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.
Like from New York, I'm Caroline Hyde and I'm Jackie Devalis in San Francisco.
This is Bloomberg Technology coming up.
Arm shares are down after a conservative forecast. We get the CEO's take on the strength of smartphone and AI demand, plus Roadblock shares slump after users and engagement slide. We dissect the worst cell of since May, and the CEO of Vanguard joins to discuss the company's record fee cuts for dozens of mutual funds and ets. But first we look at these broader markets. Right now, we're wobbling around gains and losses.
On the NASAQ one hundred.
More broadly muted, we're up just about a tenth of a There are some big moves when you look underneath the hood and video on the points upside. Here on the downside, we're a little bit anxious about TESLO. Get into that later, but move on to see what the individual moves are from an earnings perspective. Qui com off by four point eight percent one of the biggest points drags to the downside. Look, they managed to beat in terms of earnings, they've beate in.
Terms of forecast.
But the outlook for the smartphone market is where it does into investor anxiety. Are we flatlining only seeing flat to single digit growth there?
That?
Of course smartphone anxiety does feed in a little bit to armholdings as well. Key chip designer out there of course down some four percent.
Look, they too beat the street on earnings, on.
Earnings for share basis, you look at revenue dialing up almost twenty percent.
But again it's a world a.
Conservative forecast and what this means not only for smartphones, but what it means for AI demand as well. We've got to get to it with Arms CEO Rene Haas, who joins us now. And I put it to you, you've been out everywhere at the moment. There's deals being done of course, a soft bank and open AI that will dig into. But what a this forecast and what it signals for your business? Is it just you being conservative as a newly public company.
Thanks Kerley and appreciate you having me on this morning. Yeah, I don't know if I agree with the dialogue. Muted forecast. We beat our projections for Q three and we actually raise guidance for Q four and for the year, and we're looking at about four billion dollars of annual revenue, which is about twenty five percent.
Increase over the last year.
So we're super happy with the trajectory of the business and super happy.
With the performance.
Maybe just investors are too exuberant.
They're too exuberant around the fact that you've already said your compute platform is going to help open ai and SoftBank make good on their Advanced Enterprise AI, the optimism around your AI future, as well as how integral you are to smartphones. So is it that are people too excited about the AI opportunity here.
I'm going to try to decouple what the market is saying about it results and just talk about the results in general, which we are again incredibly pleased by. We are seeing extremely strong demand for our products across the board. We had record royalties. We were up twenty three percent year on year. Our Version nine compute subsystems, which drive
higher world tier rates. We're just growing faster than the market, which is what we told investors when we went public back in analyst day A year and a half ago plus, So yeah, we're not seeing any slow down demand quite frankly, Carolin. In fact, we're seeing an acceleration in it, particularly driven by all things around artificial intelligence Renee.
Speaking of future growth, one of the things that ARM is also banking on is its high profile partnership in Stargate, and you're a big player in that. Could you kind of tell us what investors can expect this year to gain from that venture.
I can say, broadly speaking, the way you think about Stargate is it's an infrastructure project unlike any other five hundred billion dollars one hundred billion dollars will spend initially, and these are to build out the world's largest AI data centers for training and inference. We are the key technology partner around CPU.
We're the only.
CPU technology partner that was named, which is terrific obviously for us. One can imagine going forward a lot of opportunity for technology innovation there. But in a near term we'll be linked with the Grace Blackwell ship using the Gray CPU which is ARM based and the Blackwell GPU, which is video based. But these large frontier models are going to require Jackie a huge amount of power for training and inference, and we're just so excited about being
involved in this. It's going to be fantastic.
Well, at the same time, this project also kind of puts you in the middle of this US China tech rivalry. You're at the front lines of it, being the top supplier to American AI companies. And I'm curious if you think that perhaps tying your fortunes so closely to Opening Eye is a risk.
I'm not sure I think about it quite that way. Open Ai is a fantastic partner. Arguably, they're the leader at the moment in terms of adoption of chat, GPT and their APIs and their enterprise suite. We work with everyone, though we work very closely with Google, we work closely with Meta Aws, you know all the partners. But we're very thrilled to be involved with open Ai. They have phenomenal.
Technology, Renee, We're going to lean into that China US story deep seek extraordinary.
The push and pull it has in the narratives.
Can you explain as to whether you think we are going to need as much compute as we all foresaw before.
Oh, I think unquestionably, Caroline, And in fact I think even more than we probably have been thought about. So why is that, Well, if you look at what deep Seek has done, which is an amazing by the way piece of work they've done what's called distillation, and distillation is building on top of an existing frontier model, which takes lots of power and lots of compute to generate. If you think about GPT four which was hundreds of megawatts,
GBT five sixty seven, these are in the gigawats. So even though you may have models that can distill or build a con the frontier models, the frontier models still need a lot of power. And then with that that drives a huge demand for inference, which is really where the larger use loads are. And more efficient inference means you can drive AI to much smaller devices, to smartphones, earbuds, devices that don't have a lot of capability for power.
It's great for armed because that's where we are today, is where we exist, and now you can run those AI workloads on the CPU. So I think actually, what deep seat proves is that we're just going to see an even more accelerant towards towards compute.
Well, on that front, you know you have a significant business in China. Are you concerned at all about perhaps how the slowing smartphone business might affect Arm's future growth.
Yeah, it's a great question.
And you know again and what we've seen in smartphones with your single digits type of growth, we're in the double digits growth in terms of royalties, in some cases twenty percent growth.
And why is that?
We're putting more technology into these phones, our version nine, our compute subsystems drive higher royalty rates, So we're just growing faster than the market, and particularly in the premium segment, which requires more and more compute. So while the units have been slowed in some areas, it actually hasn't impacted us very much.
Just look at our record royalties.
To have this kind of number in a market where people think things are slowing down, just phenomenal record royalties.
Upside in licensing.
I would just want to get to the litigation if I'm met here, Naam, and briefly, perhaps it hasn't gone the way that you thought with Qualcom.
What does it mean for the future earnings?
Really, there's no impact on future earnings, Caroline. The trial was a mistrial on one of the verdicts, so the dispute is still open. But to your question, in terms of the future forecast, we have no impact whatsoever.
Rene Ha, CEO of ARM, thank you for joining us. Coming up more with tech earnings with a Yako yoshioga from Wealth and here the speaker Caroline, let some quick.
Check on some other earnings that we've had on deck. Peloton is one of them. No, I'm afraid revenue is down, but profitability is better. A new management team managed to lift the optimism around this name. We're fourteen percent higher, but it's only trading at eight dollars sixty eight from New York, San Francisco. This's a Bloomberg Technology.
Back to earnings with roadblocks out this morning and reporting daily active users for the fourth quarter that fell short of estimates. Let's bring in Bloomberg Cecilia Denastasio to break down the numbers. Cecilia break it down for us what went wrong here that ultimately spooped investors.
After many quarters of growth and daily active users, Roeblocks unfortunately reported a disap winning decline in how many people are accessing the platform in the last quarter. In an earnings call today, Roblox's chief financial officer partially attributed that decline to Roblox's ban in Turkey over concerns over child safety.
And what's interesting is child safety affecting Turkey? Of course the key country here, But it wasn't long ago that Hindenburg research acuse roadblocks have also inflating user numbers and time played. Is there any hint that read across in these numbers, Cecilia.
Lots of analysts have cast doubt on those allegations against Roblox's user number inflation. Unfortunately, I don't have anything original to report on that currently, but Roblox's growth has been pretty consistent for a long time. People are very disappointed by these.
Results, Cecilia. What's competition looking like in this space?
Sure so?
Right now?
Growth in the games industry broadly is very challenged. The cost of developing Triple A games, your Spider Man's, you Know Your overwatches is skyrocketing, and at the same time a lot of investors are seeing potential in user generated games like the ones that people create on roadblocks. These games are often created by amateurs or by very small teams using tools that the companies themselves provide. Epic Games, which makes Fortnite, has its own platform along these lines.
As well, and some of them get sold for an awful lot of money.
Cecilia Denastasio, it's great to have you. Thank you for running us through roadblocks.
Let's get more earnings takeaways with Ioko Yoshioka is with us for for any manager at the Wealth Enhancement Group. And there's been so much to digest. One theme that seems to be running through is AI anxiety and smartphone anxiety, and I just want to bring up with what we're seeing with qualcomon ARMED today and to worry about smartphones flatlining and what.
That means for some of these chip providers.
What do you make of it, Iaco, I know you don't hold qualcommon arm, but what would you make about the readA.
Cross sure so high?
Caroline? You know, in terms of the overall AI environment, I think we're focused on both the short term and the long term. Right in the short term for companies like Qualcom, you know, they're really impacted by the handset slow down. However, you know, I think if you look out longer term and where they're going to play is really in that you know, inference side, or you know where the chips will be able to be in smaller devices as the ARM CEO talked about, and things like
new form factors with like metas ray band glasses. These are going to be where you know, Qualcom might have additional you know, exposure to which would be a positive for Qualcom.
It's interesting the best points contributor on the day is in video and there's a note out of JP Morgan saying, actually, like these deep Seak moves, this less compute necessary is actually going to win out for them from an inference perspective. So where have you come out on this whole divide as to whether companies should be spending a lot on AIF structure.
So I think the arms race is on and that most companies are going to spend in order to make sure that they have all the primary models set, all the frontier models that ARM talked about, and then it's going to be how best to access you know, all the efficiencies that Deep Seek brought are going to be you know, explored by many companies. And so I think there's a lot of ways to play AI. And you know, we're still trying to figure out what the landscape is
really going to look like, and it's accelerating. It's just moving so quickly. You know, every month there's something new on.
The cloud computing front. We've already seen some mixed numbers coming from the hyperscalers Alphabet, Microsoft. What are you expecting when Amazon reports later today?
Sure, so I think everybody's focused again on what the Capex guide might be, any sort of color commentary on Capex. You know, everybody's looking at that Capex trajectory to see, you know, is everybody getting that return.
On that spend.
But you know, I think the demand for cloud computing continues to increase, and so it makes sense from a long term perspective for many of these hyperscalers to continue to spend on increasing capacity in the cloud.
Speaking of demand, one of the things that always surprised me about Alphabet's cloud unit is that it had a good chunk of business coming from smaller, more nimble AI startups, And with some of the numbers that it put out, I'm curious if you are thinking if that kind of demand, if that vector of growth has kind of run its course.
I don't think so.
I think AI is still so relatively new that I think there's going to be new innovative players that are going to want to access you know, that that AI platform through Google, Google or through Microsoft or AWS. I think, you know, there's going to be different companies that explore different platforms just see what's best for them.
What's so interesting is Amazon has been making its own chips, and so too Alphabet. Actually, even though it shares fell on its earnings, broad Com sword because of the CAPEX spending and what it means for chip makers for some of these cloud computing companies. What do you make of how the getting into the vertically AI focus.
In terms of the overall spend, I think, you know, it's just going to continue. That spend going to a lot of these you know, chip makers, so whether it's Nvidia or Broadcom. Eventually it will come to Qualcomm as well. But I think it's going to continue. You know, there's so many ways to access AI and build it out. I think that it's going to continue to develop over the long term.
The thing that everyone's trying to wrestle with is the valuations. So with all this optimism, arm trades that are undred times future ournings. Maybe that's why it pulls back from the day on what the market says is slightly muted forecasts. What do you make of the valuation levels since the sell off from deep seacone and video for example.
Well, and I think that's why Qualcomm's valuation is pretty interesting here. You know, it's still in the you know, mid teens, low double digits, and you know, I think that if you look out far enough, you'll see that there's potentially, you know, a lot more growth coming for Qualcom in the future. However, you know, you have to
look at the valuations both in the near term. Nvidia does trade at high valuations as well, but again, if the buildout continues, if you're really going to need to continue to spend so much both you know, Broadcom and Nvidia, and probably you know, the earnings are going to grow and catch up with a.
Multiple Ayako Yoshioka from the Wealth Enhancement Group, thank you for joining us.
Elon Musk, who of course leads President Trump's government cost cutting efforts, will determine himself if there are conflicts of interest between his work reviewing federal spending and his overlapping empire of six companies. So all, according to the White House's bring in. Bloomberg News's reporter and co host of the elon Ink podcast, Max Chafkins. So he's going to be his own policeman.
He's going to be his own policeman.
And you know, while this is news because we've been wondering all along, what is the plan here? I mean, Musk has six companies, He is somebody who is his empire's rife with conflicts of interest. So it was kind of interesting to see how the White House was going to handle this, and we're learning basically they're not going to handle They're going to let Elon use his judgment, which I think was the plan all along.
And I think.
Even listening to things that President Trump said when he was on the Camp Trent pain Trail made clear that part of the point here is the fact that Elon Musk has these conflicts of interest. You know, Trump talked all about Mars that that is a thing that would necessarily involve some of Elon Musk's company. So so yeah, we're sort of learning something that I think was pretty clear, but we didn't know for sure.
Max.
I want to talk about the tech because Elon Musk has said that he wants to use AI to find cost savings, and he's already mining through medicare and medicaid data in search of fraud and abuse. Do we know if this is something he could use his own company XAI to do.
We don't know what software they're using.
It would not surprise me at all if he was using some modified version of GROC or you know, some some software that he has developed, or is that you know, is somehow associated with another one of his companies.
Musk has done this all the time.
We've seen you know, SpaceX engineers shuttled into Twitter.
We're seeing you know, people from his.
Business Empire now attached in various ways to this doje effort. So yes, and of course that raises, you know, interesting questions. Where is this data being stored? Are they taking the proper precautions. We've definitely seen critics, including you know employees, government employees, as well as some of their unions, raise questions about this, you know, saying basically, is Elon Musk taking enough care of our private data?
I wonder if investors are wondering whether they're taking enough care of his fiduciaries responsibility to Tesla. It's currently down almost ten percent on the beginning of the year.
We're training the lowest since December.
And meanwhile, he got byd in China announcing that it's getting into autonomous vehicles potentially, and Tesla takes another hit.
Well.
So, if two things are definitely true, one is that Elon Musk for sure is distracted. I mean, you know, I understand that he has like an endless amount of attention span. He's able to be very good at video games while running sales companies. But if you look, he has spent a ton of time in Washington, He's essentially been parked there in recent weeks.
He's tweeting all day and all night about Doge.
That said, so in that sense, you might say, wow, like these he's really distracted.
He's taking his eye off the ball.
On the other hand, there are clear ways that his companies can benefit from this partnership, and I think most investors understand that. And if you turn back the clock on that stock chart to like the beginning of November, you'll see that.
The stock is still way up.
So I think, yeah, some of the enthusiasms, some of the sense that oh my god, this Trump trade is like a home run, has worn off, although there are definitely still people who see this as beneficial to Musk and his companies.
That's Bloomberg's match. Chafkin, thanks for joining us.
Now.
Today's Tech in.
Depth newsletter takes a look at two different approaches in Silicon Valley on defense and war in Europe. Bloomberg's Mark Bergen has more.
Mark.
How are these conversations different in defense tech between the US and Europe.
Yeah, I mean I was sort of jumping off.
We saw a really interesting hire this week from Andresa in their American Dynamism Fund, which is their tech defense fund. They hired Daniel Penny, who was Gross Perraps most famous as he was involved in that choking incident in the subway. He was cleared of homicide but kind of became this cause celebrat and as far as they know, he's a
marine veteran. Didn't have it a track record as an investor, but clearly something that vice We saw Vice President JD Van's tweet about his excitement about this hire.
It's a signal for that firm, which.
Has been kind of really leading the vanguard of They named the fund American Dynamism that they're leading in on this new era of reforming the Pentagon. This proximity between the Pentagon and Silicon Valley and in many ways this is something that's very different than what's operated in the past, where the Silicon valley and venture capitalists didn't really think about global borders.
It's interesting David Ullivitch I interviewed a few weeks ago Catherin Boyle also leading that over at A sixteen Z, and they have been leaning into defense side Androil for example, they're looking at nuclear security. What's interesting though, is last time I saw it, A sixteen Z was pulling out of London and it's office space there. So what does that mean in terms of looking at bringing this across the Atlantic.
Yeah, so, I mean to be clear that they shut down their office, their first and only outside the US that was a crypto investing arm. They still are making some investments in Europe. They have a big position in Mistral, the French AI company as far as I know, though, they haven't made any investments on the defense side here, where you've seen others like General Catalyst. Even Sequoia we've reported has been looking. General Catalysts has been fairly aggressive
in defense in Europe. I mean, it's really interesting. Great where Europe is in the middle of this war with Russia. You go to these events in Europe, you hear constantly about Russia and they need to defend itself. And then you have events in the US and I think the focus has been shifted to China and Taiwan.
And meanwhile Palent his own sales internationally were lower in weakness in Europe. Matt Bergen, it's great to have you go read his Tech in Depth newsletter. In's course from Bloomberg's journalists around the world. You can subscribe at blomberg dot com slash Newsletters. Welcome back to bloombag Technology. I'm Caroline hid in New York. Now, Vanguard has slashed the fees for dozens of its mutual funds and ETFs this week, in a record move that sent a shockwave through the
asset management industry. The reduction is the largest Vanguard has ever undertaken. For more now on the impact on black Rock on Invesco, Bloomberg's Katie Greifeld is standing by for more.
Katie, we welcome now our TV and radio audiences worldwide, and please to say We're joined by Vanguard CEO Salem Ramji in an exclusive conversation Slim, great to have you with us. So we all saw the report to be here, Katie, thank you. We saw the ripple effects from Monday's move, and your average female is just seven basis points across your line of the industry average for contexts forty four basis points set the scene for us.
Why now, well, you know, in one sense, I will say Monday was a pretty joyous day here at Vanguard, and it was joyous figures. It really is a reaffirmation of our business model. We're owned by our clients, and so as a result, as we gain scale economies here at the company, we share those back with our clients. And that's not just been true since Monday, It's been true since nineteen seventy five, since when we founded the company.
And so this was continuing on a two thousand price cuts I think by our tally as of last week now it's twenty one hundred and sixty eight price cuts. And that's been part of the proposition that investors have had with Vanguard for decades.
And so Salim, I think I'm asking on part of your competitors but also investors as well, when I ask how low can fees go? You're at seven basis points right now? Where is the possible floor?
Here.
Well, you know, we don't price products as loss leaders. We're not looking to you know, price abnormally low in order to get somebody into a higher cost other service. And so we really look at it across the board in terms of our scale economies. We want to deliver great quality and great performance, and I think that the thing that sometimes gets lost in the mix. Obviously, index prices have been coming down for quite some time, led by us over the past several decades. But sometimes it
gets confused that we were all about index. We're actually about active and index. And really, if you go back to our origins, what Bogel was against was high fees, and so active management at a low fee can really outperform over the long term if delivered with the right quality. That was Bogel's hypothesis in the seventies and eighties, And if you look at our track record, even just in something like active fixed income, the empirical evidence backs up
that hypothesis that he had way back then. Ninety one percent of our active fixed income outperforms its peers over the past ten years. And one of the reasons why is because we price it at just over ten basis points,
and so at a very low fee. And you know, when you speak to our fixed income team, to Sarah Devereux, our CIO, and our teams who run our active fixed income, part of the reason they're able to outperform is they have a much lower headwind from higher fees, and so they're able to take risks in a much better and more disciplined way. And so what this is really about is not just about delivering high quality index management, but it's really about delivering high quality investment management at a
very low fee. And I think whether you're looking at active fixed income or whether you're looking at index fixed income or index equities, that's really what we've been.
About, right, Well, Selma, you make the point that a lot of people probably think of Vanguard and they don't think of active. And you do, have, of course active funds out there, but it's a pretty small percentage of your overall lineup. Especially if you take a look at the ETF side of things, we expect to see more active fund launches from you.
Yeah, you know, our active management the first Vanguard funds are actually active funds if you go back to the seventies and both we manage our active fixed income within Vanguard. We have a whole range of partners subadvisors that we work with for our fundamental active equities, and they're unified by the principle of being high quality at a low price.
And yeah, Katie, you already have seen us doing a lot more in active ETFs and I think you've seen that pick up over the past several months, and I hope and expect that that will continue over the next you know, this year and next.
Year, all right, so we'll keep an eye out for that. You were talking a little bit about, of course, how the ownership structure works at Vanguard. How basically all a lot of the extra cash, the extra assets that you generate are funneled towards these fee cuts. But I'm curious from where you sit, how do you balance slow boring fees versus investing in the business. What does that decision tree look like.
Yeah, it's something we do very carefully here. And you know, this week is all about our fee cuts and giving back to our clients in the form of lower fees. We've also stepped up our investments in things like technology. That's something that really began about two three years ago and is continuing this year and next year, because we're always trying to balance making sure that we've got high quality products at a low cost and we're delivering the
right level of service to clients. We're investing in newer technologies to make our investing even more efficient, to make our client interfaces even more efficient. So that's always a balancing act here at Vanguard, just like it is at many companies in terms of how do we think for the near term and how do we think for the medium to longer term. But I'd say one of the
beauties of Vanguard. I think part of the original genius of Vanguard is that when you know we've got a surplus, after we've looked at the important investments we need to make back in things like technology, the way we give back to our owners is through lower fees. And I think that's the Vanguard effect that you've been seeing for decades all across the company.
Yeah, that Vanguard effect obviously a good news story for your investors, maybe not for your competitors. But I do want to talk about the future, and I want to talk specifically about private markets and alts. One of the big take stories that we have on the terminal right now is about PIMCO and fears that PIMCO might be falling behind in alts because you take a look at the industry right now and a lot of your peers have invested heavily in alts in privates to scale up there.
What is your plan when it comes to those areas and do you fear that you're a little bit behind right now?
Well one of the again one of the great benefits of our business model, if you go back to the origin we had subadvisors. You know, for example, at our beginning we are and are still subs by Wellington Management, which is still our largest subadvisor today. And so where we don't have capabilities within kind of vanguard, we've long had an ability to partner.
With other firms.
To date, we've generally done that in fundamental active equities, but we can do it in things like private markets, and there's lots of discussions and explorations we have underway
to see what's possible. But you know, our north star is always about what's right for our clients, and it's making sure that whatever it is we do inactive in index ourselves or with others, that we keep in mind that we're about simplicity, We're about low cost and we're about long term returns, and I think that there are constructs that will allow private markets to fit in that.
But that's really part of the exploration that we're doing because whatever it is we do, we want to do it the Vanguard way, and we want to do it in a way that's well suited to our client base, which is really looking to us for a certain set of things that we've consistently delivered over the years.
All right, Seleem got to leave it there. I really appreciate you taking the time. That is Vanguard's CEO Selim Ramj back to.
You, Katie.
We get a quick check on these markets. Great interview. Let's dig into what's happening in technology right now because.
Nasak just clinging on too.
Gains only by about a tenth of percent on the higher side, and video powers us up from a points perspective, as maybe JP Morgan wais in and says, hey, maybe these open source deep seat models on as bad as we thought. But you move on to what's happening on the downside, and Qualcomm a key significant draw down in a points perspective.
We're off almost five percent.
This is the worst day that's November the twentieth for the stock, even as they managed to beat expectations when they come for their earnings in revenue and in earnings for share revenue up some eighteen percent. But we're worried about the future of the smartphone market, to which Qualcom
of course is so exposed. Skyworks also on the downside, after we see its issues around iPhone representing eighty five percent of its business more broadly, and they're having to reduce the content loss that they're seeing at the moment. iPhone content lost to Skyworks work by twenty four percent.
Jackie coming up as demand for China's deep so you can other open eye source AI models skyrocket, National security concerns emerge. We speak to Ben Harberg of Core Values Alpha. This is Bloomberg. The rise of AI chatbots and what they can bring to productivity is spurring enthusiasm across global industries. Bloomberg spoke with riied Hoffman of Greylock Partners. Here's what he had to say about utilizing AI in the workforce.
I actually think programming skill jobs aren't going out the door. I think there's human application, but I think it's also human application of like EQ as well. So the fact that you have a for example, say a medical assistant that can help you with something, or a coach that might be able to talk to something, doesn't mean you don't want a human coach.
It's more coaches, the better.
Greid Hoffman of green Up partners there.
And of course, with the rise of AI chatbots with open source models, China based Deep Seek of course is actually having to restrict access to its models. Is demand overwhelmed server capacity? More in the future of AI open source models tech competition with China.
We're joined by Ben Harveack.
He is founder at Core Values Alpha and managing partner of Nova Capital, which has a call two billion dollars in assets under management. We also know that you oversee a greater China growth ETF, so we're here for all of your expertise. And ultimately, was Deep seekersputneck moment.
I think it was. I think you know.
It challenged this hubris and this impenetrability of American AI leadership.
And the scary thing.
Was we already saw the Chinese kind of tacking global market share when it came to all the kind of next generation technologies being electric vehicles, drones, solar panels, and this was really the last holdout, and so with that bubble being pierced, I think we need to now put our foot on the gas and re examine our own capabilities and how do we continue to lead in that market?
Ben, what's the starting point here? What should companies be focused on in the wake of deep Seat. We're hearing a lot of talk about expanding infrastructure. You saw open AI and veil new models just a couple of days after the news hit. What should be the focus for AI startups in the US?
I think a space race is great for a competition, and it's great for American innovation, and so I hope we don't take this as a slight instead use it as a motivator. Obviously, AI is a discipline that requires a huge interdisciplinary kind of collaboration across energy, talent, technology, regulatory availability and all you know, and the open source nature of models, and so my view is that this
has to be a whole country effort. We should be looking at this more as a Manhattan Project two point zero, where we bring all those factors to bear. And I think that the new Trump administration is really looking hard, particularly at the regulatory front. How do we stimulate that and support on the energy front. You heard this one hundred billion dollar number coming out of Open AI and others. So I think we need to bring all those together and to put our foot on the gas.
You were pretty heavily involved in the Trump campaign. Are they asking you for advice?
I've done my best, So I've certainly believed that in the current environment, we need to put our foot on the gas when it comes to extending American technology leadership, and that is an interdisciplinary process. Requires that we bring together immigration, energy rethinking, education of course, permitting and regulatory reform, and subsidies and technology, and so we have to bring
all these things to bear. And so my advice to them has to kind of draw down these walls of bureaucracy and siloed different departments and instead kind of get interdisciplinary, interagency working groups together. We don't just need a ZAR for AI and crypto, We need zars for shipbuilding, drones, hypersonic missiles, et cetera.
What's so interesting about the Great China Growth etf The tagline if you go on to have a look, is it accessing China alpha without compromising American national security or American values.
How do you.
Invest in a BYD when suddenly news of potentially BYD having autonomous vehicles sends TESA shares down and the biggest points drag on the day.
Yeah.
So our strapline from a year and a half ago, which I think we preempted the market a bit, was America First Equities investing. We know people still wanted to access China, and we knew one of the things that was scaring them away from China was a fear that they would be investing in companies that might show up on a blacklist or a gray list. We also identified their biggest competitor, k Web was CCP owned, so it's owned by CICC, which is an SOE asset manager of
the Chinese government. And so we first determined that we could be American owned entity and so we wouldn't have any influence from the Chinese government. Second, we'd filter our equities by looking at what was coming out of Congress, what was coming out of Treasury and Commerce in terms of entities lists, gray lists, and then we would even go a step further and bring in former government officials to kind of vet these names and ensure that they
weren't compromising American national security or value. So working with the PLA, working with organizations that were involved in slave labor, some other form of American values.
Ben, let's stick with your point about access to China. Do you expect this administration to take a tougher stance on curtailing VC's ability to invest in Chinese companies?
I think it will. So they call that the Overseas Investment Program the OIP coming out of Treasury. I think that that program needs to be expanded and be made more concrete. Over the Biden administration, it was more of a reporting mechanism certain something that dissuaded a lot of capital,
but didn't specifically restrict it. I do believe that American money should be used to develop American innovation, and so to the extent that we can keep money at home and use it to build the next generation of open ais, the next generation of electric vehicles, of drone companies, of next generation military defense, that's a critical use of that capital. And so I hope to see that program made more
concrete and expanded. At the same time, I think China and the United States are going to be in better kind of collaboration when it comes to just day to day business dynamics, because there's a lot of the intractable issues and fears that were kind of getting in the way and wedging during the last administration are no longer there, and this is much more of a dollars and cents conversation.
Well, sticking with policy here, immigration and H ONEB visas are also a bit up in the air as it relates to AI. AI depends a lot on those two things to be able to fuel its pipeline of talent.
A lot of this talent is coming from.
Outside the US. Do you think that the administration's position could actually undercut our efforts to stain the lead in AI.
There's clearly a bit of a split here, and we saw that battle a few weeks ago that really played out over Twitter, and the President i think reaffirmed his commitment to the H one B one program. I think we need to look at that as a stop gap. Clearly one of America's greatest advantages that we attracted the world's best minds to our shores through our university system, but education as a whole in America needs to be reformed.
We need to look at maybe, for instance, the German model of trade schools, hulk Schule's gymnaseums, where we split kids off much earlier and send them to trade schools where they can learn a lot of those tooling and mechanic type roles that can be brought to bear in these next generation technologies, be it defense, American kind of
smart manufacturing, et cetera. And so I think we need to look deeply at education as a whole and not just rely on foreign talent as a stopgap, but think about how we start training American born citizens for next generation technology enabled roles.
What's interesting is when you were saying you foresaw almost this America first idea of investing in China, you understood what was potentially going to end up on a gray list or a blacklist, but you love and Tencent was put on a blacklist. Do sometimes we throw babies out with bathwater when we're looking at what is really a Chinese military challenge to the United States.
There are certainly companies that have dual use technologies and that have very broad array of different discipline. So, for instance, Alibaba, well it's known as an e commerce player, also has their own cloud business that bumps up against the likes of Amazon, Tencent has cloud, some of them have geospatial and other kind of forms of engineering, and so this is a constantly evolving process. And that's exactly why we think you need an active management because you can't sit
on an index and just trade these equities. So we've got to be able to move in and out of them as we think see things coming out of DoD Congress, et cetera.
Natest you might have been exposed if Dominimus was something you'd been depending on for some of these e commerce players in China. Are we likely to see barriers put up to Chinese trade ever more? But even just me as a consumer trying to access cheaper goods.
Well, I think the dominimous kind of tax loophole was something that needed to be closed. She and obviously tim Wu and others are really putting a lot of American companies out of business or eating their market share, be it Amazon.
Or the likes. I think that was doing okay, right, they're doing fine.
But even some of these smaller offline stores I think are having some of that market share now eaten by the likes of Timu, and they're building their own fulfilled by Amazon models. So definitely we want to favor or have a level playing field, and so that you know,
this affects Amazon as well. I think a lot of the impact of that that was already baked in the actual numbers coming out of tim WU aren't necessarily included in PDDs kind of projections, I think, And so our view is that PDD is still a strong name even in spite of these these new Dominimus regulations.
That's Ben Harberg of Core Values Alpha. Thanks for joining us. Looking ahead to after the closing bell today, Amazon is slated to report its earnings and is expected to report that revenue grow ten percent in the fourth quarter. Bloomberg's Ryan Westellica joins us.
Now for more, Ryan.
Aws is the cloud computing titan. What are investors expecting to see from that unit today?
Hey, thanks for having me.
I think people are expecting a pretty strong quarter, but it does come in the wake of disappointments from both Microsoft and Alphabet, which are number two and three in the sector. So sorting a little bit of a more cautious uh, you know, you know lead up going into these results.
It's interesting that that likely to have committed more than seventy billion in CAPEX for this year and even more going forward.
To be comfortable with the.
Amount of spending on AI build out.
Well, we've seen so many other companies come out and really lift their targets. Alphabet earlier in the week, Meta not too long ago, Microsoft, These are all the major cloud hyperscalers, and it wouldn't be surprising to see Amazon do a similar kind of boost. Although you know, some of these were like, you know, fifty percent more than
people were expecting. Whether we see something like that I think would be pretty shocking, but it wouldn't be surprising to see them bring up their caffects at least somewhat.
We were just talking to Ben Harberg about Deminimus and the impact on Chinese competition for Amazon from an e commerce perspective. Briefly, Ryan, what we hear about how it will impact the business, the duties on Chinese rivals.
I'm very curious to see that.
So far, we haven't seen too much reaction in the stock to the idea of you know, a trade war or tariffs against China or something like that, but certainly to the extent that we see less competition from these lower price rivals. That's certainly a good thing for Amazon and its e commerce market share where it is, of course, you know, still major player here in the States.
Bloomberg's ran place. Selka, It's great to have you on. Thank you, thank you.
Now.
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