and fifty billion.
All right, Bloomberg Sarah McBride with the latest pitchbook data out this morning, let's keep the conversation going in today's VC spotlight bring and CRV general partner Max Gazer. Let's bring up the data again, the US data, specifically twenty twenty three, the year that was.
You can show the chart.
And you can go over the dollar values, But what story does that chart tell you about your industry?
Thanks?
Ed.
I think it's a very simple explanation.
Which is that the growth capital markets in twenty two and twenty three basically dried up. And so if you look at it by dollar amount, that would explain the drop off from twenty one, which is to explain that most VC activity in the growth stage pre IPO has slowed down.
In the early stages.
Where CRV operates, the activity is still very strong and many of the companies that we funded, for example, last year in twenty three are still in stealth, which wouldn't have been represented by the data there. So it feels all within sort of the bounds of what's natural and what feels right. We're very excited about twenty four and the IPO window possibly opening up to reaccelerate VC.
Let's go one layer deeper. You talked about some of your early stage investments being in stealth. The other story of twenty three continuing from twenty two is layoffs. All of these talented people were laid off from big tech companies, and we had evidence on this program at least that they went and started businesses. Was that the main catalyst?
Well, you know, with respect to the layoffs, I think a lot of that was just right sizing. A lot of these companies had exceeded what was expected of them as in the public markets, and so a lot of that was just sort of the natural right sizing of those companies.
To the point that you made about you.
Know, people leaving and starting new companies, that's absolutely catalyst. We think that we'll continue in twenty four with some liquidity in the IPOs and people, you know, having an opportunity to start new companies with that resource.
When you're looking at a potential IPO windows, are there certain names you're anticipating. Do they have to be AI related names? Can they be ones that have been grown because many of us sort of have seen these companies just having to start to write size their own valuations having taken money back in the heady days of twenty twenty one on a private market basis.
Well, Caroline, there's over one hundred companies when we last counted that I think are ip already. We have close to a dozen in our own portfolio at CRV that are on that path, whether it's you know, this year or sometime later. We think that based on how the public market reacts to some of these public offerings, it's going to change the narrative, right, And so I think that many are anticipating and expecting AI you know, IPOs.
To drive the narrative.
It could be something else, but what we've seen over our history in fifty three years is that the public markets certainly influence how even early stage vcs think about opportunities and where you know, public investments reward companies the most. We think data and AI are going to be front and center, and there's a long pipeline of great companies that we anticipate will do well.
I'm interested in the way in which you said in the early stage, look, things are still active, checks still being written. Are they being written at the right sort of valuations from your perspective, has that right size or are you seeing sort of bigger funds muscling in an earlier stage investments because everyone's to worry to try and write some of the larger series later series checks that are necessary.
Yeah.
Well, it's been well documented that the valuation correction the public markets saw has not quite yet trickled down into the private markets. And so what you see is vcs being a little bit more selective, paying the price that the market bears, but maybe doing fewer of them, or you know, being a little bit more selective with the
criteria required to underwrite those. And so again, I think that's just a normal cycle until the IPO window opens and vcs concerted document and demonstrate results and raise more capital to fuel the next generation of companies. And so I think that liquidity window is very important.
I want to take a look at your portfolio at CRV.
You know, half the job of an early stage investor is writing checks for new companies. But there are those companies that you backed almost a decade ago and you must now be sitting there and thinking, what should I advise them to do in this environment? Is the one blanket rule at the moment for all.
Of them, you know, growing.
Responsibly, right. I think it's sort of the still the sentiment this year. You know, many of the companies that we've we've demonstrated here Airtable, Iterable for sell Cribble, all companies that we invest in the very early stages when the company was in you know a few people, and so it's very rewarding to see the companies grow. And we want to make sure that we're creating companies of enduring value so once those companies go public, that they can continue to compound growth.
But you know, I think the theme.
This year is to make sure that we're ready for the IPOs.
All right, CRV General partner Max Gazer, Thank you.
So.
Over the past year, Instagram has released a slot of new features, avatar stickers, new verification program, and bonus program. And that's a top of dozens of behind the scenes algorithm changes to try and compete of course with TikTok.
Now those changes make the.
App more about the user's interests rather than who they actually follow, and we'll shell a little tier.
Therefore for some of the creators who depend on the.
Platform for their livelihoods, and that just makes it harder and harder to predictably reach their fan.
Base and therefore, course said generate some real income.
Well.
Speaking of competition, particularly with TikTok, it's not only Instagram's worst nightmare.
It might become.
Amazons too, because TikTok is aiming to grow the size of its US e commerce business tenfold to as much as seventeen point five billion dollars this year, according to sources, an ambitious target that sets up a clash not just with Amazon but also some of the Chinese owned outfits Timu and Sheen. Let's bring in Bloomberg's Alex Brinka. One of the bylines in this report that merchandise volume number.
Give me the reporting on it. That's big.
Yeah, seventeen point five billion for the US for TikTok Shop US, which you'll recall just fully launched right before the holiday season.
I want to put that in perspective.
Ed Earlier last year, my colleagues and I also broke that globally all of TikTok was looking to sell twenty billion dollars worth of merchandise in twenty twenty three. So that US number for twenty twenty four is already close to and edging out that global number in twenty twenty three.
The vast majority of that volume came from sales in Southeast Asia. So this is a.
Really big move for TikTok, and it's probably the first big tech social media company that might have Amazon actually worried. TikTok has really gained its presence here in the US as an entertainment platform.
This year.
They've been rolling out an interesting strategy.
To get people actually purchasing, and the company told me that over the holiday month, over Black Friday and Cyber Monday, they had about five million new people buy something on the app here in the US, So a big push for them and a very ambitious target for twenty twenty four.
E Commerce Front and Center so Too is sort of using it for live programming. And what was interesting is Peloton today, I mean shares about nine percent on the fact that they're doing a deal with TikTok and going to be offering some of their live classes through the platform. Will e commas be sort of interweaved into that? Do we think how much is this about drawing our attention more and more to the app?
It will and I did some reporting last year. TikTok, remember really started with live stream commerce in Southeast Asia and Indonesia and Malaysia. It's sister company, Douyenne under the bytdance Umbrella does live stream commerce in China where people get on live videos and they sell things. It's incredibly popular in the Asian market.
Try to port that over first.
To the UK and then to the US, but users here are just not willing to tune in at the same time to shop, so they actually split their strategy.
They said, hey, let's focus.
On developing live so people tune in for live videos even if it's without shopping, well at the same time rolling out our shopping business. This Peloton deal Caroline definitely falls in the bucket of live that live push.
As Blorenka always on top of all things social media, we thank you so much now does it for this edition a Bloomberg Technology Don't forget to check out the podcast this is Bloomberg,