From Marhart.
We're Innovation, Money and Power Collie in Silicon Valley, NBN.
This is Bloomberg Technology with Caroline Hyde and Ed Love Love.
I'm Caroline Hyde back at Bloomberg's World headquarters in New York.
This is Bloomberg Technology Today Tech. It's on top. We are diving into the AI rally.
He's looking at you, Marvell and Nvidia Hype versus Reality. And later we have arts Kathy Wood joining to discuss that rally.
Why she sold out of Nvidia in her flagship fund at the start of the year.
And as we approach Memorial Day weekend, how is AI changing how we travel? Choice Hotel cio. That's Brian Kirkland is going to join to explain more on what to expect. But first let's just have a look at the macro picture. You know what is weighing over this market over the last few trading days. It has been the debt ceiling demarcle.
It continues, still no answer, but there is hope is driving the Nasdaq up one point eight percent As we head towards the weekend, Volumes just a little bit thinner ahead of the Memorial On weekend here in the United States, two year yield actually seeing a reversal right there, you're seeing seven basis points, almost eight basis points, still pushing high.
Is that on the flationary read that we see the macro data coming in just showing that the Federal Reserve still needs to tamp down on that all important price. The PCE data that they can particularly look at more four point four percent year on year growth. Bitcoin no managing to get a bed as the US dollar.
Coming calms down a little.
Maybe we're not searching for such safety from the US dollar today. Let's get the latest though on this debt sealing, the negotiations, because it.
Is fast moving.
Bloomberg's Balance and Power co host Joe Matthew and Policea says with us in Washington and just is it going to be a busy weekend for future It's a great question.
It will be a working weekend for somebody. Even if they come to a deal today, staffords are going to have to work the weekend on Capitol Hill to actually write legislation. Keep in mind, we're just talking really about bullets here, top line points that would go into a potential deal, and then that would start the clock ticking.
I will tell you that folks I talked to over the course of the week on Capitol Hill were really hoping Democrats and Republicans to have something done before the weekend so investors wouldn't have a lot of fear going long into a long weekend, and it's really unclear if
that's going to happen. There is a sense that something may come about here today as they start to narrow differences, And it's interesting here some of the more significant budget cuts that had been demanded by Republicans appear to not actually be happening here. This actually could be a bit of a wash with what we're seeing, and I do want to stress there's a lot we don't know. Even some of the things we're hearing could change over the
course of this day as negotiators continue their work. What we do have, though, is a likely two year raise in the debt ceiling, two years in capping discretionary spending for that period of time except the Pentagon. Defense spending as we understand, would rise three percent next year, which is in line in fact with President Biden's budget proposals.
Here would cut about ten billion dollars as well from an eighty billion dollar chunk that was going to go to the IRS as part of the Inflation Reduction Act. There are some things we don't know about in terms of what would happen to unspend COVID funding or for that matter, permitting reform, which we've been hearing a lot about.
So it's really a critical moment here. It's very quiet in Washington, and things are getting quiet around the negotiating table as well at Caroline, which might in fact mean that we are close to a deal.
Calm before the storm, bringingmo bouncer Power co host Joe Matthew, We thank you so much. Let's dive into some of your tech movizo on the day, because aside from politics, we are front and center artificial intelligence on the day. Just look at how some of these companies are being powered. I want to first though, check in on what's happening
with Tesla because actually getting a nice rally here. Interestingly, frenemies for the day forward plus Tesla maybe sharing some of that charging infrastructure they do this deal, they go on guess where Twitter spaces to discuss it. Tesla currently riding high app amost six percent on the day in video, though at one point eight percent after that enormous rally the previous day their earnings, really adding what one hundred and eighty billion in one day to the market capitalization.
We haven't really seen that.
Only three times in history have we've seen that sort of market cap ad on one single day. Marvel playing some catch up to look, this is a fifty billion dollar overall market cap for this company, so nowhere near the near trillion in video is coming upon. But Marvel Technology also showing that artificial intelligence is the way for chip makers at the moment, twenty seven percent rally as their numbers show that official intelligence is going to be
driving their future revenue growth. Let's stick into that AI rally. Let's go to a Wooloomberg. Intelligence is man deep singing manded two hundred million dollars is there or thereabouts they get from AI powered silicon, and it's going to grow, if not double. They think, what four hundred million in the fiscal twenty twenty.
Four, Yeah, and they're talking about eight hundred million now. So that is what I think got the market excited. But look, I think one thing is clear is inventory bottoming is playing out for all or most of the chip makers. I wouldn't say that for memory yet, but for the fabulous chip makers, we saw that with Nvidia. You know, they've raised their guidance by almost forty percent, so we didn't see that kind of a guidance race.
But I think the bottoming part is almost certain given what bea hearing from everybody.
Just remind us where Marvel has leaned in.
What are the in particular offering in terms of networking, in terms of the ability to service what basically is a huge compute need by nearly everyone right now.
Yeah, and the big change right now is things are moving from CPUs towards these custom accelerators and that's what you need for running large language models and doing generative AI. And that's where Marvel, even though it's a niche player when it comes to networking and storage, but that's how you design those custom chips for you know, working as accelerators,
and you can do that with CPUs. Every hyperscaler is kind of doing a combination of in Vidia GPU and custom chips on the networking side, and that's where you see the demand when it comes to a small chip maker like Marvell.
Well, we can see the public market impact on the day Bluemmeg intelligences mandats saying thank you so much for breaking it down, and let's just think about how this affects publicly traded companies, how it affects of course those been raising capital in the private markets as well.
We're going to get the VC angle with Sarah.
Counstg's Clear Capital managing director and founder, and Sarah, you hit me up on Instagram in fact, saying this in Nvidia price point, the level that they're training at the overall price, this is really hefty stuff. Where are you starting to see the value in AI play, particularly on the chip side of the equation.
I like Taiwan semi Conductors, right, you know, not only are they a contract manufacturer who's providing services, you know to messive companies like the Apples of the world, they actually help in Nvidia, you know, do their chip manufacturing. And so in Vidia is a good company. It has done a great job of being relevant, you know, through crypto, through AI, you know, through gaming over the last couple
of years. But the reality is that like it's getting way too much credit for where it's real earnings are and where the revenue is, and I think that that's dangerous to keep buying into that kind of rally when it's not clear.
That they're going to grow into those shoes Versus a Taiwan semiconductor that candidly I think is close to undervalued for all of the actual you know, amounts of chips it's manufacturing and the technology there.
This technology is not something that's easy to build, but it's something that there are several companies that do it. And the reality right now one of those companies is getting crazy credit and all the other companies are sort of not feeling the loves.
Yeah, when I'm looking at what twenty times future earnings is why we're currently trading at for TSMC. When you're looking over that's what a price point is for in video, we are fifty five times future earnings. Putting on your hat and thinking about the companies within your portfolio. Have you lent in in any way to some of the under a lying infrastructure to help power the AI boom
that we're seeing. Is it more that you're having to ready your portfolio companies for the disruption that AI and indeed large language models and generative AI might have on them.
You know, it's a little bit of both.
I'm an investor in groc which is a TPU company. You know, it spun out of Google and it's definitely an interesting company in the space in the private sector working on these chips started for autonomous vehicles, but a lot of that you know, same technology and compute power needed is incredibly relevant for AI in some of the LLLMAI that we're seeing. And then you know, the reality is that there's a lot of great software companies being
built around this as well. I'm an investor in Forethought, which is a customer service AI company that's been doing incredibly well for a few years. I'm an investor in in Global Metals, which is a rare earth mineral mining company that actually uses AI to figure out, you know, where can we get more lithium, Where can we get more of these rare materials that we need to make our batteries for everything from you know, our tesla is to our iPhones because right now it's just incredibly hard.
And expensive to source that material.
So, you know, if software was eating the world fifteen years ago, I think it's reasonable to say now that.
AI is it is.
And yet Sarah must be inundated with emails that suddenly have companies vaguely reworking themselves, repivoting themselves to seemingly be adopting this new sea change. How easy is it and understandable is it to ensure that you're getting the right founder and indeed the right business model built upon it.
Yeah? Absolutely.
You know, the reality is that a lot of people who were Web three companies a year ago, and you know, big data companies three years before that, are now suddenly AI companies. And they either have the smartest, most you know, visionary founders in the world who just can never quite get a product launch, or you know, they're hustle and they're trying to make it work. But the reality is that you know, they're they're sort.
Of chasing the trend.
And so the nice thing about AI is that it's not an easy space, meaning that if you come in and you don't have pretty significant you know, engineering experience, you don't have some experience with AI, with you know, mL, with with large language models, all of those things, you know, it's incredibly hard to say that that you have a
chance incredibly building. Now, could you build a really slight consumer application that pulls in you know, that relies on on APIs from existing AI companies absolutely, and I think we'll see a lot of those, and that's not a bad thing, but it is surprisingly somewhat easy to tell who's real and who's not because very few people have, you know, the technical background that's going to allow them to make a fundamental breakthrough in AI, and even the
fundamental breakthrough is take an incredibly long time. They're in expensive, and so there's just not going.
To be a ton of them.
When you multi stage bench capital firms such as yourself, how do you decide what size of company you want to be getting in on at this particular level, what sort of valuation you can even be picking, because what are the comparables out there in the public market When you're seeing such enormous rallies in a place like Nvidia.
I mean, I think that you have to be practical. Right right now, venture is definitely on a bit of a downturn, and the only area where you're seeing these sort of unreasonable or sky high valuations is in AI. And you know, if you think that somebody is building a company that has a real fundamental sort of intellectual property mode that could truly change the world, like you actually believe that it's the next Google.
It's the next.
Google, then maybe you do invest in a slightly higher valuation. However, you know, I think what a lot of people do is they're just sort of jumping on h you know, any pitch deck that looks interesting, and they're pain prices that are just completely you know, out of whack to reality and the market right now in venture and so you know, for me, I've been doing a lot of my AI investing a little bit later when it's a little bit de risk because a lot of my AI
founders are doing more kind of fundamental uh you know, work where you don't know it day zero, how it's going to pan out. I think early stage AI investing right now, you know, is incredibly incredibly risky, unless again, it's something that's building you know, building a consumer enterprise interface that upfront they say, look, we're using GPT, we're using you know, these existing AI tools you know, to make it easier to do X, y Z.
Great.
That's an interesting business that I believe you might be able to scale much more easily than the idea that you know, two women in a garage are going to go make the next you know, AI super chip.
Here so the two women, but the Clear Capital managing director and founder Sericans really great to have some time with you. Thank you. Builder AI it's an AI powered software platform. It's raised more than two hundred fifty million dollars in its Series D fundraising led by Qia the
Kata Fund. I sat down with a co founder such an dev Doogle at the Cator Economic Forum, where he discussed the importance of digital innovation and in fact well the investment he received from that sovereign player and how it married with VC.
Just take a listen.
Our total round was two on a fifty million. The region for US is really important, not only the GCC, but also because we think between the markets here, there's so much digital innovation that's going on, so many small businesses that are now building software. But I think the second thing is, especially with the QIA, they're a very patient investor and long term capital and when you're trying to build something generational, you're going to make mistakes and
you're going to learn from those mistakes. And you want someone that's not running necessarily a seven year cycle. Yeah, but they're really thinking about the.
World at large.
You, of course kept on some previous investors insight for example, what's interesting do vcs do you think have to be worried about basically startups now going direct to sovereign wealth funds?
Is that becoming an obvious form of capital now?
Not me evening to see these sort of you know, middle people who are benched capital.
Look, I think it's different, right, I don't see the big sovereigns writing one million dollar checks, ten million dollar checks. I definitely think Series C and D or the early end of it. But you could easily crossover into sovereigns just like you could cross into crossover funds at that point. It really depends on what you're building. Yeah, if you're if you're building to be acquired, you're probably well suited towards a more venture style investment.
If you're building where it's.
Sort of a bit more generational, it's it's a bigger platform.
You want to have the right mix.
It's always a balance, right, So we want to have an insight, we want have an iconic, but we also want to have a QIA And what it does is it gives us a right cause but also the right connectivity.
That's so interesting that you say, what you're looking to build because perhaps people might have gotten the wrong end of the stick a few weeks ago when they saw that you took money from Microsoft and you're building within their platform, offering your services on Microsoft.
Why did you do that?
If you're looking, I'm trying to insinuate the between the lines that you're building to be a big public company, individual and scale great heights.
Look and it might sound raisen, We're looking to build a triger lot of business. We're not looking to sell for a few billions, not ourmo because it's never about the money, as much as money is important. And so when you're looking to build that big and you're looking to be that grassroot. And how suffer is used, Office is used everywhere, Windows is used everywhere. There's a lot of patterns you learn from someone that sort of solved the problem. I think the second is always again it's balanced.
And so we have two corporates that have had worked with us. One we haven't disclosed yet for obvious seasons. But with Microsoft, the key was alignment around mission and they want to digitally transferm the world. Aligner around values we just get along so important and it's a balance also with our cap table. Yeah, because it's not an investment because that's an exit. It's an investment because there is joint value that can be created when you bring those two platforms together.
Such a dev Doogle co foundal builder AI that helps anyone be able to build websites, apps, you name it. Now, let's take a look at some of the impact of artificial intelligence on the financial sector, in particular, what differentiates companies kind of slapping on chatbots to existing tech to marketing and saying, look, this is us, this is AI.
Maybe we're starting to call.
It AI washing, and well those actually are on the differentiated side. Who's actually building the artificial in products of people really need? That's bring in ramse you is Eric Gyman for more.
On this, because you've been coining and using this frame AI washing.
Everyone doing it like who is out there at the moment sort of naming that they've got some large language of model and d got some chatbot that's going to solve all your issues.
I think far more companies are marketing the use of AI, how they have a chatlot that's going to revolutionize their industry than you're truly trying to solve problems for me. I've never met a customer who said, I just wish I could chat with my bank account. I would ask a questions and learn things. Instead, they tend to ask things like I'd like to pay less for this service and paying for I'd like to automate my accounting, close
my books quicker. Those are the kind of things. So I think often if you see companies claiming AI, but you can't find real customers behind it, they're not talking about how they're integrating AI truly into the workflow of their software. It's probably AI washing.
Okay, So how do you ensure that what you're trying to market, what you're trying to say, doesn't come across as washing.
It really starts first with starting with the customer trying to under stand their pain points. For us, our mission is to help companies spend less money in time. We help the average customer cut there since by three and a half percent per year. And so one of the first things we did is within the user interface start to show companies where upon renewal customers maybe getting quoted higher rates than the rest of the market. So if you're paying for a software vendor and another customer is
getting twenty percent less integrating it into the interface. It's not creating new novel interfaces people aren't already using, like chat interfaces, but including it and where people do things next having it fade away. We automate expense reports by polling receipts when available from whether it's email, text messages, so you don't need to add additional step. I think a lot of great AI is invisible, so.
It's sort of running in the background being far more efficient. You don't suddenly realize how much more productive it's actually made you. From the perspective of which companies are coming to you asking for these sorts of issues. Have you had calls saying, look, I just need to understand what artificial intelligence offering is. Or is it more that they are calling from wherever they are geographically saying I need to cut expenses in this current economic environment.
It's a great question, certainly the latter. You know, we're supporting over fifteen thousand businesses, whether it's publicly traded companies like Event Rights to Sierra Nevada Brewing Company, you know, to local businesses, and often what they're trying to do is say, look, I'm spending a lot already. Whether it's thousands to millions per year. I'd like to cut expenses down. We spend a lot more time on closing our books,
on our accountants manually keeping books and records, tagging transactions. Instead, often they're asking i'd like to cut that time down so controllers can be asking strategic questions about the business, not bogged down and manual work. So it tends to come from the pin point they're actually happening, not if there's this new technology, can you find some use for it for me?
What about you though? As an employer, I think of what IBM came out and said. Look, ultimately, our back office in particular can be shoun by at least a third. How are you thinking about either the productivity of your labor or the fact that perhaps you don't have to beef up your own talent pool.
As much as you see.
You know, look, if you came to someone and said we're going to make someone on your sales team able to sell fifty percent more contracts, you'd say, I want more of that. I'd like to hire more salespeople just
like that. And we think that's exactly the case. When you have members of your finance team, for example, that have a lot more time in the day, and they're able not to be tagging receipts, you know, checking on what prices are, but instaid, getting better deals, closing your books faster, and fundamentally focusing on the strategic areas you can be investing on higher return on investment. I want more folks like that. I think that's true in sales. I think it's true in finance. I think it's true
in any part of an organization. And so I believe people will be more productive over time and rather than working on low value tasks, making businesses better, more profitable businesses.
That's the optimism I'm CEO. Thank you, Eric Leiman. Meanwhile, stell ahead look a unique pack between Tesler and Ford. It's aimed accelerating EV adoption. I'm going to tell you more about it next time for Talking Tech.
This is a pretty much in his time now for Talking Tech.
First up, a rare partnership between electric car rivals Tesla and Ford.
They're starting in spring twenty twenty four.
Ford customers will have access to more than twelve thousand Tesla superchargers across the US and Canada. Fords evs we'll have to use a special adapter, but as later models will have the Tesla charging capability built in starting twenty twenty five. Then JP Morgan is working on a service software that's the likeness of chat GPT. CNBC reporting saying that the firm applied to trademark product called index GPT service will help customers select investments tailored to.
Their specific needs. Flowers shares a Workday surging after.
It narrowed its outlook for annual subscription revenue. It's a key metric for measuring the demand for workday software, which helps businesses manage HR related tasks. Workday also appointed a new CFO, Zane Raw from VMware.
Coming up. How is AI impacting the travel industry?
We'll talk more with more from Choice Hotels CIO Brian Kirkland.
This is a Bloomberg.
Welcome back to Bloomberg Technology and Caroline Hyde in New York. Now, let's talk about travel because Clear just think about the way in which you get through an airport.
Well, it's fees. Are they still worth it?
Now that the TSA lines are kind of getting faster themselves, That's what many customers are wandering lately. Clear's lines have been backing up themselves with some annoyed travelers citinglack of staff, some ffical computers, and at times clumsy process of escorting people to TSA checkpoints, which could all be, of course, potentially due to Clear's own success and it's explosive growth.
And let's just stay in the travel industry now and take a look at how generative AI could transform it and please to say, Choice Hotels CIO Brian Kirkland joins us now to talk about, well, how have you as a business been thinking about generative artificial intelligence been able to ensure that, look, hotels are full when you want.
Them to be.
You know, at the end of the day, Choice is a company We've been using AI for a long time. Generative AI has the buzz right now, it's the thing that everybody's talking about, but really the Choice We've been using AI for a long time. We have a lot
of systems out there, like our Choicemax system. It's a revenue management strategy and program that we rolled out that puts that decision making in front of the franchisees to be able to look at data from millions of data sets from all over the internet to figure out what is the right travel strategy when our guests going to show up, what kind of state do they want? And look at the right rate and revenue management strategy for their hotels. And they can do that from the beach
if they want, on their own vacation. So it's a lot of fun for them to be able to manage their hotel that way. And we've been using AI for a long time to try to deal with just exactly what you're talking about.
I hope you're not advocating people should be working well on the vacation bran, but talk to us a little bit about Okay, I understand that perhaps this weekend is going.
To be a big one.
I'm suddenly going to have basically ninety percent of my hotel full. Is it more about ensuring you have the right staffing? What is it that they take from these data points?
It's everything, right. It goes all the way from the developers at the very beginning of the cycle to figure out what is the right hotel and where is the right hotel the franchisees managing and optimizing their staffing, looking at just the inventory they're buying, looking at the way they maximize their efficiency in the hotel, and then the consumer is putting in front of them where they want to go and what matches them for Our Choice privileges
customers to be able to look at their historical trends and figure out, Okay, what's going to make you happiest in your journey in your trip and then make sure that the hotels are ready to be at full full war when you show up.
You claim to be the first hotel company to create your own cloud based reservation system on AWS.
Ultimately, how is that? You know?
How have you thought as CIO to be ahead of the curve in that way?
How heavy a lift was it?
After their journey with the cloud and the journey with transformative technology started years and years ago. The first company to put a property management system in the cloud back in two thousand and five, and with Choice Edge, when we rolled that out, it was the first of its kind, and we were the first company to commit to going all in with AWS. And it really boils down to having a board and a leadership group that really understand I the end of the day, Choice is three companies
in one. We're a hospitality company, we're a technology company, and we're a franchising company, and that technology arn't really does get the investment. We put the effort and energy in the building Choice Max in the middle of the pandemic. Instead of kind of worrying about that the pandemic, the energy was put into investment right in figuring out how do we make sure that we come out ahead. So we rolled it out in the middle of the pandemic and it's been a huge asset for our franchise ease.
So as that board was potentially not in serious talks, but potentially in talks to be eyeing another company, there are reports that Choice Hotels have been looking at Windham for example. How easy or hard would that be to integrate another company if indeed a deal was going through.
You know, I can't speculate on deals like that, But at the end of the day, generative AI or AI in general, it allows you to take data from all over the world and take millions of data sets and
react quickly to information. So the things we're doing with our planning, things we're doing for guests, the things we're doing with picking the right location for a hotel, picking the right revenue management strategy, all of those things are cored in the ability to use AI, and with technology where it's at and with the cloud where it's at today, we get to do that faster, quicker, better than we
ever have been able to do in the past. So all of those technologies lead to the ability to react, to make decisions better and faster.
Do you think you said generative AI is the hot thing right now? Ultimately will that be weaved in far much more into my customer experience If you're already integrating artificial intelligence throughout from a predictive point of view, but from a generational point of view, are you able to save on your own costs on the hotel franchisees, own own customer service hires for example.
Absolutely. I think one of the things that we're paying a lot of potention we're working with our partners on
is generative AI has all the buzz right now. It's the thing that everybody's looking at to be commercially viable and to be something that really transforms how we do business and not just how guests and people in the world use generative AI for the great amazing things that does right now, but to commercially use it, we need to make sure that we can securely use it, so how do we get private data sets in there, how do we curate the answer to make sure that, for example,
if we use that system to enable our guests to find answers fast about what they're doing in our hotels or to our franchises to figure out what's the right type of strategy or even the policies around how they run the business, to make sure that the right answer is coming back. So it's curated, it's accurate, it's not based on old data. It's based on the current set of policies that maybe changed yesterday, right, those types of things.
So when we merge the power of generative AI with the ability to do it with the private data set that's curated, then you really have something. And that's something we're talking about with some of our partners and looking at I know Amazon with Bedrock recently talked about that in a Microsoft talking about that. So those things are coming. When they do, it will be transformative.
Brian, great to speak with you. Go have a wonderful Memorial weekend. I'm sure you will be Choice Hotels CIO Brian Kackland. Now coming up, we've got to get back to it in video. Getting close to a one trillion dollar market valuation, So traders really feed into this AI rally.
We're going to get Kathy Wood's perspective, of course, CEO, chief Investment Officer of ARC invest share her thoughts on the recent frenzy, why perhaps they dial back their overall exposure to InVideo, but she does have exposure to this one palanteer check it out shares currently at more than seven percent. Remember this is another company saying that they are all in in AI. In fact, they want the whole market from New York, this Bloomberg. I want to
welcome Bloomberg television and radio listeners to Blomberg Technology. Of course, the biggest techt story of the day surrounding artificial intelligence, you know it, and of course the recent rally in the chip maker and video. I pleased to say we've got the perfect guest joining us on this now, our CEO CIO founder Kathy Would, who basically as one as our Eric belchunis a re Bloemberg intelligence put it said, you were in video.
Before it was cool.
You were buying it at four dollars back in twenty fourteen. You rode the wave on this particular stock. Kathy to three hundred and thirty back in twenty twenty one. But the recent rally you've missed because the flagship Arc Innovation ETF you sold out of your mainstake back in January.
Why yes, So if you.
Were very positive on in video, we have been very positive on Nvidio. We bought it down when it hit nearly one hundred dollars in the fourth quarter last year, and then it tripled as some of our other AI oriented stocks stood still. So you know, we're looking at believe it or not, many people do not believe this
about us. We're looking at relative valuations of names in the AI space, and we were looking at Nvidia at twenty five times sales, which is where it is, and Tesla, which is probably the biggest AI story out there, is at six times earnings. UiPath yesterday, I mean not earning six times sales. UiPath yesterday reported it is a beautiful AI play.
It too is at.
Six times sales, and as far as in video goes, there are few reasons we take some pause. It still meets our minimum hurdle rate of return, so fifteen percent in a compound annual rate over five years, and so you'll see it in some of our more specialized portfolios. We're looking for.
The better values.
But the risks to in Vidia would include cyclical When I hear shortages, shortages, shortages about GPUs or anything, I begin to think about about the cyclicality of a group competition. Tesla is coming up with its own chip meta platforms, Google their own chips for more specialized large language models, and then the tech itself. We're learning from meta platforms. The Lama model is able to do with less computing power.
But more data.
It's able to deliver better models. So there are puts and takes here, as there always are.
How many frustrated investors have got in touch with you via Twitter or the other forms in which you connect with your own purchases of the ETFs, I mean there must have been a lot of frustration that you kept it in some funds but not the main ACHTF.
Well, i'll tell you what has happened mostly is people who understood the nvideo story. We were pounding the table on it on twenty fourteen, you know, really to twenty twenty one, and many people actually put it into their portfolios, their own portfolios, and they may.
Have held it. We have not gotten much pushback. And the reason is people know.
That we are on we are on AI, but we're doing it in a little bit of a differentiated way. Nvidia has become a check the box stock. That's why the valuation is.
Where it is.
But we are looking for those plays that have not only the vision from management team point of view and broad distribution, but also proprietary data and AI expertise. So we're just pivoting to another set of plays that most people have not discovered yet, much like they did not understand that a video was an AI play really until very recently.
So Palentea you mentioned, or UiPath you mentioned, Hasli you mentioned. There's actually quite a few, though it seems relatively limited overall AI focused names that you have. Am I missing something there or the far more AI exposure within your flagship fund or are you really just deciding that there are going to be a few key names that you back.
No, Twilio would be another name.
Almost every company except for well actually even including the multiomics companies like Exact Sciences are using their own proprietary data and their broad distribution networks to gather information and create better products and services. So I would say almost every company that we have in the portfolio is in some way, shape or form. We ask the question, how are you harnessing this powerful tool called artificial intelligence?
And I would say ninety.
Percent of the names in the portfolio are harnessing it and do have proprietary data we'll call my eye.
And we've actually seen so much disruption already to the market capitalization of companies when they have found themselves disrupted by, for example, the chat GPT.
I think of cheg the education company.
But you noted that Apple, for example, it's apps platform could be disintermediated by chat GPT platforms. Is that a key company that we need to worry about being disrupted? What other names do you think that come to mind that maybe the market has it wrong on how much they could be overwhelmed by this new competitor.
Well, for Google, chat GPT was either the worst thing that has ever happened to it or maybe the best thing. We tend to think it's going to be disintermediated though by chat GPT and other chat but so we're not going to need the kind of search and therefore advertising that drives Google's model, So we do worry about that one, and.
As you said Apple, you know there are.
Many people who think that even Amazon is going to be disrupted, not only by social commerce, so people just shopping through Instagram and other social media sites, Pinterest, but it also could be disintermediated, as if consumers use chat, GPT and other AI tools to say I want exactly this kind of item at the cheapest price anywhere in the world, and we go directly to that source. So you know, any platform that has served as an intermediary is at risk.
We would say you've name checked a couple of metas things now Instagram and you mentioned Lama. Is meta something that you're doubling down on from an AI perspective, So meta.
Is interesting to us. We do like what it is doing.
We love its sophistication and the fact that Mark Zuckerberg is now prioritizing artificial intelligence as opposed to the metaverse, which was really what he was focused on last year.
So yes, we're interested in metas play here.
We don't have it in the flagship portfolio, we do have it in other portfolios.
We'll speaking with Kathy Woods, CEO, chief investment officer of ARC invest just to go back to where we started in Nvidia, is there any.
Entry point that gets you back in.
You've actually been selling out from some of the other funds a little bit, perhaps with the profit that you've recently taken in the run up in the last couple of days. Anything that, despite its head evaluation, make you go, Okay, it's not going to be disrupted in the way that we were worrying. We're not going to see the supply chain rec have.
It, you know, anything for a price. I would say if this cycle were to worry, we tend to think we're going to have a harder landing than most economists do if the cycle were to hit it. And Nvidia surprisingly gets hit very hard by cycles because the inventory builds up build ups, and I would say we're in one of those right now.
Are so spectacular.
If we have a combination of a correction and the recognition by the marketplace perhaps that some of these models don't have to be as large and don't need as much computing power as more companies use more specialized models, you know, you get the confluence of a reality check. You know, in Video is just a very powerful company. They are so exquisitely positioned in the space, but you're paying for it now.
Having bought it at four dollars.
How did it make you feel in your stomach when you saw one hundred and eighty billion added in one day like it did yesterday.
Well, the frustration yesterday was another one of our AIE Playspath reported a quarter and revealed some products AI products and really opened the kimono a little bit more in terms of what it is doing on the AI friend and it's going to be one of the most interesting plays out there. I think it was down ten percent after beating numbers because it talked about the economy being somewhat variable I think is the word as using it's it was fact focused on the macros and that's what
analysts focused on. Now it's having a good day. It's up about ten percent today, I think.
Nine percent on the day.
So you didn't feel like you didn't feel any frustration about in video.
You're more focused on the iPath.
Of course, of course, and we published our trades at the end of every day, and you'll see we bought UiPath in almost all of our portfolios.
Aarkk Ark Wark f arkq.
So you know, we use those opportunities when we feel like the market isn't seeing something that we are, especially when it relates to artificial intelligence.
So tell us what you're seeing with XAI or with Tazla's focus on AI. Today, Tesla getting bought because it's done to deal with ford on its electrication and indeed the way in which you charge a cause. But what are we perhaps missing when it comes to being the number one artificial play as you just.
Said, Yes, the autonomous taxi network that we believe Tesla is building, it has more data, talk about proprietary data. It has more data of real world driving miles than all of the other auto companies and technology companies like WEIMO put together around the world. We would say except for perhaps China, because we don't know exactly what's going on there, and we do believe that the autonomous taxi platform opportunity is a winner.
Take most opportunity.
The company that gets a person in an autonomous vehicle from point A to point B as quickly and safely as possible is probably going to get the line's chair of the market, and that company will in the United States, we believe be Tesla, and we believe globally that opportunity will scale from zero today to eight to ten trillion dollars in revenues by twenty thirty. So you can see
why we're so excited by Tesla. It is it is the furthest advanced from an AI point of view, and it's even becoming a manufacturer of factories using artificial intelligence and becoming more and more and more efficient in manufacturing factories and cars. We think it's the most efficient in the world right now.
Land manufacturing in China, Kathy, and I'm interested in you reference this worry about maybe it's not a worry.
You talk about least in the US.
All you're looking at China remaining exposed to China amid the trade tensions and indeed the tech tensions.
Yes, we our history with China after COVID was We plowed in during COVID because we liked what China was doing from a monetary and fiscal point of view.
They were they were not overdoing it.
And then of course we entered the period starting in November of twenty where you know, managements were basically banished from their companies and there we were. There was one restriction and regulation after another, and so we've pulled away
quite significantly. Common prosperity, it seems means very low profit margins UH and services that reach into tier one tier two cities, So JD Logistics and JD we have some of that, but we have minimized our exposure until until China basically seems more inviting to capital.
Once again, that's all politics. Closer to home, the debt ceiling.
When they say debacle debate, deal still not done, default being uttered, what do you think about that?
Are you worried?
You know, with our five year investment time horizon and having been around this block a number of times, we know they're going to come to a deal. They are not going to deprive government employees of their paychecks Social Security, so retires of their paychecks would be politically disastrous. As we're heading into this election year and already the field has heated up so so significantly, so they're going to get through this. It's a very short term phenomenon.
It might be a short.
Term fix and hopefully they do get serious about this at some point in time, but we don't think now is the time.
We're speaking with Kathy Woods CEO and CIO, i'll invest you of course, have been really frustrated yourself with a federal reserve. You've said, in particular, inflation is something they shouldn't be looking at. You still think that there's deflation out there. But then when we get a CPE or PC print like we did today, the personal consumption expenditure four point four percent, is that still to you the wrong day to be looking at? Or you think deflation is coming after this swiftly?
Yes.
I think when history books are written, we'll look back at this period and we'll see the sharp rise in inflation, which was caused by massive supply chain, really supply shocks from COVID and the war in Ukraine, and you will see so sharp increase and it feels like it's so slowly coming down.
But when the charts, when.
You start looking at these charts in history, this decline will be look very like it was very rapid, and we will descend into deflationary territory. Don Luswin wrote a piece, it was an editorial in the Wall Street Journal. I believe about this, and I think the FED is going to be blamed for sending us into a deflationary period. Already we're getting negative signs for guidance home Depot. It's same store sales down three to five percent for the year.
Now they're expecting we got GDI, which is the other side, so global gross domestic income which is the other side of gross domestic product, and they need to equal, but they're at a record gap right now. It's been negative so in recession territory for the last two quarters, and I think many companies are going to feel a hard landing and it's going to come both from units, and I think more and more companies are reporting this on.
Their earnings report.
These these economic statistics that take all the oxygen out of the room are hugely lagging and they're not even getting it right. If you look at the digital world. Gross domestic product was that statistic was devised in the industrial age. We're in the digital age right now, so we paid more attention to gross domestic income, which tends to be more accurate as we're seeing these inconsistencies.
Thank you for talking digital looking the world economy with us on the day ahead of the long weekend.
We wish you a good one.
Kathy Wood ceoc Io of ARC and Best, Thanks for joining Meanwhile, that does it for this edition of blie Bag Technology. Go have yourself a wonderful long Memorial weekend volks from New York.
That's a bloebag.